Sales of Organic Supplements, Functional Foods on the Rise

Companies considering entering the organic functional foods or the organic dietary supplements markets need to pay attention to regulations for organic production in addition to the general regulatory requirements for those products.

Functional food sales overall are growing. According to the market research firm Packaged Facts, mass-market sales of packaged foods and beverages that provide a positive pharmaceutical benefit beyond basic nutrition by virtue of their inclusion of medically beneficial ingredients represented nearly $25 billion in sales in 2006. Products in this category include a broad range of foods and beverages, such as cereals with added omega-3 fatty acids, refrigerated teas, food bars and yogurts. Because functional foods cross so many categories of products, it is difficult to know how many organic products would also be considered functional foods. According to Packaged Facts, these foods are seen as an alternative delivery system from dietary supplements.

Sales of organic products in functional food and dietary supplement segments are burgeoning, as well. According to the Organic Trade Association’s 2006 Manufacturer Market Survey, organic dietary supplements represented about $238 million in retail sales in the United States in 2005, and grew 29 percent over 2004.

As with the dietary supplement industry in general, certain ingredients are expected to be in high demand. “During the next few years, the largest increases in nutraceutical ingredient demand are expected to be for glucosamine, probiotics and sterol esters, whey protein, omega-3 fatty acids and coenzyme Q10 (CoQ10), all key drivers in the nutraceuticals market,” said Don Montuori, the publisher of Packaged Facts and its new report “Functional, Fortified and Inherently Healthy Foods and Beverages: The U.S. Phood Market.”

Dale Hollingsworth, director of purchasing for Arrowhead Mills, said that although more companies are offering organic options for ingredients, some of the dietary supplement products are a wide open field, with very few companies making them from natural or organic ingredients. For example, Ken Cowan, national marketing manager, Flora Inc., noted: “In the functional food category essential fatty acid products are doing very well, including chocolate with EFAs inside of them. Tea is also an excellent product in this category.”

Going Organic?

Considering entry into the organic supplements and functional foods market? Take some advice from organic certifiers to make the road easier.

First, be familiar with the organic regulations. According to David Abney, vice president and general manager of Quality Assurance International (QAI), organic supplements and functional foods must comply with the U.S. Department of Agriculture’s (USDA) National Organic Program (NOP) regulations, and be able to justify the nutrients, vitamins and minerals that are added.

Organic dietary supplements and functional foods are regulated under the handling section of the rule, section 205.605. (See www.ams.usda.gov/nop for the most up-to-date version of the regulations.) Essentially, the agricultural ingredients must meet the NOP requirements. Those requirements regulate the use of the word organic on labels, based on the percent of organic ingredients in the product. In order to use the word organic at all on the principal display panel, the product must contain at least 70-percent organic ingredients, excluding water and salt. In that case, the product can list up to three organic ingredients, such as “Made with organic soy, flax and cocoa powder.”

Products with 95 percent or more organic ingredients can be called “organic,” as in Organic Cereal, and can choose to show the “USDA Organic” seal on the product.

If the product is 100 percent organic, the law allows for that claim as well, and those products can also use the “USDA Organic” seal.

For products with at least 95-percent organic ingredients, the regulations require any agricultural ingredient be organic, if it is available. Any non-agricultural ingredients and any non-organic agricultural ingredients must also meet the specifications of the regulations, as detailed in the sections 205.605 and 205.606. Those sections are part of the National List of Allowed and Prohibited Substances, which are the exceptions to the general principle that natural materials are allowed in organic products and synthetic materials are prohibited. If an ingredient used in a company’s product does not appear on those lists, it is possible to petition for review of that ingredient, if it meets the criteria for use in an organic product.

All materials approved for organic production are carefully reviewed according to the following criteria and are reviewed every five years to be sure their use is still acceptable. The criteria used by the National Organic Standards Board (NOSB), an advisory board to the Secretary of Agriculture, to determine whether a non-organic material is acceptable for use in an organic product include: effect on human health; effect on the farm ecosystem; toxicity and mode of action; availability of gentler alternatives; probability of environmental contamination during manufacture, use and disposal; potential for interactions with other materials used; and overall compatibility with a system of sustainable agriculture.

Certification Requirements

Manufacturers of organic dietary supplements and functional foods also need to be prepared to be certified according to the organic standards. Organic certification is conducted by businesses or state agencies approved by USDA, and includes physical inspection of the processing facilities and an audit of paperwork related to sourcing and production.

There is greater interest in organic certification, according to certifiers. Jessica Walden, technical specialist for QAI, said: “We have seen a lot more of these products in the review process. We are also seeing the inclusion of more exotic ingredients.” However, it’s not an easy road, according to Jody Biergiel CCOF certification services handler certification supervisor, particularly for supplements, as many of the ingredients are not allowed in organic production.

At this point in time, however, Biergiel pointed out that the best way manufacturers can prepare for certification is by keeping clear records of which batch of ingredients went into each batch of products. “Record keeping is typically one of the areas that is a challenge,” she said, “but keeping good records can be a money saver during certification if everything is lined up.” She also emphasized businesses need to take the time to read the regulations, especially the lists of materials in sections 205.605 and 205.606.

For those applying to CCOF for certification, the burden of proof that the nutrients are allowed is on the applicant. Her suggestion was to include the portion of the federal regulations that applies with a written statement in the application. She also reminded companies that they can list their organic ingredients on the ingredient panel, which can be one easy step to let end users know that there are some organic ingredients in the product.

Holly Givens is the public affairs advisor for the Organic Trade Association (OTA), a membership-based business association that focuses on the organic business community in North America. OTA’s upcoming All Things Organic Conference and Trade Show will offer a session, “Supplementing Your Health: Food, Herbs and More,” that will explore more of the issues about organic dietary supplements, especially in products for new and expecting parents; visit www.organicexpo.com for more details. Also, OTA’s free directory, The Organic Pages Online (www.theorganicpages.com), offers listings of companies supplying organic ingredients.