Regulatory change and future scenarios for Solgar supplements

Business Management

Jack Watson

Organizational Change

Solgar is one of the foremost manufacturers of vitamin, mineral and herbal supplements in the nation. It has a long history of providing quality products to consumers who are interested in alternative methods for improving health and treating ailments. Throughout its history, Solgar has been faced with a number of changes that have fundamentally altered the way in which business is conducted. From the passage of legislation to the discovery of new supplements and uses for supplements, the organization has been faced with difficult challenges and has found a way in which to cope. Over the next twenty years the vitamin industry is challenged with a significant number of external forces that will undoubtedly cause Solgar to change the way it does business. One specific change that is virtually inevitable has to do with the regulation actions that were enacted in 1994 by the Dietary Supplement Health and Education Act signed by President Clinton. Many of the stipulations that were detailed in the bill have never been fully implemented but considerable action has been taken in Congress to change that fact. Much of the impetus behind the change has to do with recent problems with supplements that have made significant headline news. Therefore, Solgar is faced with major changes in how it will be regulated and while these changes may improve the quality of the overall product and methodology for distribution, it may also signal the end of the company and many companies like it.

This paper focuses on the changes that will undoubtedly impact Solgar over the next twenty years by analyzing the driving forces behind the changes and by examining the possible outcomes of those changes. To accomplish this it will be useful to examine how the proposed changes affect the demographic, economic, technological and social impact of the changes to fully understand how Solgar's business will be modified. Once those elements have been determined it will be possible to discern two different outcomes that could be reached as a function of implementing those changes. Through this analysis it will be possible to determine in which ways the major changes imposed by legislation may affect one of the country's largest manufacturers of vitamin, mineral and herbal supplements. However, as Schwartz points out "Scenarios are not predictions. It is simply not possible to predict the future with certainty." (1991, p. 6) Therefore, these determinations are simply possibilities of future events. Nevertheless, it is a useful exercise to examine what the impact of those changes could be in a long-term model.

Consequences

The consequences of implementing the Good Manufacturing Practices in theory sound like an ideal step to improve products that consumers purchase. However, legislation of this nature necessarily assumes that all companies fail to provide their own processes to assure the products they provide are of a high quality and are safe for use. Still, the poor choices of some have put the entire industry at risk and have potentially prevented many people from obtaining the nutritional supplements of their choice. Thus, based on the analysis of the directions that Solgar could take as a result of the imposition of such standards two distinct possibilities are worthy of analysis.

The first reality envisions a nutraceutical industry that is very much like the pharmaceutical industry only to a larger degree. The companies that manufacture vitamins, minerals, and herbs for consumers merge into two or three major conglomerates with the resources and wherewithal to support the mandated regulations and still remain competitive. As a result of the mergers and acquisitions many of the people who work industry now will be forced to find employment elsewhere. This is not a purposely bleak projection for the workers of those companies but should be mentioned to describe the impact of the change. Further, the cost of nutritional products could rise to the highest level ever with the fewest number of supplements available. Most retailers will only be able to carry basic vitamins and minerals which may be kept in the pharmacy area because of their enormous expense. It is not out of the realm of possibility that the supplements themselves will be provided by prescription only and be covered under health plans. Unfortunately only a small percentage of the people who now use supplements for prevention will be able to acquire them and then only after being treated by a physician. This reality is not intended to be purposely dreary but simply reflects the necessities of doing business in a competitive environment with the number of products being considered. The major costs associated with medical trials, research, product tracking and other steps that are required by the drug manufacturers are simply not possible for the number of products manufactured by many of the larger supplement companies such as Solgar.

The second reality is one that effectively closes down the industry because of the costs involved. Companies faced with such significant requirements as imposed by DSHEA may at first attempt to comply but in the end may only be able to provide one or two products. Many of the companies that are in the industry today are family run and take a great deal of pride in the products that they manufacture. Rather than sell their companies to a large conglomeration many of these manufacturers would rather close the doors. This presents a possibility of many companies shutting down and the resulting effect that their closures would have on many local businesses. In virtually every city there is at least one supplement store that purchases their goods from many of these small manufacturers. When the supply of product disappears, these stores will also be unable to remain open. In the end, the industry may simply disappear in the United States. This creates another problem because the demand will not go away simply because the product is no longer available. Therefore there is a possibility of creating a black market for nutritional supplements manufactured in foreign countries. A willingness to purchase products illegally that cannot be obtained in the United States at a low price or at any price is already going on in the pharmaceutical industry. It does not seem improbable that such an activity could take place in this industry as well.