Pharmavite Puts Energy Into Immediate Results
When Joy Joseph started working at Pharmavite Corp. 20 years ago this week, the company’s research and development branch included just herself and two others.
Today, as vice president of quality, research and development and technical operations, Joseph oversees a staff of 25 chemists and pharmacists, including several with doctorates.
“We’re a think-tank type of R & D group,” Joseph said.
These days, her branch is especially busy as it is the key to the company’s five-year strategic plan. The company, which markets its products mostly under the Nature Made and Nature’s Resource brand names, was built on traditional vitamins. But now consumers want supplements that provide them with more immediate benefits, Joseph said.
“We’ve set a strategy to develop new products that have a specific health benefit,” Joseph said. “Today, supplements are more directed at providing an immediate effect.”
The best example is SAM-e, an amino acid derivative that the company says relieves joint pain and the symptoms of arthritis and can improve mood and liver function. Pharmavite was the first company to market SAM-e widely in the U.S. Since it was introduced in March 1999, SAM-e has become the best-selling supplement among the more than 150 products the company sells. Between March and December, the company had sales of $60 million for SAM-e.
The rise of SAM-e has come at a time when other supplement makers are struggling to deal with a downturn in the herbal supplement market. Although Pharmavite is a privately held company, competitors who are publicly traded have seen their stock prices plummet largely because of concerns about slowing sales of once-hot herbal products such as St. John’s wort.
“I think SAM-e ate it up,” Joseph said of St. John’s wort. “A lot of people who were using St. John’s wort are now using SAM-e because it works better for what they need.”
In coming years, the company plans to use the SAM-e strategy to develop new supplements in areas that include women’s health, intestinal health, bone health and the sports nutrition market, deemed by the company’s market researchers as potentially the most lucrative areas, Joseph said.
Started in 1971 by local pharmacist Barry Pressman, Pharmavite Corp. is now fourth in national sales of vitamins/supplements, according to Nutrition Business Journal. Acquired in 1989 by Tokyo-based Otsuka Pharmaceuticals, Pharmavite declined to specify its annual revenue or to confirm the Nutrition Business Journal’s numbers.
Grant Ferrier, editor of the journal, estimated the company’s 1999 supplement sales at $450 million. That tally puts it fourth in nationwide sales behind American Home Products, makers of Centrum ($620 million), Carson-based Leiner Health Products, which makes the Your Life brand ($530 million), and Rexall Sundown ($520 million).
Ferrier estimated the company would have sales of $500 million this year, continuing a pattern of growth that started in the ‘90s, the vitamin boom years. In 1996, the journal estimated the company’s sales at $290 million. “They have been one of the leading growth companies in a growth industry,” Ferrier said.
Although vitamin industry growth slowed this year, causing a nose dive in stock prices among publicly traded companies, Pharmavite is still experiencing sales growth.
“We don’t experience the same highs and lows that the other companies do. We have a broader base of products,” said Doug Jones, the product manager in the company’s marketing department.
Last year Pharmavite’s Nature Made brand scored big with SAM-e. Between March and December of 1999, the company had sales of $60 million for SAM-e.
Joseph said SAM-e is an example of Pharmavite’s new strategy of providing supplements that offer immediate relief of symptoms. Traditional vitamins may offer a benefit over the long term of a person’s life but do not have an immediate effect on how a person feels, she said.
In the last year, the company has introduced several new products to the market, including a new sports nutrition bar under the Jog Mate brand name and new high fiber and calcium beverages under the Optimize brand name.
“For all of the leading vitamin and supplement companies, new products are key to your future growth,” Jones said. “It’s something we try to be very aggressive about.”
It makes sense to Ferrier that the company is weathering the current downturn in the industry. The company has a broad range of products and never relied heavily on the herbal market. However, he said the company’s aggressive approach to introducing new products is pretty standard in this industry.
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“One of the characteristics of this industry is it sort of rides the wave of new emerging products,” Ferrier said. “You have St. John’s wort dropping by $70 million, but now SAM-e is making $100 million.”
Pharmavite is also insulated from the Wall Street fluctuations because it is a privately held company. Publicly held companies are under pressure to react quickly to declining sales figures, but Pharmavite can be more thoughtful about its strategy.
“They don’t have to report their performance every quarter so they can take a longer term approach,” Ferrier said. “The other companies spend half their time trying to deal with a bad quarter.”
Jones said the company is currently in a growth mode, although it is not as dramatic as the growth the company and the industry experienced in the 1990s.
“The baby boomers are aging. There’s a tremendous population reaching an age when they increase their vitamin intake,” Jones said. “The base of regular vitamin users is steadily increasing.”
Even though Pharmavite officials contend the company is still in a solid growth mode, it’s been an up and down year for the vitamin industry, said Scott Van Winkle, a food, beverage and nutrition analyst for Adams, Harkness & Hill, a Boston-based investment bank.
The overall market is either flat or up very slightly, he said. Although vitamin sales have stayed somewhat consistent, herbal supplements have taken a beating and are down 20%, Van Winkle said.
Back in 1998, television news shows were filled with stories about such herbal supplements as St. John’s wort. Larger stores such as Wal-Mart responded to the demand by increasing the supply of herbal supplements on their shelves.
“They went from having one shelf of supplements to a huge 10- to 12-foot display, six or seven shelves high,” Van Winkle said.
New consumers, however, didn’t stick with the new herbal products, Van Winkle said. They weren’t the committed vitamin users the industry relies on.
“With vitamins you don’t see any benefits for 30 years. If you take them your whole life, you’ll feel better when you’re 70,” Van Winkle said. “There’s no immediate gratification from taking these products.”
However, the more traditional vitamins have a solid customer base.
“If you’re selling just vitamins, that business continues to grow every year,” Van Winkle said.
The vitamin/supplement industry is odd because it’s not dominated by one or two players. It is made up of many smaller companies like Nature Made.
“There are 20 brands that don’t even make up half the industry,” Van Winkle said.
Some companies have seen their revenue rise and fall on trends and fads, but Jones said the Pharmavite strategy is to create products with staying power.
“All the companies in this business had substantial growth in the 1990s. The key to our success is that we manufacture to pharmaceutical standards,” Jones said. “Consumers can be very much assured we go through an enormous amount of testing. There are a lot of products out in the marketplace now that make claims that we wouldn’t be comfortable with.”
Pharmavite markets its products under four brand names: Nature Made, which includes the more traditional vitamins and minerals; Nature’s Resource, the company’s arm for herbal sales; Jog Mate, which sells protein and muscle recovery bars; and Optimize, which sells calcium and high fiber beverages.
There are more than 150 Nature Made products, which are sold through mass merchandising outlets such as Albertson’s, CVS, Eckerd, Food Lion, Kmart, Kroger, Osco, Costco, Sav-on, Safeway, Target, Vons and Walgreens. The Nature Made products include Vitamins A through E, herbs, calcium, multivitamins and multiminerals and other supplements.
Headquartered in Mission Hills since 1971, the company is planning to leave by the end of the year. Pharmavite will give up its 46,000-square-foot space on San Fernando Mission Boulevard and move to a 58,000-square-foot site in the Harman International Business Campus on Balboa Boulevard in Northridge. About 200 employees will make the move. The company is moving so that it can lease more space at the complex if it is needed.
“We’re moving to increase our expansion capability,” said Kathy Doerwald, manager of facilities and administrative services.
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In addition, the company is in the process of moving its manufacturing, distribution and packaging facilities from San Fernando to Valencia. However, Doerwald said Pharmavite does not expect to vacate the San Fernando site for another three years and may in fact keep the facility depending on the company’s needs. Pharmavite had considered moving to other parts of Southern California, but ultimately decided to keep its operations in the area.
“We’re all residents of the Valley and we are very happy we are staying here,” Jones said.
