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Indian nutra start-ups in US need build evidence to prove product efficacy
Friday, 06 November, 2020, 08 : 00 AM [IST]
Nandita Vijay, Bengaluru
Indian start-ups and early stage companies in USA nutraceuticals industry are facing challenges in terms of building a robust presence and branding. In all these, the most important factor is developing a viable product or technology with a significant dose of scientific evidence and product efficacy.

There is also the issue of branding, positioning and packaging. In many cases, companies need to ensure palatable products with good taste and flavour, according to Sheldon Baker, principal advisor, media communications, Nutrify India - US operations.

In the past 10-15 years, the need to provide scientific evidence for a product has increased. Customers need to have a basic understanding of the product formulation. “There should be proof of safety of contents and clinical trials for efficacy. All these product attributes must be clear-cut and hopefully unique. If companies have an intellectual property strategy where patents and a protection would be immensely helpful to enter the market,” he added.

Key points for entry into the US for product distribution and brand marketing include identifying the right partners. The US being a large country with diverse population, indicates wide disparities in terms of choice. For instance, a retail product, may sell extremely well on the West Coast, but might not have much appeal in the Midwest. “It is here we see that demographics play an important role for early-stage companies. Therefore it can be wise for a brand or product to target a specific population to gain a strong or even dominant position in that category, rather than trying to appeal to everyone across a larger market,” stated Baker.

Distribution strategy too is quite important. It is here partnering with US-based distributor is mandatory especially for nutraceuticals ingredients.

“Even distribution of dietary supplements is extremely different from any other country. In today’s market each channel supports the other. All new launches should be via omni channel as the trend is that customers are seen to shift seamlessly from brick and mortar stores to online. The most effective method is to have a marketing plan that has each element necessary reinforce the other,” said Baker.

“For distributor to retailer to consumer, margins are fixed. While the margins for the distributor are 30%, retailer 50% and manufacturer 50-60%. There are distributor costs. Advertising programmes vary from distributor to distributor. The top four with costs range from US$2,000 to $8,000/annually. The top leading USA distributors are UNFI, Kehe, Threshold and Palko. Retailer slotting fees is for an average 3 piece per SKU per store and for some it is a flat-fee,” said Baker.

National chains like Walgreens and CVS Pharmacy will take 2-4 years before they will look at a new nutraceuticals product. This is because they will view the track record of the product to opt for a massive public relations campaign to support the introduction.

From online to consumer is either through distributors. Most brick and mortar stores have an online presence. Many of these major online dealers prefer to buy through a distributor, for example: Kroger owns a major online store called Vitacost and they buy through UNFI. Online direct sales are through Amazon, Google, iHerb and so on.

Overall start-up costs for first 18 months using this strategy will be about US$750,000 to US$1 million for the first 18 months.

“Brand promotion for retail products is important for selling products. This could be through print advertising and digital promotion where the investments are in addition to distributor fees,” concluded Baker.
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