the nutraceutical market

Nutraceuticals are a loosely defined category of products (along with dietary supplements and functional foods) targeted at improving health and providing medical or physiological benefit. They include body building supplements, diet aids, and pain reducers, among others. NeutriSci estimates the total market for nutraceuticals & supplements in the US exceeds $28B and is growing at 4.4% a year, projected to reach $37.5B in 2017. Nutraceuticals are not subject to the same testing and regulation as drugs (which means they can be brought to market more quickly), but products are FDA regulated under guidelines specific to the nutraceutical industry.

The two principal markets for NeutriSci’s initial product are normal adults and adults experiencing cognitive decline, with about 5.4 million US patients growing to 16M in 2050, and healthy adults looking to improve memory and cognitive function. NeutriSci estimates cognitive supplement sales at $750M annually (US only). Prescription drugs written for Alzheimer’s patients constitute $2.8B in revenue.

distribution network

Products and product lines change. Customers and customer demands change. The arrival and departure of competitors change how manufacturers and retailers work together. Nowadays, however, change is more top of mind than ever: Global markets are repainting the selling and sourcing picture. Retailers are more in control of the overall relationship. And economic travails are squelching sales, altering pricing strategies and redirecting promotional activity.

As a result of these changes in retail buying patterns NeutriSci focuses its retail efforts on “Channel Optimization”. NeutriSci seeks to identify highly profitable (or unprofitable) customers, and then leverage supply chain mastery to increase (or reduce) total expenditures on behalf of those organizations. Throughout the branded manufacturer community, significant costs are expended on services to retailers and retail distributors.

This is neither wrong nor inappropriate. However, a growing body of research reveals that those expenditures aren’t doing enough to improve long-term growth prospects for the manufacturer. In fact, there are many situations when those services are neither needed nor appreciated by the customer.

Given the current economic climate, NeutriSci has concentrated on the long-term profitability of all customers. These ideals must be considered, with carefully calculated amounts spent on the “right” customers rather than just the largest or most strategic. This is the goal of channel optimization—enacting policies and service decisions that identify highly profitable (or unprofitable) customers, and then leveraging supply chain mastery to increase (or reduce) total expenditures on behalf of those organizations.

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