Introduction
Inflation
Recession
CPG Playbook
Get in Touch
Vitamins, minerals and supplements (VMS) are a resilient market. U.S. sales were brisk even through the Great Recession. They went from $24 billion in 2007 to $30 billion in 2011, reflecting an annual growth rate of roughly 6%. Today, the VMS industry faces significant challenges to continued growth.
What Consumers Tell Us About Buying Supplements in a Downturn
EXECUTIVE INSIGHTS
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Today, the VMS industry faces a trio of post-pandemic headwinds: supply chain challenges, rising operating costs and an uncertain consumer.
The supply chain is vulnerable partly because supplements often consist of many ingredients, so a problem with any one input can curtail availability of the finished product.
Labor shortages, overseas plant shutdowns and other issues driving up production costs for VMS brands and retailers.
In a recent L.E.K. Consulting survey, roughly 60% of VMS users report that inflation has affected their overall (not just VMS) shopping patterns. Just how much of an effect varies somewhat by generation.
Baby boomers (31%) say they’re not impacted by inflation, which is a significantly higher share than the Gen X (18%), millennial (12%) and Gen Z (24%) respondents who say the same.
Despite these numbers, the average VMS consumer is spending about the same or more on nutritional supplements as they did the previous year (see Figure 1).
Inflation has high impact on shopping patterns
VMS consumers indicate they’re taking a variety of steps to deal with inflation (see Figure 2). The most common are:
The last step is especially common among the largest-spending consumers — those who spend $100-plus a month on VMS — with 35% of this group saying they’re purchasing more at retailers that offer a better value.
On average, consumers with larger monthly budgets appear more inclined than those with smaller budgets to take steps to ease their financial burden in times of high inflation.
buy products on promotion
29%
look for private-label brands
25%
shift to more value-oriented channels
25%
Develop more targeted marketing tactics
Double down on innovation
Fine-tune price pack architecture
Emphasize preventive care
Establish or increase presence in value-oriented channels like mass-market retailers, warehouse clubs and dollar stores.
Diversify points of distribution
Develop more targeted marketing tactics
Double down on innovation
Fine-tune price pack architecture
Emphasize preventive care
Diversify points of distribution
To respond to these consumer concerns, VMS companies should take a page from the playbook of consumer packaged goods (CPG) companies, with strategies that have been effective in the past under similar economic conditions.
Strategies used by CPGs during a recession
Although VMS may be more resilient than other categories, shoppers say they expect to reduce spending if a recession occurs. By following strategies from other industries that have been effective during challenging economic conditions, VMS companies may be able to help consumers maintain their spend on brands they’ve grown to trust.
VMS companies will need to prepare to ride out a downturn
Percentage of respondents
100
90
80
70
60
50
40
30
20
10
0
4%
8%
14%
12%
28%
9%
10%
14%
Over 10% less than last year
6%-10% less than last year
1%-%5 less than last year
Same spend
Total
Gen Z (18-25)
Millenial (25-40)
Gen X (40-55)
Boomer (55+)
1%-5%
more than last year
6%-10% more than last year
Over 10% more than last year
I don't know
N=761*
Legend
Net change**
0%
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About L.E.K. Consulting
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About the authors
Alex Evans, CFA
Managing Director
Alex Evans
Alex Evans, CFA, is a Managing Director as well as the head of L.E.K. Consulting’s Los Angeles office and a member of L.E.K. 's Americas Regional Management Committee. Alex concentrates on consumer-facing sectors. Specifically, he focuses on a diverse set of verticals, including health and wellness, direct selling, specialty retail, sports, television, film, and OTT (over-the-top)/DTC (direct-to-consumer) digital services.
Responding to a recession
Across all age groups, the weighted average consumer expects to spend about 3% less on VMS in a recession (see Figure 3)
of Gen Z consumers say they expect to spend less on VMS
50%
expect to reduce spending by at least 10%
32%
Although inflation is an issue, consumers mention they worry more about a potential recession. Among survey respondents, about 70% express significant concern over the prospect of an economic downturn.
If a recession does happen, the youngest consumers are the ones most likely to dial back their spending.
Geoff McQueen, TMT
Managing Director
Geoff McQueen is a Managing Director and Partner in L.E.K. Consulting’s Technology, Media & Telecom (TMT) and Consumer practices and is based in the firm’s Los Angeles office. He advises clients on growth strategies, international market expansion, new product launches, M&A and digital transformation. His expertise spans digital sports and OTT media, digital fitness, pricing and live events strategies.
Geoff McQueen
Figure 1
Average change in consumers’ monthly VMS spend versus previous year
Figure 2
Inflationary impact on VMS consumer behavior
Percentage selecting impact (N=761*)
Purchase more products that
are discounted/on promotion
29%
25%
25%
21%
21%
19%
14%
24%
0%
25%
50%
To deal with a recession, consumers intend to pursue strategies largely similar to the ones they’re using to deal with inflation, but more plan to do so across the board (see Figure 4).
Consumers currently spending the least on VMS — under $25 a month — expect to reduce their spend by 4%. That compares with an expected reduction of just 1% among the group spending $100-plus a month.
(1%)
(1%)
1%
0%
Source
*Survey question: How much has the recent rise in inflation impacted your average monthly spending on nutritional supplements when comparing your average monthly spend today to your average monthly spend last year?
**Average change is calculated by taking a weighted average of respondent answers (e.g., 1%-5% less than last year was treated as 2.5%; 10%+ was assumed to be 15%)
Source: L.E.K. survey and analysis
Purchase more store
/private-label brands
Purchase more at retailers that
are offering a better value
Purchase lower-cost
formats of the same products
Purchase fewer
supplement products overall
Purchase supplements
less frequently
Purchase smaller
pack sizes
It hasn’t impacted the way
I shop for supplements
Source
*Survey question: How has the recent rise in inflation changed the way you shop for nutritional supplements?
Source: L.E.K. survey and analysis
For this discussion, let’s focus on the third headwind to understand how inflation and a potential recession are affecting VMS consumer behavior.
Addresses consumers who shift to more value-oriented channels, buy more private-label brands.
Addresses consumers who purchase fewer supplements overall.
Focus on claims related to preventive healthcare that can potentially limit traditional healthcare costs.
Addresses consumers who purchase smaller pack sizes, shift to more value-oriented channels, buy more on promotion.
Build value offerings in non-club channels like drug and grocery stores where larger packs are not as readily available.
Addresses consumers who buy more private-label brands, buy fewer supplements overall, buy more on promotion, shift to lower-cost formats.
Bring compelling ingredients, new formats (e.g., “many-in-one” solutions) or other novel solutions to market.
Addresses consumers who buy more on promotion, buy more private-label brands.
Offer personalized discounts and other appeals to specific consumers.
16%
12%
14%
23%
7%
21%
3%
5%
N=91
Learn more
10%
11%
6%
30%
13%
12%
14%
4%
N=190
17%
7%
5%
32%
12%
14%
10%
3%
Learn more
N=282
13%
14%
15%
21%
14%
14%
4%
5%
N=198
100
90
80
70
60
50
40
30
20
10
0
Percentage of respondents
Legend
Net change**
Total
Gen Z (18-25)
Millenial (25-40)
Gen X (40-55)
Boomer (55+)
3%
(6%)
(3%)
2%
2%
N=761*
N=91
N=198
N=190
N=282
19%
8%
9%
31%
5%
8%
7%
14%
20%
10%
12%
26%
6%
6%
11%
9%
16%
16%
15%
25%
7%
10%
5%
6%
32%
19%
13%
14%
2%
12%
3%
4%
20%
12%
12%
26%
5%
8%
7%
9%
Over 10% less than last year
6%-10% less than last year
1%-%5 less than last year
Same spend
1%-5%
more than last year
6%-10% more than last year
Over 10% more than last year
I don't know
Figure 3
Recessionary impact to VMS spend, by generation
Source
*Survey question: If there were a recession, what impact do you expect it would have on your average monthly spending on nutritional
supplements compared to today?
**Average change calculated by taking a weighted average of respondent answers (e.g., 1%-5% less than last year was treated as 2.5%;
10%+ was assumed to be 15%)
Source: L.E.K. survey and analysis
Figure 4
Recessionary impact on VMS consumer behavior
Percentage selecting impact (N=761*)
0%
25%
50%
Purchase more products that
are discounted/on promotion
Purchase more at retailers that are offering a better value
Purchase more store
/private-label brands
Purchase fewer
supplement products overall
Purchase lower-cost
formats of the same products
Purchase supplements
less frequently
It wouldn’t impact the way
I shop for supplements
Purchase smaller
pack sizes
34%
30%
39%
28%
27%
24%
16%
15%
Source
*Survey question: If there were a recession, which of the following changes to your nutritional supplement shopping habits would you expect to make?
Source: L.E.K. survey and analysis
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