Facing Wellness Overload, Supplement Brands Get Creative

In just four years, digitally-native vitamin seller Care/of went from a $225 million valuation to closing its doors entirely.

The brand, which recommended a personalised mix of vitamins and supplements to customers after taking a quiz, announced in June that it would shutter operations in early July, stating on Instagram that it “no longer [has] funding to operate in the way we have been.” It was quite a turn of fate for a brand that, after its founding in 2016, went on to raise $46 million in outside funding before pharmaceutical giant Bayer acquired a 70 percent stake in 2020.

It’s a sign of the times in the supplement business. After several years of rabid customer interest in wellness, which fuelled major growth for oral supplements, the party is winding down. Demand for multivitamins in the US spiked in March of that year, with sales rising by 51 percent, according to the Financial Times, as more health-conscious consumers stocked up in hopes of warding off a case of Covid-19. The supplement category reached a peak in 2021, according to Anna Pione, partner at McKinsey & Co., but since then, growth has been flat.

Some of this is a natural maturation of the category, but that process has brought changes. Growth is now primarily found in products for specific concerns, like women’s and gut health. The funding environment has also contracted, with already-conservative investors reluctant to pour money into a seemingly-stagnant category. In 2021, venture capitalists poured $980 million in funding into 222 global wellness deals, according to Pitchbook, but by last year, that number had dropped $580 million into 119 deals. As of early July, there have only been 35 deals worth a total of $80 million this year. Pharmaceutical companies like Bayer, too, are getting rid of their consumer brands.

To combat these changes in an environment where survival isn’t guaranteed and investors are less interested, supplement brands are adjusting their product offerings, building product franchises that include non-supplement items, offering new services like health consultations, and experimenting with new supplement formats like patches. Nimble indie brands are best positioned for this change.

“Older brands in the category are seeing less than average growth ... brands that are [serving] unmet consumer needs can use that positioning to reach breakout growth,” said Pione.

What’s Happening in Supplements

Declining consumer interest is a major factor behind supplement’s decline. But the category faces other headwinds, including increased competition and a decrease in strategic acquirers.

Part of the reason that the supplements sector was able to attract a high level of investor interest was because of the clear path to exit in acquisition by a major pharmaceutical company. Today, however, that path is much less clear: Much like Care/of-owner Bayer, since 2021, several major pharmaceutical companies are divesting from their consumer health divisions, which includes supplements, by closing them, spinning them off or selling them.

This divestment strategy is a product of the recognition that different capabilities are needed to run consumer units. Supplement product development timelines are faster than those for drugs, drug sales teams are widely different from retail field teams, and consumer product marketing must speak to a larger base than specific drugs.

“The skills and capabilities required to be successful in consumer health care, which includes over-the-counter products and supplements, are fundamentally different from pharmaceuticals; the skills needed are much closer to a traditional CPG company,” said Pione.

With less funding to go around, additional supplement brands could be subject to closure if their growth or business does not align with the new crop of standalone consumer health businesses. For digitally-centric brands like Care/of, customer acquisition is the biggest hurdle. That’s due in part to more expensive social media ad costs, but also the fact that after years of an expanding their customer base, supplement brands may have naturally hit a ceiling. When consumer brands face a consumer acquisition issue they can usually turn to trying to increase individual daily consumption to juice sales. But for oral supplements, increased consumption can exacerbate consumer fatigue or even be dangerous.

Plus, younger customers who are entering the market are less likely to engage with the category. According to a 2021 survey by the US National Center for Health Statistics, 57.5 percent of people between 20 and 39-years-old used zero supplements; people use more supplements as they age, with nearly 25 percent of people 60 and above using four or more.

Thinking Beyond Pills

To court consumers in the face of category-wide hurdles, brands are getting creative, introducing products beyond pills and investing in marketing that demonstrates their effectiveness.

In March, 8-year-old supplements label Love Wellness introduced two topical skin products and a lymphatic body massager bucketed under the brand’s hero Bye Bye Bloat category; its first extension since the original bloat supplement debuted in 2018. Founder Lo Bosworth said that the launch of the new Bye Bye Bloat products has had a halo effect, with Bye Bye Bloat supplement sales increasing 75 percent since March. Going forward, the brand is focussed on building franchises around hero products.

“We talk about supplement fatigue all the time,” said Lo Bosworth, founder of the supplement label Love Wellness. “For us, as many points of entry as we can develop for people, the better the brand will be long-term.”

It’s not alone in making these extensions: In May, oral probiotic brand Seed began to sell vaginal suppositories. Traditional Chinese medicine brand Elix also expanded its business model in June from oral supplements to focus on health coaching. Pione said that other brands could expand beyond oral capsules by offering other formats, like patches, powder supplements and ready-made food, which would allow customers to integrate them more easily into food or beverages.

“For a lot of consumers, pill fatigue is real. There is a different feel to the consumption experience [with other forms] than if you’re taking something that feels like medicine,” she said.

Innovation is not the only important element. Supplement competition has also spurred more companies to invest in clinical studies to demonstrate product efficacy — long considered a weak spot for the supplement industry. Nutrafol and Ritual began investing in clinical studies for final formulation products back in 2018, while Love Wellness plans to clinically study all its final formulations by the end of 2025. It’s an investment: generally, clinical studies can cost between $25,000 to $100,000 with third-party testers, according to beauty software company Good Face Project. But It’s an important one, said Lisa Wu, partner at Norwest Venture Partners, which invested in vitamind brand Ritual’s 2016 seed round.

“First the focus was on building credibility around clinically-backed ingredients, but that’s no longer sufficient because consumers are demanding,” said Wu. “Now the focus is on clinical studies on final [formulation] products.”