Quick Hit Summary
Purchasing supplements can get expensive in a hurry. However, buying the highest priced supplement does not always mean that you're obtaining the best one. Rather, the cost may be a reflection of the business model practiced by participating company brands and distributors as the supplement goes from crude starting materials to "on the shelf" product. Thus, purchase your supplements from those who sell high quality products as well as eliminate unnecessary expense blocks.
New Year Resolution Series
This is the 2nd part of our New Year Resolution Series. This collection of articles focuses in on popular topics which tend to get brought up at the start of every year as individuals pursue their newly minted health and performance goals. The other articles in this series are as follows:
Supplements – Yes, I DO Like Them!
Figure 1. An overview of the various business models that will be discussed in this article. Image created by Brian Putchio.
I am a registered dietitian (RD); that coupled with the title of this article, "Expensive Supplements – Why?", along with the fact that my last few nutraceutical articles have went against marketing claims, you're probably saying to yourself:
"Oh great, another RD writing an article stating that supplements are a waste of money and we can get everything we need to optimize our physical goals by eating a sound, healthy diet."
However, before you get too deep into that line of thinking, I want to stress that this couldn't be further from the truth. Although I never force supplements on anyone, I do encourage certain ergogenic supplements to people (if they're interested) depending on their individual goals. Remember – good supplements do exist… Unfortunately there are just a lot of junk ones that give the industry a bad name!
My definition of a relatively "clean" diet: To make sure we're on the same page, I define a "clean" diet simply as eating a variety of minimally processed whole foods 80-90% of the time + supplements specific to your needs (including processed ones like protein shakes, etc). As you can see, in stark contrast to that recommended by some guru-"esque" personalities out there, my definition of "clean" is nothing too anal where certain foods are taboo/banned… But then again, I'm NO guru!
On a similar, but related topic, I'm not going to say that your diet must be perfect in order for supplements to be effective. As stated by Dr. Jose Antonio, 100's of studies have shown creatine and caffeine to be effective; yet not one of them demanded that the study participants "clean up their diet." prior to taking the supplement1. (Although a few acute studies may implement a 0-3 day standardized diet prior to testing.) Don't get me wrong, relatively speaking, I'm all for eating as clean as tolerable as I feel this will enhance your ability to achieve your physical performance goals (SEE SIDEBOX). It's something I stress in my nutrition consultations with individuals as proper training + a relatively whole food based diet + proper supplementation = most efficient results! Yet, one may receive benefit from a given supplement despite less than ideal food eating habits.
Thus, before we proceed into my discussion on "Expensive Supplements", I want to make sure that these 2 key points, discussed above, are clear:
- 1) I AM a fan of supplements
- 2) I DO NOT feel that a diet must be 100% perfect/clean for supplements to be effective. (Although a relatively "clean" diet as described in the sidebox + proper supplementation will help you reach your physical performance goals MUCH more effectively than a mostly garbage one + supplementation!)
Ok, now that we have that discussion out of the way and you realize that I'm not just another anti-supplement RD, let's get to the point of this article – Discussing some of the factors that contribute to supplement prices!
Business Model #1 – Huge Marketing Campaigns at ALL Levels
The expense-block figures that are depicted in this article represent excessive expenses that are above and beyond the typical business margins that are necessary to sustain and grow a business. This discussion on expensive supplements is not supposed to be a political statement or attempt at social warfare by declaring that profit is bad. I think everyone in their right mind realizes that profit spurs growth and development. Rather, my goal in writing this article is to explain some of the different reasons why the supplements you're buying may be expensive. Neither is this direct commentary on the quality of the products produced by companies that use one of the business models that I will describe in this article. Obviously higher quality ingredients and greater quality control measurements tend to lead to greater product cost.
Figure 2. Business model #1 and its effect on supplement price. Image created by Brian Putchio.
Levels of Cost Contributing to Final Price
- Level I: Cost to manufacture supplement (machinery, worker's & management salary, etc)
- Level II: Cost of company to promote their brand name supplements via advertisements in magazine/tv/internet/conventions & expos
- Level III: Cost of company to promote their brand name supplements via paid celebrity endorsements/sponsorships
- Level IV: Cost of retail store to promote business via advertisements in magazine/tv/internet/conventions & expos
- Level V: Cost of retail store to promote business via paid celebrity endorsements/sponsorships
- Level VI: Consumer Price (Which includes the typical business margins that are necessary to sustain and grow a business.)
One of the most obvious reasons why your supplement may be expensive is related to the marketing done by the company/brand and retailer in promoting the product. An example of this can be seen in Figure 2 where 5 contributing factors to final product price are built into the equation before even reaching the 6th level, the consumer price; It's worth noting that the final level (ie- 6th level) includes the typical business margins that are necessary to sustain and grow a business.
If I had to guess, this is the business model most individuals are likely feeding with each purchase. However, as we'll discuss later on, not all distributors and companies follow this exact business model. This is one of the main reasons why the regular price of an item can vary so much from location to location.
Expensive Supplements Scenario II – Mutli-level Marketing (MLM)/ Ponzi Schemes
Figure 3. Business model #2 and its effect on supplement price. Image created by Brian Putchio.
Please NOTE: Some pyramid or Multi-Level Marketing plans also have the promotion cost shown in Figure 1. However, for simplicity sake, I chose to leave them out of this figure and discussion.
Levels of Cost Contributing to Final Price
- Level I: Cost to manufacture supplement (machinery, worker's and management salary, etc)
- Level II: 1st line of sales
- Level III: 2nd line of sales (signed up by level I)
- Level IV: 3rd line of sales (signed up by level II)
- Level V: Infinity: 4th line of sales (signed up by level III); etc, etc
- Level VI: Consumer Price (Which includes the typical business margins that are necessary to sustain and grow a business.)
An Example of a MLM Supplement Company: Advocare®. For those looking to see a MLM company in action and how their business plan affects pricing, I refer you to Part III of this New Year Resolution Series
The next business plan worth discussing is that of the pyramid approach known as Multi-Level Marketing (MLM). These businesses tend to produce expensive supplements simply due to the fact that you're paying each "level" of sales. In other words, MLM's can have an infinite # of middle men/women, all of whom receive a profit cut, packed between the end user and actual manufacturer. Therefore, a higher product price is often needed to prevent this business model from collapsing on itself. An example of this would be if someone asked me to sell a supplement, thus making me a "distributor". They would make X% off of each of my sells. I would then go off and convince 5 more people to sell the product. I would then make Y% off my own sales + Z% off of their sales (as well as anyone who they signed up to work below them).
Now, if someone decides to become a "distributor" themselves, depending on the MLM company, they may be able to receive the supplements out a reduced rate vs. retail price; thereby eliminating some of the added cost. However, in my experience, speaking in general terms (as I have not reviewed every MLM supplement company!), even after they get the reduced "distributor" rates, they still tend to be of higher cost than that found in the business models discussed below.
Is Your Distributor Knowledgeable?
One final note I would also add to this discussion on MLM…. Be very careful and question the knowledge of someone trying to sell you products via this technique; In my experience dealing with individuals who are "making BIG money" with these pyramid approaches, their actual knowledge of the product tends to be POOR, while their motivation to simply make money is HIGH. I'm not saying that I expect every supplement salesperson to know the physiological ramifications of taking a supplement all the way down to the nitty gritty biomolecular/DNA replication and transcription level. However, they should have a very good idea of how the supplement is working in your body…
For instance, I worked with an individual who purchased a bunch of expensive supplements via a popular MLM based supplement company. This individual failed to have any success with the products. Thus, they turned to their supplement "distributor" for help; all the advice they were able to get was "I don't know." I personally believe that if you sell any good/service, you SHOULD be able to trouble shoot reasons as to why it isn't working. I guess it all falls back to the basic business idea of if EVERYONE can do it, the knowledge at the point of distribution may be a wee bit watered down.
Ponzi Scheme Pyramid Approaches
An ugly sibling of the MLM approach is the ponzi scheme pyramid sales approach which has an infinite number of levels of people selling the product – yet no one actually receives the final product. Money is made simply by signing people up below you. In other words money is made via bringing people in underneath you to sell the product vs. actually selling the item/supplement to an end-user. This is ILLEGAL.
Some MLM's have come under heavy criticism; many "tip-toe" a fine line between legal supplement distribution & the ILLEGAL pyramid plans discussed above. I refer you to the Bureau of Consumer Protection for greater discussion on how to distinguish between legal and illegal MRM business models
Business Model #3 – Marketing Campaigns ONLY at Brand Level
Figure 4. Business model #3 and its effect on supplement price. Image created by Brian Putchio.
Levels of Cost Contributing to Final Price
- Level I: Cost to manufacture supplement (machinery, worker's & management salary, etc)
- Level II: Cost of company to promote their brand name supplements via advertisements in magazine/tv/internet/conventions & expos
- Level III: Cost of company to promote their brand name supplements via paid celebrity endorsements/sponsorships
- Retailer (no advertising or company sponsored/endorsed celebrities)
- Level IV: Consumer Price (Which includes the typical business margins that are necessary to sustain and grow a business.)
I know what you're thinking to yourself, "OK smarty pants, where the heck are we supposed to buy supplements as basically all supplement sources use one of those above methods!?!?". Truth be told, you're always going to be buying into some sort of a multi-level business profit model. This in and of itself isn't a bad thing. Let me once again make sure you got this straight – I don't feel "profit" is a bad word. Without profit, most individuals would lose the motivation to further research and develop whatever it is that they're working in/on.
Thus, the approach I would suggest in making your supplement purchases is to make sure that you're buying high quality products from those that have the fewest # of expense blocks in their business models. For instance, the place where I purchase supplements uses the business model depicted in Figure 4. As you can see, the cost incurred by the customer at the retail level has shrunk considerably simply because you're not paying the the retailer's advertisement and endorsement bills.
Business Model #4 – Non-existent Marketing Campaigns at ALL Levels
As you know, here at CasePerformance it's our stance to NOT directly name any brand or supplement retailer. However, if you're curious to know where I get my supplements from which have eliminated some of the various "cost blocks" that I describe in this article, feel free to drop me an email or touch base with me on the CasePerformance facebook page And please know, I receive NO commission/% kickback if you choose to purchase supplements from them.
Figure 5 Business model #4 and its effect on supplement price. Image created by Brian Putchio.
Levels of Cost Contributing to Final Price
- Level I: Cost to manufacture supplement (machinery, worker's & management salary, etc)
- Level II: Retailer (no advertising/company sponsored/endorsements )
- Level III: Consumer Price (Which includes the typical business margins that are necessary to sustain and grow a business.)
For the customer, the ultimate business model would be that which A) Has no middle men/women and B) Has no marketing overhead cost at either the brand and retail level. These companies are few and far between, especially if you're looking for one that also produces high quality products. However, they can be found. For example I started purchasing a 100% organic oat bran powder from a retail company that follows this business model. End result…
Cheap Price + High Quality Product = A Smiling Sean Casey … Which seems to result in a similar smiling effect for those who have to put up with me as well ;-)!
Bottom Line
As discussed in this article, there are many factors that contribute to the final price you pay when purchasing supplements. Thus, assuming that we're looking at products of equal quality, I'm all for purchasing it from the distributor that has the fewest expense blocks in their business model!
Now that you've digested Part II of our New Year Resolution Series, I encourage you to check out Part III of our series, Part III: 28 Day Challenges.
A SPECIAL thanks is extended to CasePerformance contributor Brian Putchio who put great effort into designing the figures for this article.
References
1 Antonio, Jose. "Supplement Controversies". Iron Radio. Episode 99. 2011. ~ Minute 33 Accessed from: http://ironradio.org/Audio/99IronRadio_Joey_Antonio_Dietary_Supplement_Controversies.mp3