Growth challenge: NZ supplements sector’s huge potential hampered by regulations and low capital

By Tingmin Koe

- Last updated on GMT

The New Zealand natural health products industry’s combined revenue last year was NZD$2.3bn (US$1.4bn), up 64% from five years ago. ©Getty Images
The New Zealand natural health products industry’s combined revenue last year was NZD$2.3bn (US$1.4bn), up 64% from five years ago. ©Getty Images

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The New Zealand natural health products industry’s combined revenue last year was NZD$2.3bn (US$1.4bn), up 64% from five years ago, but the potential of even greater growth has been hampered by regulatory restrictions and low working capital.

About half (51%) of the natural health products companies are small medium enterprises (SMEs), of which only 41% paid more than NZD$1m (US$646k) in salaries, Kerry Warn, the GM of industry organisation Natural Health Products New Zealand (NHPNZ) said during its annual summit held online last week. 

Exports wise, the industry traded products worth NZD$642m (US$415m) last year.

This was 125% higher than five years ago and China, Australia, the US, and Canada were its biggest trading partner.

About seven in 10 of the companies export their products overseas.

Exported goods include mussel extract powder, plant and marine oils, kiwi-based specialised ingredients, berry fruit powders and concentrates, natural honey products, and deer velvet.

Despite the domestic and exports growth, the association found that there were still a number of barriers hindering growth from an industry survey.

Respondents identified 1) restrictions stemming from the country’s and international government’s regulations, 2) increased competition, 3) increased operating cost, and 4) the cost of getting the product out into the market, as barriers to growth.

Hands are tied

The country has been debating the passing of the Natural Health and Supplementary Products Bill for almost a decade, but progress has been slow.

The bill calls for the establishment of a system for regulating low-risk natural health products. The industry also believes that it could help boost exports​ and consumer confidence.

In 2017,  it was withdrew from the parliament’s agenda​.

The latest development was that the first reading of a replacement bill was promised to take place before the 2020 election due on Sep 19.

This has yet to occur and Lorraine Moser, chair of Natural Health Products NZ, responded that: “The Government can put up a Bill for Medicinal Cannabis with a short consultation period and pass it through in the space of a few months.

“Why can’t this be done with regulation that is ready?”​ she said.

Instead, the government is consulting on extending the existing Dietary Supplements Regulations 1985 by five years, from 1 March 2021 to 1 March 2026.

“The aim of this bill is to maintain consumer access to New Zealand dietary supplements until a fit-for-purpose regulatory regime is expected to fully commence,”​ it claims.

Another director of Natural Health Products NZ, Phil Rasmussen, commented that New Zealand was the only developed country in the world where Good Manufacturing Practice (GMP) certification was not required for the production of natural health products.

“Some companies choose to do so voluntarily, but products not manufactured to GMP compete with them and the NZ consumer can't easily tell the difference,” ​Rasmussen said.

“Furthermore, there is no definition of a natural health product or complementary medicine in NZ legislation.”

Low R&D spending

On the other hand, while the sector’s rate of R&D was four times higher than the national’s average, the amount spent on R&D was low.

Over half of the sector (56%) spent only four percent or less of their turnover on R&D.

The lack of capital, time, and regulatory restrictions were cited as factors hampering R&D.

In terms of ingredients, 81% of the respondents said they had used some New Zealand-sourced ingredients, while 27% said they have used more than 50% of New Zealand ingredients or materials in their products.

Award winners

The organisation also held its yearly industry awards event, with nutraceutical firm Anagenix the biggest winner, bagging three awards.

Judges said the firm had demonstrated the power of the networked natural health products industry, with its science team collaborating with various research organisations, such as the Plant & Food Research and the universities.

Established in 2011, the firm was presented the Supreme Award, the winner of the Marketing Award (under the category of NZD$2m and over in sales), and winner of the FernMark Licence Programme Growth Award.

The FernMark Licence Programme Growth Award was given to firms with the highest yoy growth in total revenue and Anagenix last year recorded 300% yoy growth.

Its products are sold in the US, Canada, Australia, Asia, and Europe.

The other award winner in the category was Harker Herbals, which was presented with the highly commended title.

BioEquitas took home the Marketing Award 2020 under the category of under NZD$2m in sales.

The winner of the Cawthron Institute Innovation Award 2020 went to Absolute Essentials for its “Biodegradable Russian Doll Packaging” solution.

Grin Natural Products was titled highly commended under the same award category.  

Minesh Patel, founder and GM of NZ Health Manufacturing Ltd, received the Outstanding Contribution to the Industry award.

“This year’s Awards winners exemplify the great job our sector is doing in continuing to push boundaries with innovations, further enhancing New Zealand’s international reputation as a source of high-quality natural health products,”​ said the awards’ lead judge Lorraine Moser.

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