Botanical Bounty has identified three main customer groups: supplement companies; botanical processors; and other nurseries. The customer segments are distinct enough to be able to target each one differently. The industry that Botanical Bounty produces for has been undergoing consolidation for several years now. Botanical Bounty will be able to serve the industry by leveraging their competitive edge of healthy, potent plants.
Botanical Bounty has identified three different target market segments which they will sell to:
This customer group manufactures botanical supplements for their own label products. The companies purchase the plants and extract the active ingredients and transform them into sellable products for their own brand. There are a handful of large companies that operate in this market space. Ten years ago there were many different ones but through consolidation the industry has grown in size but decreased in the number of different players.
These customers purchase the the plants, extract the botanicals and either sell the concentrated botanicals to the end producers or they themselves produce the supplement and sell the final product to other companies for their private label products. In essence they are the subcontractor for the supplement companies. These companies therefore are one layer within the manufacturing system and do not sell to the end consumer. They act as a supplier/processor for the retail brands.
Other Nurseries/Garden Centers
This customer group purchases the plants which they in turn sell at retail to the individual end consumer. The typical consumer is a health conscious individual who is interested in either extracting the botanical from the plant immediately or growing the plant in their own garden for future use.
Botanical Bounty has chosen the three market segments based on the consistent demand for botanical extracts. While there are other potential customers, they are smaller, less consistent in terms of demand, and more difficult to reach. The supplement companies, processors, and to a smaller degree the nurseries are attractive customers due to the their consistent demand and typical long-term contract needs. There is significant value to these customers for a grower to consistently offer the same high level of active botanicals in each plant and to be able to meet the needs of large volume, long duration contracts.
The botanical perennial growing market is typically concentrated in several regions around the U.S. which have optimum growing conditions. While there are a couple mega farms, on the whole, 78% of the U.S. production comes from growers with 5-20 acres of land. Approximately 23% of botanical extracts are grown abroad and imported into the United States. Reasons for botanical growth to occur overseas is typically based on the type of herb and its ability to grow better in the respective region.
The market for supplements is huge and growing:
U.S. Supplement Market
Surveys show that over 158 million consumers (over 55% of the U.S. population) use dietary supplements. An estimated 115.3 million consumers buy vitamins and minerals for themselves, and 55.8 million purchase them for other members of their family, including children. Consumer surveys consistently find that nearly half of all Americans now use herbs - a statistic that is particularly remarkable when we realize that today's herbal products industry is just over a quarter century old.
The basic reason cited for dietary supplement growth is the desire for self-care. Consumers use dietary supplement products to help them achieve their self-care goals that arise out of a sense of alienation from the established health care system. Results from a national survey conducted in 1999 by Men's Health magazine show that consumers use dietary supplements as a means of ensuring good health. They also use supplements for very specific medicinal purposes such as treating and preventing serious illnesses, colds, and the flu; increasing mental sharpness; and alleviating depression.
The consumer's desire for self-care and the widespread use of dietary supplements may cause problems for public health. An estimated 22.8 million consumers use herbal remedies instead of prescription medicine, and an estimated 19.6 million use them with a prescription product.
In the past, except for vitamin and mineral products, dietary supplements, particularly botanical products, were sold mainly to adults in health food stores. In contrast, now such products are available in supermarkets, other retail stores, and on the Internet, making these products readily accessible to children and other vulnerable populations. The Nutrition Business Journal estimated that in 1999, U.S. consumer sales of supplements over the Internet amounted to $142 million, almost three times the previous year's total of $48 million.
The five main channels of distribution are: consumer-direct (includes direct mail/catalog, direct from sales representatives, multi-level marketing, Internet & infomercial/direct from television); food, drug, mass-market stores, health and natural food stores, healthcare professionals and practitioners, others.
Channel of Distribution % of $ Sales
|Food, drug, mass-market stores||30%|
|Health & natural food stores||20%|
|Healthcare professionals / practitioners||4%|
The 10 largest companies in the botanical and dietary supplement market account for 83% of the total U.S. annual market.
Company 2001 Sales
|General Nutrition Companies||$1.4 billion*|
|Nu Skin Enterprises||$921.60|
|Weider Nutrition International||$335.50|
As mentioned previously, competition takes two forms, farms similar in size and production capacity to Botanical Bounty and megafarms. The similarly sized farms range in size from 5-30 acres. The number of different herbs grown varies from a handful to upwards of 50. The choice of plants grown is based on owner preference as well as location and the ability of the local growing conditions to support the different plants.
On the other end of spectrum is the megafarm. These farms have a similar range of species cultivated, however they differ greatly in production capacity. These farms are huge, typically not less than 100 acres, peaking at 300 acres. These growers however are few number.
The buying patterns of the different customers are typically based on these variables: