Weekly News Update

October 5, 2000

OMRI Awarded 100,000 to Consult USDA on Organic Farming, Processing Materials

Eugene, OR-based Organic Materials Review Institute (OMRI) on Oct. 3 announced that USDA has awarded it a $100,000 consulting contract. Beginning Oct. 1 and ending Sept. 30, 2001, OMRI will compile 50 technical reviews--or Technical Advisory Panel (TAP) reviews--of substances under consideration for inclusion on or removal from the National List of Approved and Prohibited Substances for organic farming and processing. Upon completion of its TAP reviews, OMRI says it will recommend a status for each substance to the National Organic Standards Board (NOSB), which provides policy advice in executing the National Organic Program.

Analysts Report Continued Supplements Sales Decline

According to unrelated reports by Carole Buyers, VP at Tucker Anthony Cleary Gull, and Greg Badishkanian, VP of equity research at Salomon Smith Barney, the dietary supplements category is still in a slump. Quoting IRI data, Buyers says the sector reported mass-market growth rates of -5.8% in July and -3.4% in August. She attributes the decline to ""a lack of new products and an increasingly skeptical customer base."" Badishkanian agrees. He says that in the four weeks ended Sept. 10, VMS sales declined by 3.0% year-over-year and that ""this is the fifth straight month of negative year-over-year growth in the food, drug and mass channel."" Additionally, Badishkanian says, nutritional supplements sales in the core naturals channel also remain flat. On a positive note, however, Buyers says the food and beverage category appears to be strong and stable.

FDA Grants Stay on Structure/Function Rules, Rejects AHPA Petition

FDA on Sept. 29 announced that it would grant a stay of the effective date of the Jan. 6, 2000, structure/function regulation. In the Jan. 6 rule, FDA stated that the new structure/function provisions would become effective on Feb. 7 and that any product marketed for the first time after Jan. 6 is expected to be in compliance on the effective date. However, FDA has established compliance deadlines for all supplements claims as of July 7, 2001, for companies with fewer than 500 employees and Jan. 7, 2001, for all others.

According to the National Nutritional Foods Association, FDA has also agreed to grant a stay of compliance for ""pipeline products""—those that were labeled no later than Jan. 6, 2000. These companies will also be given the additional 17 or 11 months, based on their number of employees.

In related news, the American Herbal Products Association (AHPA) said that FDA has rejected a petition that argued that products in compliance with the law previous to FDA’s final rule for dietary supplements claims should be allowed to be labeled up to the end of the relevant compliance period, and that products should be allowed to be shipped even after the end of the compliance period. According to AHPA, FDA says that products not in full conformity with the final rule will be regarded as misbranded if they are found in interstate commerce at the end of the compliance period.

Stock News: NAII Files 10-K Extension; Zila Posts Net Income; GGEN to Be Listed on NASDAQ SmallCap

Natural Alternatives Intl. (NAII) on Sept. 29 filed with SEC to extend the filing of its Form 10-K. NAII was unable to file its 10-K due to delays in converting its foreign subsidiary financials to U.S. accounting principles, the company says.

Zila (ZILA) posted a FY00 net income of $2.9 million or $.07/share vs. a FY99 net loss of $1.9 million or $.05/share. Zila reported FY00 revenues of $77.6 million, up 9% from FY99 revenues of $71.3 million.

Nutritional-ingredients maker GalaGen Inc. (GGEN) on Sept. 29 announced that effective Oct. 2 it will be listed on the NASDAQ SmallCap Market under the trading symbol GGENC due to a temporary exception to the net tangible assets requirement.

CRN Speaks Out Against Labeling Violators

In reaction to Olympic shot-putter C.J. Hunter’s nutritionist’s speculation that Hunter unknowingly ingested the anabolic steroid nandrolone through his iron and calcium supplements, the Council for Responsible Nutrition (CRN) emphasized that under the Dietary Supplement Health and Education Act (DSHEA) and the Food, Drug and Cosmetic Act, it is unlawful for manufacturers to omit supplements ingredients from their product labels. CRN says it supports ""strong enforcement"" against violators of labeling requirements.

Judge Dismisses Lawsuit Challenging Biotech Foods

A U.S. District Judge on Sept. 29 dismissed a lawsuit filed on behalf of advocates of the labeling of foods containing genetically modified organisms (GMOs). The suit challenged FDA’s 8-year-old policy that considers GM and conventional crops to be the same. Judge Colleen Kollar-Kotelly said GMO critics failed to prove that FDA violated laws in establishing policy or show cause why the agency should mandate the labeling of GM foods.

Briefly:

National Nutritional Foods Association Executive Director David Seckman on Oct. 2 applauded CA Gov. Grey Davis for vetoing a bill that would have regulated the sale and distribution of ephedra-containing dietary supplements in CA. In related news, NNFA on Sept. 29 submitted comments to FDA urging it to cease its reliance on inconsistent and inconclusive adverse-event reports as its primary basis for the safety of ephedra-containing supplements.

According to the Santa Barbara News-Press, Wild Oats Markets (OATS) on Sept. 30 closed the CA city’s Milpas Street store. OATS President Jim Lee attributes the store’s sales drop to area road construction.

Supermarket News reported that Harry’s Farmers Market (HARY) will engage in a ""significant management overhaul"" in an attempt to improve its stores’ performance. For the first six months of FY01, Harry’s posted a loss of $2.3 million on sales of $70 million.

Bethesda, MD-based National Institutes of Health (NIH) has established Centers for Dietary Supplement Research at Purdue University in West Lafayette, IN, and at the University of Arizona in Tucson. Each college was awarded roughly $1.5 million a year for the next five years to study botanicals.

Alexandria, MN-based soy producer Northern Food & Dairy on Sept 28 announced the startup of its Fosston, MN, plant, which will produce a natural preservative that will increase the shelf life of baked goods and dairy products.

The 2000/2001 edition of the ""Thomas Food Industry Register"" is now available free to qualified buyers and specifiers. To order, contact 212.290.7341, www.tfir.com.

According to ""Beyond Foodservice…How Consumers View Meals,"" a new report by the Food Marketing Institute (FMI), meal planning and preparation are consumers’ primary frustrations. The report suggests that well-designed and managed meal solutions programs could present lucrative opportunities for retailers. Additionally, FMI says in its ""2000 Report from the Supermarket Pharmacy Survey"" that grocery store pharmacies reported a halt in declining gross profit margins and increases in weekly sales and market share.