Suppliers Have Been Shifting From Weight-Loss Product

The once-booming ephedra business hit lean times in 2003, with sales falling about 60% as retailers and manufacturers dropped the controversial dietary supplement in advance of the federal government’s ban.

Six manufacturers, including Herbalife International in Los Angeles and Metabolife International in San Diego, accounted for about 70% of the $1.3 billion of ephedra sales in the U.S. in 2002, according to the Nutrition Business Journal.

By fall, retailers such as General Nutrition Centers, CVS Corp. and NBTY Inc. halted sales of ephedra-based diet products.

As a result, sales this year are expected to drop to $500 million, the NBJ estimates, with most sales expected to shift to the Internet and mail-order catalogs. “The concerns and liabilities shut down the sales pipeline,” said Grant Ferrier, NBJ’s editor.

Among major suppliers, Metabolife held on to its ephedra-based product perhaps the longest, dropping its popular Metabolife 356 product only last month after several states, including California, banned the ingredient.

“We tried to stay on the path of science,” said Jan Strode, spokeswoman for privately owned Metabolife. “We still believe it’s safe.”

Metabolife’s ephedra sales fell to about $100 million this year, down from $300 million in 1999, the NBJ estimates.

Metabolife has about 150 employees. More than a year ago Metabolife laid off about a quarter of its workforce after retailers started cutting back on orders for Metabolife 356.

Although the company has rolled out new weight-loss products with guarana, bitter orange and green tea, sales are still well below their peak.

“They were really strongly associated with ephedra,” said Ferrier, and were slow to move to alternative products.

Herbalife said it pulled its ephedra products from the market in December 2002. The company declined to comment further Tuesday.

In 2001 Herbalife had sales of $1.7 billion, with about 43% coming from various dietary supplements including ephedra. After the death of founder Mark Hughes, Herbalife was sold last year for about $685 million to two private equity firms.

Advantage Marketing Systems Inc., which sells ephedra products, saw its stock price plummet 23% on Tuesday after the Food and Drug Administration announced its ban. Ephedra products account for about 18% of the Oklahoma City company’s $20 million in annual sales, Chief Executive John Hail said.

Smaller ephedra manufacturers also will suffer from the FDA ban.

“This is going to hurt us significantly,” said Kelly Harvey, vice president of TSN Labs in Murray, Utah. TSN sells two ephedra products online: Thin & Slim Naturally and Extreme Stack. The products account for about 30% of the firm’s sales.

The small firm has 10 full-time employees. “We may have to lay off at least two” of them, Harvey said.

TSN plans to continue selling ephedra products as long as possible, he said. The FDA ban is expected to become effective by spring.

Harvey said the government ban was a “politically motivated” attack on the dietary supplement industry.

“We’ve been selling this product for 12 years now,” he added. “We’ve sold millions and millions of dollars’ worth and we’ve never had a medical claim.”

Some manufacturers say they already have seen a pickup in sales of non-ephedra weight-loss products.

Fred Krause, chief executive of dietary supplement maker Pure Performance Nutrition Inc. in Anaheim, said sales of its ephedra-free Rapid Thermal EF diet pill have surpassed those of the ephedra product it replaced.

“Our sales have increased over last year by more than 250%,” said Krause, without giving specific sales figures.

Longer term, Metabolife’s Strode said the cyclical industry would recover and most manufacturers would find products that catch on with consumers.

“Obesity remains a problem in the U.S. today,” she said. “People are looking for ways to help themselves.”

Times wire services were used in compiling this report.