Sephora gathers startups. Bugs as a feature. 3D printing pills.
An unexpected player announced last Thursday that it had raised the largest CPG investment in 2018 to date.
Ancient Nutrition, based in Florida, sells protein and collagen supplements based on bone broth. The brand raised $103M from VMG Partners, Hillhouse Capital Management, and a long list of individual investors ranging from celebrity trainer Jillian Michaels to Stonyfield Farm chairman Gary Hirshberg.
Earlier this month we also saw investors pour $40M into Hims, a direct-to-consumer supplement startup targeting millennial men worried about hair loss and aging.
Then on Monday, major CPG leader Clorox announced plans to buy supplement maker Nutranext for $700M.
So, what’s up with supplements?
First, it’s worth noting Ancient Nutrition’s pedigree may have attracted investors as much as its products.
Its co-founder Jodan Rubin previously founded Garden of Life, acquired in 2009 by Atrium Innovations, which was in turn acquired by Nestle in December 2017 for a whopping $2.3B. Other co-founder Josh Axe is an influential wellness writer, and the brand has plans to expand into Asia.
But, Nestle’s acquisition of Atrium Innovations, along with Clorox’s acquisition of Nutranext this week, calls attention to a growing CPG strategy — buying your way into healthy markets by snapping up supplement brands.
Over the longer-term, we could see the following results:
1. Food and beauty brands will cross-brand with vitamins. Vitamin-enhanced foods and cosmetics have taken off over the past few years, and we expect the trend to continue.
These products could compete with stand-alone supplements — but, food and makeup companies could also lend their products a healthier halo by partnering with, investing in, or acquiring supplement brands.
2. Personalized supplements will pave the way for personalized food products. Personalized supplements are gaining traction in a way we’re not yet seeing in food. Using AI and 3D printing, startups like Multiply Labs offer pills designed specifically for each user.
It’s much easier to print a pill than a custom granola bar or hamburger. But, personalized products can be great tools for brands — they lock shoppers in and collect large amounts of personal data.
We may see food brands adopting some of the same technologies used by customized supplement startups — for example, rather than personalizing the entire food product, embedding personalized supplements into foods and beverages.
3. Growth in supplements won’t save vitamin stores. Leading vitamin/supplement stores like GNC and Vitamin Shoppe have been struggling (stocks down 42% and 75% respectively over the past 12 months).
At the same time, big corporates and VCs are flocking to supplements — but these new brands aren’t boosting store foot traffic. They tend to sell directly-to-consumer and offer subscription plans.
Furthermore, as we see more overlap between food, beauty, and vitamins (trends #1 and #2), even if vitamin brands do sell through stores, they’ll be more likely to target grocery and makeup retailers.
Ancient Nutrition, for example, sells through Whole Foods and Ricky’s (a regional beauty chain) in NYC, while supplement startup Hum Nutrition chose to sell through Sephora.
Between growing demand, new ingredients, and changing distribution strategies, food leaders, beauty brands, and grocers alike would be wise to keep an eye on supplements.