Negative Economic Impact of Claims Regulation on EU Supplements Likely to be Huge – Study

There is an expectation from industry that the ‘other substances’ part of the EU market for food supplements may decrease in size by about 25% (EUR645 million at the ex-production facility level or EUR1,031 million at retail level) and result in a 30% loss of gross profitability (EUR242 million).

Oct 1 2010 --- The economic impact of the European Regulation on Nutrition and Health Claims on the EU food supplement sector and market will be highly negative, according to the findings of a new impact assessment study. While companies operating in the European vitamins and minerals space (50-55% share of the EU market for supplements), which has had many ‘general function’ claims approved so far should be limited, companies operating in the rest of the supplements market (i.e. other substances) believe that they will suffer dramatically from negative opinions on claims, particularly SMEs. There is an expectation from industry that the ‘other substances’ part of the EU market for food supplements may decrease in size by about 25% (EUR645 million at the ex-production facility level or EUR1,031 million at retail level) and result in a 30% loss of gross profitability (EUR242 million).

Speaking at the European Health Claims Alliance (EHCA) Health Claims Conference in Brussels yesterday, Graham Brookes, an independent consultant and analyst presented the findings of an industry survey (April-July 2010), commissioned by the EHCA. Respondents accounted for nearly 18% of the EU food supplements sales and 25% of ‘other substances’ sales and was therefore ‘reasonably representative’of the EU market for food supplements, which was worth EUR8.2-8.6bn in 2009 at retail level.

Additional costs associated with, for example, stock and packaging write offs and changes, would likely add EUR291 million resulting in short term losses equal to two-thirds of the annual gross profits in the ‘other substances’ market and 41% of total gross profits in the broader market, including vitamins and minerals. Employment generation is expected to fall by about 13,300 full time equivalents, equal to 18% of total employment in the “other substances” part of the sector (excluding employment impacts in the retail sector e.g. small nutrition shops).

“Our study looked at the impact of the European Health Claims Regulation on supplements to date, but because the vast majority of the opinions on claims made by EFSA so far haven’t been made legal opinions yet, the impact to date has been limited. This is because most companies that sell products with health claims for which opinions have been made,choose to not make changes until a final decision has been made legal,” Brookes told FoodIngredientsFirst.

“It is more convenient from the point of cost to make all changes at once if necessary, as well as because of competition issues. If you are selling a product with a health claim and no longer use it and somebody sells a similar product with a health claim that hasn’t yet had an opinion, you are essentially losing out because of the importance of health claims in the decison making process of consumers,” he added.

John Redman, Group Managing Director of Merck Consumer Health Care UK and Chairman of the Health Food Manufacturer’s Association (HFMA) from 2006 to 2010 was not surprised by the study results, with similarly negative results reported in a previous HFMA study in the UK [loss of one third of the market in ‘other substances’]. Redman welcomed the revised approach on Health Claims that was announced by the European Commission on Monday, but noted that from many respects “nothing has changed”. “As EFSA continues to work on traunches 3 and 4 the distortion on the market remains,” he added.

Basil Mathioudakis Head of Unit: Food Law, nutrition and labeling at DG SANCO at the European Commission, who spoke at the event, was adamant that health claims should be based on sound science. When asked by FoodIngredientsFirst afterwards to respond to the industry concerns about the Health Claims Regulation stifling innovation in the food sector, he said, “We take the issue seriously. But we want real innovation and we do not think that innovation can be built on misleading claims. Therefore, yes innovation, but there should also be the scientific basis for what is put there.”

by Robin Wyers