Even as inflation has forced consumers to make hard cuts and purchasing decisions when it comes to grocery shopping, the macro shift towards health, wellness and functional products has continued to push ahead. For Tracey Warner Halama, CEO of Nestlé Health Science-owned collagen products brand Vital Proteins, navigating the market for functional food and beverages today is not just a question of keeping consumers interested in collagen, but how to expand the brand with new demographics and into new parts of the store.
The global collagen market is projected to reach $19.9 billion by 2030 at a CAGR of 10.2%, according to a January report by Grand View Research, and in the U.S., Vital Proteins is the clear leader of consumer-facing collagen products. We spoke with Halama to learn how the brand is continuing to grow in the face of rising prices, rising competition and – much to Vital Protein’s benefit – rising consumer interest in collagen and other functional ingredients. This interview has been edited for length and clarity.
What does the current roadmap for health and wellness trends within the food and beverage space look like to you? Which trends are gaining the most momentum and are there any current trends we’re moving away from?
I think from a functional standpoint, functional ingredients still are very critical, [including] multipurpose uses like collagen, which supports hair, skin, nails, bones and joints. I’d also say, adaptogens, nootropics, mushrooms – anything that provides that functional benefit in the realm of energy, sleep or detoxification. We’re looking for so much more from what we’re consuming, whether that be food or beverage. So, how do we get the most bang for our buck with the ingredients that we’re putting into our bodies?
I also see a lot of focus right now, especially coming out of Expo West, on the sober curious movement. [There are] so many new brands that are going in and really talking about adaptogens and mushrooms and ‘How can I really embrace the social aspect of happy hour?’ if you will, but not embracing the alcohol aspect of it. We’re seeing a lot of our customers pair our flavored collagen, like our lemon collagen, with their favorite mocktail. So that seems to be a big trend that is continuing and just by seeing how many new brands were at Expo West this year, I think that that’s a trend to be on the lookout for.
As it relates to things that Vital is stepping away from, it’s really about the planet. Single-use plastic, as an ethos, doesn’t feel very on brand for us. I recognize that there’s a lot of great brands out there that are still putting their beverages in single-use plastic, but that’s a big initiative for Vital Proteins. As an example, in 2023 we’ve taken our plastic scoops out of our canisters, and that is between 250,000 and 300,000 pounds of plastic being eradicated. So that trend is going to continue with what we’re doing.
Where does household penetration of collagen products stand? Is its growth still strong enough as a standalone proposition for Vital Proteins? What is the competitive landscape for collagen and how do you defend your position as a leader in the space when new brands race into the category?
Obviously, the landscape is very different today in 2023, than it was back in 2016 or 2017. Back then there were a handful of brands. Now on Amazon, as of last month, there were 227 brands selling collagen peptides in some format. So it’s definitely evolved, and there’s been a huge interest in collagen.
The good news is in 2022 our market share increased 10 points, so we’re now sitting right around 60% of the ingestible collagen market and we’re extending our market leadership position. I think that’s really due to the amount of time and energy we invest in education. Collagen now is much more of a mainstream ingredient than it was even a couple years ago, and we’ve had a laser focus on household penetration and making collagen more accessible to the masses.
Our new campaign ‘Everybody With a Body’ features a 72-year-old man doing a cartwheel. So I think that that’s part of our brand evolution, to make sure that we all benefit from collagen and you don’t have to be 35 and beautiful with a big TikTok or Instagram following.
You can be someone who’s a baby boomer or a Gen Xer who really just wants to embrace a healthier lifestyle.
As the price of household staples rises significantly and consumers wallets tighten, has your approach to pricing promotion changed? What about marketing in light of inflation?
We’ve made a very conscientious effort to ensure that, in keeping with that whole spirit of collagen for the masses and bringing collagen to different demographics and generations, we really keep the price point down. For example, in the active nutrition category for the past five years the average price increase has been 36%. If you look at vitamins, minerals, and supplements, that category has increased 15% over the past five years. Obviously, we can talk about some other consumer products that have increased a lot more than those, but if we look at Vital Proteins our average price has increased two and a half percent over the past five years.
We’ve gotten much more efficient with how we manufacture and how we bring to market our products; we own our own manufacturing facility here in Chicago, so we’re not reliant on co-mans like a lot of other brands and it’s enabled us to really keep our price point very accessible to the average consumer.
Along those same lines, we want to do more of an everyday low price strategy. We don’t actively promote as much as other brands or other categories; we’re promoting usually 14-to-16 weeks a year, compared to the straight up beverage industry, [where] I think it’s more like 24-to-26 weeks a year. So we really try to deliver a solid value in terms of what the everyday low price is.
As it relates to marketing, I mentioned earlier about ‘Everybody with a Body.’ That’s a big campaign, making sure that collagen supplementation is part of the daily wellness routine of our consumers. We want to make sure that we’re educating in a very science-forward approach and even since the beginning of time at Vital we’ve always been very committed to three values, which are transparency, quality, and clean label. They’ve really guided our marketing approach and have helped us differentiate between what Vital Proteins collagen is, and the 226 other collagen providers in the marketplace.
How are you approaching channel strategy today? What parts of the store do you most want to be in and which channels do you see the most room for Vital Proteins to grow in?
Since I’m a former chief revenue officer, and sales is near and dear to my heart, distribution has always been a critical strategy for Vital. That really enabled us to grow as quickly as we did grow over the past nine years. We’re currently in 70,000 doors and I’m a big believer in a data-driven approach; where our ACV is, where opportunities are for whitespace – you’ve got to have the right products in the right doors with the right accessibility. And obviously, you have to have pricing and promotional strategy to support it. But that’s how we’ve had success thus far.
As we think about how we’re going to continue to grow innovation, a big piece of that is we really dominate the active nutrition, sports nutrition, vitamin and mineral, and even Women’s Health categories. But where we’re not as visible, and where the brand awareness is a little bit less, is in the center store. I think the big opportunity is [there], be it snacking, bars, bites, breakfast – those are all areas of opportunity for us.
We’re a little less bullish about cold chain distribution, just because it’s not core to our model. I think that there’s a lot of opportunity for other brands out there to do something in the cold chain distribution space with collagen and adaptogens and nootropics.
For us, the real opportunity is expanding more into the center store and then, from a merchandising perspective, making sure that we show up in produce, because a smoothie with a banana and Vital Proteins is a really good opportunity.
On that note, how has a variety of product formats been important to growing the brand and where can you innovate from here?
Up until now, I’m going to say somewhere in the neighborhood of 98% of our products have been collagen-based. That’s what we’re really known for, that’s our true north star. I think as we evolve as a lifestyle brand, and as we talk about even the naming convention of Vital Proteins, we’ve earned the right to go play in adjacencies.
We just launched a new product called Daily Greens, and it’s a supplement that does not include collagen. It’s a powerful, nutrient-rich green powder with two servings of fruits and vegetables and probiotics for immunity and digestion support. These are all adjacencies that feel very, very true to who we are as a company. We launched our green apple flavor of Daily Greens with great success at Expo West and we’ll be thinking about how we can do line extensions off of this product in both the Greens arena and in other similar adjacencies.
You also sit on the board for beauty brand cocokind and Naturally Chicago. What does the investment M&A landscape look like today for smaller functional product brands? And what advice do you have for startups seeking capital in this environment?
Find that true north star. There’s a lot of young brands that want to be all things to all people, so having that unique point of view, making sure that you hone your value proposition. We launched into the market with very unique packaging: Our branding was very different at the time, back in 2015, and it was bright and colorful. Now, there’s so much great branding out there, so making sure that you’ve got standout branding and a strong social strategy is really important and having a path to profitability.
Since we are now part of Nestlé Health Science and Nestlé does a fair amount of acquisitions, it’s interesting to see the different viewpoint on which brands would be likely to be acquired. One thing that’s very true now, and I think it’s different than it was even two or three years ago, is you have to have a profitable business model. So making sure that you’ve got that path to profitability from day one and you have the ability to reinvest some of your profits back into the business. But showing that you can run a really sound operational cadence is critical.