We continue to be amazed by the relative success of the natural and nutritional products sector in light of a very 'fragile' economy. During past downturns, this industry perceived itself as relatively recession proof, yet the fact that this economic environment was so harsh, the future so unpredictable, and the scope so broad, there were no guarantees we would not be horrendously affected with the crisis coming on the heels of repeated scientific validation challenges for many products in our sector.

Sure, we've been hit during the storm. Sure, companies balance sheets are as fragile as they've ever been. Yet, despite gloom all around, even mainstream media is now starting to pick up on a fact that many on the inside have known for some time (especially those at Expo in Anaheim). Our industry is doing ok. I can't count the number of times in recent weeks that I've heard the term, 'flat is the new up'. It's apparently true. If you are holding your own in this environment, you're doing well, and as an industry, in general, we're doing just that.

So where, if anywhere, is the impact being felt?

A few weeks ago, on my return from the CHFA show in Vancouver, I commented on changes in ordering patterns that major Canadian brands were noticing. As retailers began conserving cash in the current uncertainty, they'd allow inventory levels to drop lower than usual, and when the inevitable point of no return came, they's be ordering in a panic to get inventory available as quickly as possible. On the manufacturer's side, they observed huge oscillations rather than a steady pace of new business.

I had a similar discussion/observation in a call this week with Peter Wennstrom from HealthFocus Europe. He told me about what he termed the 'ketchup effect', essentially nothing....nothing....then all at once - everything. Aside from the crystal clear visual of a ketchup 'accident', the concept made sense and reinforced what I'd discovered in Vancouver. In summary, much, if not all of the business is still there, it's just the patterns and cycles that have been distrurbed. 

Let's extend that argument to the value chain. Several companies not dropping out of the market imminently may be on the sidelines currently as an ultraconservative attitude prevails, but others, thankfully, are operating based on the premise that this is a good industry with a strong future, and current merit in challenging economic times. So those on the sidelines are losing ground and market share to those actively participating. Can we expect the pendulum to swing as these strong companies eventually make up for their current lackof participation and commitment?

I'd say to some extent yes, although the ability and need to discern and measure investment ROI has never been more of a priority. This fact holds true for marketing, research and most other core operations.

So, maybe the ketchup effect in this instance is really the catch-up effect!

Does the same hold true for product introductions? I'd say likely, that many programs are either delayed outright, or have been scaled down. As hunger for new opportunities and products continues to mount on the demand side, we should see increased activity and new product introductions, as there certainly has been a stall on that side of the business. On the flip side, we have seen introduction of innovative formats, as some companies take advantage of changing buying patterns and sieze any opportnity to differentiate.

The next 60 days will be interesting. There are several trade events to watch, there are some sporadic signs of confidence in the general economy, and then we're into the summer months and third quarter. Stay tuned....