The average supplement store can make $100,000 per year in income. The industry’s average profit margin is around 38 percent.
In this age of awareness and modern technology, people are always looking for ways to better themselves, and many turn to supplements. Supplement companies are known to create and market – but don’t actually manufacture – these supplements.
According to reports, the supplement industry is enormous, strong and offers lots of potential. In-store sales at health stores have been growing at a respectable 4.5 percent annually, and online vitamin and supplement sales have been growing at 12 percent each year.
When put together, these industries account for more than $30 billion annually and have over 100,000 businesses. People who start supplement companies are individuals who have personally used supplements and appreciate the benefits they offer.
Marketing supplements requires a fierce tenacity, and being passionate about the products helps business owners keep going after sales. A typical day at a supplement company tends to involve talking with manufacturers, distributors, retailers and/or customers. Since supplement businesses don’t actually manufacture their products, there’s little hands-on work.
The target market for a supplement company is anyone who would benefit from the supplement. Products may be sold directly to customers, or through distributors and retailers. However, the exact amount they make can vary depending on some industry based factors.
Note that no two supplement companies generate the same income, and this tends to vary based on these factors mentioned below.
7 Factors That Determine How Much Money Supplement Companies Make Yearly
The primary responsibility a Supplement company owner is to provide customers with the highest-quality supplements possible. Everything from the ingredients used in the formula to the packaging used for the product is expected to be top-notch.
Since most supplement companies use contract manufacturers, that decision tends to impact the future of the supplement line, and how much it will cost to get the supplement manufactured. The price of your project and production time coupled with other factors tend to affect the price of the supplement and the possible income of the company.
2. Supplement Packaging
Note that some ingredients are sensitive to air, light, temperature, and require very product-specific packaging. Such formats that differ from the standard packaging tend to be expensive.
Manufacturers looking to cut down their costs will strive to obtain an altered supplement containing different ingredients that can make the product less safe and effective but easier to pack. Irrespective of the mode of selling, the packaging format will greatly affect the demand of the product and influence the income of the company.
3. Branded Ingredients
Utilizing patented ingredients over the standard ones can also contribute to a higher manufacturing cost. Note that these products guarantee that specific compounds or strain produced work better than standard ingredients. For example, ingredients like FloraGlo (lutein) and BC30 (probiotic strain) cost more than standard ingredients. The more it cost to produce, the higher the price it is sold to customers.
4. Testing and Certifications
Some specific ingredient verification processes are costly. 3rd party ingredient testing and certifications like getting a product USP certified will without doubt drive up the price. But at least consumers will be assured that they are not buying questionable, low-quality products.
Even producing supplements that are organic, allergen-free, vegan, kosher, etc. require the appropriate certifications and testing. The production costs and possible income of the company may go up or down depending on these factors too.
5. Product Form
Have it in mind that the way a supplement is manufactured plays a key role in its final cost. For instance, supplements manufactured in tablet form have a lower cost of manufacturing than capsules. But, these have certain disadvantages like being harder to digest due to the addition of fillers and binders.
Even though capsules are better than tablets, liquid supplements that tend to be more expensive are preferred over them. This is because liquid supplements are better absorbed and don’t use additives. Nonetheless, each dose form, whether tablets, liquids, capsules, or powders have their pros and cons and are likely to affect the business income.
6. Raw Materials
Supplement prices can vary drastically depending on the origin (synthetic or natural) and seasonality of the ingredients.
Synthetic ingredients are known to have lower production cost and eliminate the need to manage natural sources from which the functional principles are to be extracted. However, synthetic raw materials cannot match the quality of natural raw materials.
The bio-availability or seasonality of the raw materials in the product is another factor that can influence the final cost of your supplement. Plus, most natural ingredients will not be available throughout the year, or their prices might increase during certain months, such complications also affect a supplement’s manufacturing cost.
7. Ingredient Sources
Note that ingredients developed after years of research are likely to cost more. Glucosamine, for instance, is derived from sharks and is expensive compared to products made from bovine sources. Calcium carbonate is cheap and abundant, but some research studies show that its costlier substitute calcium citrate may be better absorbed in the body.
If a Supplement company incorporate ingredients like these in their supplement, the cost of manufacturing will go up. This also implies that the final product will be technologically advanced and better than most in the market. And the cost will be reflected in the final price of the supplement.
Owing to these factors and the number of sales generated by the company, the income and profit of a particular company can differ from another in the same market.
The Estimated Profit Margin for a Supplement Company
Supplements typically sell from just a few dollars to more than $100. Price is normally a matter of how rare a supplement’s ingredients are and what benefits the supplement provides. Companies that sell directly to consumers aim for a 10 to 40 percent profit margin.
Those that sell through distributors frequently see a 5 to 15 percent margin. However, many supplement companies increase their sales and profits by developing more supplement products.