Orange County takes a big bite of the $30 billion pie that is the “nutraceuticals” market in the U.S.
The term is an amalgam of nutrition and pharmaceuticals and encapsulates a range of dietary supplements—so-called functional food in industry jargon—which provide health and medical benefits on top of their basic nutritional values. That includes vitamins, minerals, herbal products and other extracts in a number of forms, such as tablets, capsules or powder mixes.
“There’s a heavy presence of dietary supplements companies in OC,” said Frank Jaksch, co-founder and chief executive of Irvine-based natural products company Chro-maDex Corp.
The cluster of nu-traceutical manufacturers here might be helped by OC’s di-verse business landscape, which includes significant concentrations of healthcare and technology companies.
“The nutraceutical industry is very, very small in comparison to ‘big pharma’ and medical devices,” said Thomas Tierney, chief executive of Tustin-based VitaTech International Inc. “We are like the red-headed stepchild. But as this natural product industry gets more credibility and evidence-based, we will be able to assimilate more easily under the big umbrella.”
Jaksch calls it a “fast-growing marketplace” that has reached $30 billion in U.S. sales last year.
ChromaDex has about 40 employees here. Its stocks trade on the over-the-counter Bulletin Board.
The company had $8.1 million in revenue last year, up 7% from a year earlier. It has grown 40% over a two-year period.
Jaksch was recently reappointed chief executive following the resignation of Jeffrey Himmel, who filled the top post for about five months.
The company this year launched BluSci-ence, its first product line intended for re-tail sales. The capsules contain pTeroPure, ChromaDex’s patented antioxidant supplement extracted from blueberries.
“PTeroPure isn’t the only thing we have,” Jaksch said.
A significant part of the company’s business comes from analytics, testing and other support services for various nutraceutical and cosmetics companies.
“We sell a catalog of reference standards and have analytics testing labs,” Jaksch said. “We’ve continued to grow into the way we are because of a lot of the movement in regulation has fueled our business.”
VitaTech also is seeing business grow and finding investment opportunities. It makes vitamins and other supplements in various forms, including tablets, capsules, gels and powders.
The company has grown to see more than $50 million in annual revenue, marking what Tierney characterized as “double-digit growth” last year. Nutraceutical consumers tend to value the products as a means of combating problems from aging, such as the loss of memory, vision or motion flexibility, the VitaTech chief said.
VitaTech began in Costa Mesa in 1954 and now operates out of five facilities in Tustin with about 250 employees. It recently put in more than $2 million into new equipment, which will be used for custom packaging.
Production Boost
VitaTech is expected to boost manufacturing capacities by 30%, helping the annual output of “1.2 billion capsules, 3.8 billion tablets and many metric tons of custom drink mixes,” Tierney said.
The company plans to add about 60,000 square feet of new capacity this year for a total of 200,000 square feet of facility space.
“We have 22 customer partners outside the U.S.,” Tierney said. “As much as 25% comes from outside. Interestingly, much of it is because ‘made in U.S.A.’ is a powerful marketing tool.”
Boscogen Inc. executives agree with that.
The Irvine-based supplements maker has seen better business potentials outside of the U.S. and has taken advantage of that to grow its business.
“Ninety-five percent of total sales revenue is export,” said Geana Phan, the company’s marketing coordinator. “Originally, Boscogen was founded with the intent to sell primarily to the U.S. market, (but) it did not take long for us to discover the extraordinary demand for high-quality, American-made products overseas.”
The company began in 1994 as an offshoot of a pharmaceuticals company that’s now Irvine-based Stason Pharmaceuticals Inc. Stason was ranked No. 11 among OC-based drug makers last year in a Business Journal list.
Since then Boscogen has developed client relationships in 45 countries, including Switzerland, Thailand, Taiwan, Ecuador and Jordan. It has 12 employees and makes about $4 million in sales.
Boscogen continues to get “more responses from overseas than domestically,” Vice President Lynae Chang said.
The company was recognized last month with the presidential “E” Award from the U.S. Commerce Department, given annually to companies that help boost U.S. exports.
Running as an export-heavy company works well for Boscogen, but it carries its risks, too.
“You never know if [overseas buyers] are going to pay,” Chang said. “Payment collection is a challenge. We have to go conservatively. We have to ask for deposits.”
Boscogen also has to register its products in each of its foreign markets.
“A lot of the products are considered over-the-counter or prescription,” Chang said. “We have to register with their ministry of health and submit it like a drug to their local FDA.”
NFL Connection
The company continues to operate out of Orange County “despite the high rent,” because it’s a locale that supports Bosco-gen’s constant dealings with foreign businesses, Chang said.
“OC is a good showcase” for foreign and out-of-state clients, she said. “We’re also close to LAX for international flights.”
Elsewhere locally, Scilabs Nutraceu-ticals Inc. makes custom tablets, capsules and powder blends from its Irvine facility.
The company owns more than 2,000 proprietary formulas, said R.J. Demman, chief marketing officer. The roster of formulas and brands include All Pro Science, a line of nutritional supplements developed by Scilabs in partnership with Tony Gonzalez of the Atlanta Falcons.
“It’s approved by the NBA and the NFL,” Demman said. “Whatever it is you’re manufacturing, you start out with the simple scientific process, the formulation behind it. It goes through the whole mixing process, assembly lines, right down to putting the products into the containers.”
Scilabs opened a new 50,000-square-foot facility last year in Irvine with a focus on producing supplements for the All Pro Science brand.
Nutraceutical companies are finding themselves in an increasingly competitive industry, which has surfaced as one of the “hottest acquisition sectors running,” ChromaDex’s Jaksch said.
Jaksch cited the 2010 deal in which the Carlyle Group in Washington, D.C., bought Bohemia, N.Y.-based nutritional supplements maker NBTY Inc. for $3.8 billion.
Local companies have been tapped, too.
New York-based drug maker Pfizer Inc. in February acquired Alacer Corp., the Foothill Ranch-based maker and distributor of vitamin C supplement products, including its flagship Emergen-C brand of effervescent drink mix. Alacer had grown its annual revenue to more than $120 million before it folded into the Pfizer name.
San Clemente-based vitamin maker Metagenics Inc. also bought Catalina Lifesciences Inc. in Irvine two years ago for an undisclosed sum.
Metagenics has more than $200 million in annual revenue and more than 850 employees in its offices worldwide. It manufactures at its Gig Harbor, Wash., facility and works on bottling and distribution here.
“It’s been robust,” ChromaDex’s Jaksch said. “If you look at the level of large companies acquiring companies in our space, in the private equity space, it’s a huge deal right now.”
