Supplements Complementing Functional Food Are Attracting Investor Interest

Supplements offering health benefits that aren’t typically available through functional foods are poised for massive growth as the sector gains further interest among consumer investors.

Products delivering substances, particularly adaptogens and probiotics, will most likely grow at an accelerated rate due to a recent increase in the number of consumers looking for ways to improve their immune health during the pandemic, investors predict.

Shad Azimi, managing partner at Vanterra Capital, recently told me how the rise of dietary supplements resonates closely with the growing popularity of functional ingredients, noting that functional foods overall offer positive effects beyond simple nutrition.

“The delivery form is extremely important, and that’s why people want to get extra doses of probiotics from yogurt, and gummies have exploded in popularity,” Azimi explained, adding how new technologies are enabling functional foods to better target mainstream shoppers by enhancing their flavor profiles. 

However, supplements remain appealing to the majority of the U.S. population, according to Azimi, who previously created a wellness platform under Vanterra Capital by purchasing a contract manufacturer that vertically integrated brands offering ingredients such as collagen, magnesium, and vitamins.

The platform was reportedly sold to the Clorox Company

CLX
in 2018 for $700 million.

Buying supplements through e-commerce

Indeed, rising health concerns and the changing lifestyles are expected to drive the global dietary supplements market to grow at an 8.2% CAGR between 2019 and 2027, reaching $230.7 billion by the end of the period, Grand View Research estimated.

E-commerce portals offering favorable discounts and cash-on-delivery features are also expected to open new avenues in the coming years for supplement players, the market research company added.

Fredi, an all-natural supplement brand recently launched by the brother-sister duo Mitch and Chelsea Glaser to help people promote focus, memory, energy, mental clarity, and stress reduction, notes how the pure digital strategy has made their business a success.

“We’ve put our [digital] content at the forefront of our customer acquisition strategy, and the pandemic has driven social media engagement rates through the roof,” Mitch Glaser recently told me. “With our strategy of strictly direct-to-consumer, we’ve seen very good growth in our subscriber base.” 

He said: “It’s hard to put our monthly growth into a ballpark figure, because we probably grew 10,000% [in sales] in December” to reach around $2 million in annual run rate, forcing Fredi to switch to pre orders before running out of its inventory.

“Once we’re back in stock, when we can replicate what we were able to achieve in December… we’ll be well on our pace to do $5 million to $10 million in revenue in the next few months,” Glaser added. “I think we’re just getting started.” 

Scientific validation is top priority

Fredi is among the growing number of supplement brands jumping on the plant-based bandwagon of using natural ingredients to boost energy, cognitive function, and the overall brain health. 

Recently launched supplement company Flume also uses botanicals to help people enhance pre-workout energy and focus, speed post-workout recovery, and support restorative sleep through its three varieties of products — Flow, Bask, and Drift.

Dr. Taryn Forrelli, the naturopathic physician who co-founded Flume, said how she was inspired by her research showing substances in plants can support brain chemistries believed to be at the heart of the flow state when formulating their products.

“It is well established that caffeine enhances dopamine signaling in the brain, so I included a caffeine-containing botanical from the Amazonian rainforest called guayusa in our Flow pre-workout formula,” Dr. Forrelli said in a statement. 

“Another botanical, Galangal, commonly known as Thai ginger, has similarly been proposed to exert its clinically studied effects on mental alertness through the dopamine pathway.”

For any supplement companies looking to fundraise, scientific validation should always be their priority, according to Azimi, because it’s easier to build a brand and marketing story around real science than vice versa.

“We typically don’t like to get involved until there’s proof of concept, and we don’t want to take R&D risks,” he said. “We need a commercially viable product that’s already in the market with very strong demand, and they need expertise and money to fuel that growth.”