OCTOBER 11, 2024 | SALT LAKE CITY - SEE CHAIR ADDRESS HERE
Typically, I use this opportunity to debrief you on the business of the industry, specific legislative issues that we're working on, threats that we may see approaching from media coverage or potential incursions into consumer confidence, promoting specific programs that CRN has been implementing to improve the climate.
But you've already heard about all of these things from Tara and Andrea and JD and Megan and others over the last few days.
So today I'm going to spend my time talking about the business of the association, the collective nature of an organization that is ironically composed of competitors. A team of rivals, if you will. And the critical importance of expanded collaboration in this industry. If the industry is going to continue to grow. So what is this business of the association and what is it not? Why is it so critical that we achieve a unified voice in the industry? And then lastly, what can each of you, each of us do about this?
You know, trade associations are strange animals. So let's start by stepping back and asking ourselves, why do trade associations exist in the first place? A trade association is typically a not-for-profit organization, made up of a collection of companies and individuals with common interests who work in the same industry.
But trade associations also sit at the very heart of their industry. They act as the personification of the industry that they represent, putting forward the collective view of their members. As the industry's voice, trade associations speak on behalf of their members to government, to policymakers, to regulators, to the media, to other opinion leaders and stakeholders in the industry. Trade associations, although completely voluntary, are an absolute necessity of modern business. Somehow competitors find common ground and they reach consensus and develop a commercial opportunity for the industry, generally. They create a rising tide that lifts all boats, and they exert influence over the quality and safety of the industry through various voluntary programs or industry education.
I've been an association executive since 1992, a certified association executive since 2000, and this is actually my 20th annual conference, even though my anniversary is not until March. So I think I might know a little something about this topic.
For my entire tenure in the dietary supplement industry, there has been a conversation around the state of industry associations. People say there are too many of them. They need to consolidate. They are too fragmented. They don't collaborate enough. They compete for membership. Why are they always taking my money? These conversations have always been there, but I believe today that we're at an inflection point.
The threats to the dietary supplement marketplace are many, and some of them are even existential.
Consider the age restrictions that are being imposed in New York and proposed in multiple other states. Stopping this advancing wave of unnecessary restriction will require a united front: a combination of diplomacy, advocacy, legal tenacity, scientific rigor, media savvy, and the ability to connect on an emotional level with our opponents in order to defeat these proposals.
FDA's reorganization is another example. It could be a positive development, or it could be an excuse for the agency to make this $60 billion industry even less of a priority than it has been. For this industry to grow, we need to forge stronger relationships with the people who regulate us, and insist that they develop programs that reward responsible industry players, protect our innovation, and give consumers further assurance that our products are regulated and that there is actual enforcement to back that up.
It's going to take much more diplomacy than it does antagonism and a dexterity and nuance to persuade FDA to do what's in consumers best interests and the political clout on both sides of the political aisle...a unified voice.
Add to all of that the issues on Capitol Hill, and we've heard how chaotic Washington is and the likelihood that there will be legislation to modernize DSHEA, as well as, separately, an opportunity to get dietary supplements recognized for the first time as qualified medical expenses in HSAs and FSAs.
The combined efforts of our companies, from grassroots to a keen understanding of the legislative process to actual shoe leather expended on the halls of Congress are all going to be critical.
And yet, at this very same moment, I'm concerned. And if I'm being honest, I'm actually worried about the ability of this industry to come together to rally its energies and resources to mount a response. So back to this business of the association.
Let's look at the size of this industry. The Nutrition Business Journal says that dietary supplements in the US in 2024 will be a $67 billion industry.
CRN's own economic footprint study that we released earlier this year likewise demonstrates the strength of this major economic engine. It successfully employs more than 615,000 Americans, either directly or indirectly. It generates $6.7 billion in state and local taxes. Money that helps to build schools, supply schools, helps police and fire departments, builds roads and other projects. And then another $10.7 billion in federal taxes. In the United States, the dietary supplement industry's overall economic impact in 2023 was nearly $159 billion, and it continues to grow.
Industries much smaller than ours have found a way to rally around a single organization, giving them an outsized voice in public policy. And if they can do it, why can't we?
So let's look at CRN. We are by far the largest association representing dietary supplement manufacturers and marketers. We have over 100 companies as voting members, and sometimes CRN is misportrayed as being only the largest companies in the sector. And that's simply not true. Yes, out of over 100 members, we have 20 companies who pay us six figure dues on more than $100 million in sales. But we also have 50 companies among our members who pay $20,000 or less in dues, and then a lot more in the middle. And yet, our revenue from membership has remained relatively flat over the last three years, despite increases in sales of the industry. Since coming out of the pandemic, I have witnessed a lethargy and an apathy to being part of a collective voice that shapes this industry. Despite the majority at the top 20 largest companies in the industry being CRN members, there are still many among that group that are not.
So what if CRN did not exist? What if CRN wasn't leading the fight to roll back the New York law and defeating bills in other states? What if our voluntary programs weren't exhibiting a level of self restraint and responsible behavior to counter our critics. What if CRN wasn't pushing back on the media reports of an unregulated industry, or demonstrating the safety of vitamins and minerals above the daily values, or educating doctors and pharmacists about the benefits of prenatals and vitamin D, or educating FDA on how gummies are made, or defeating probiotics proposals at Codex that could have prevented the sale of these products in regions around the world, or developing voluntary programs for the use of melatonin with children and e-commerce and gummy forms. And that's just some of what CRN has been doing since January.
CRN's board of directors had a rather frank and raw debate a couple of years ago about the future of CRN, and the consensus was that if tomorrow CRN didn't exist, companies would simply have to recreate it all over again, because we're that essential to this industry. But when you look around the room for the last couple of days, where are your competitors? Where are your vendors? Where are your customers? Now, you might think that they're not here because there are too many trade associations.
And I do think that's part of the problem, but maybe not for the reasons that you think. Too many companies are sitting on the sidelines all together. They don't belong to any association. Now, maybe they think that because there are so many of them, they don't have to belong to any of them. Or maybe they're putting their faith in the wrong ones, and the ones that are the cheapest but are not delivering any results. Maybe they think that that kind of thinking is really ignoring the gravitas and credibility that's necessary to make an appreciable impact on the policy climate.
Because CRN makes a difference.
Maybe these non-joiners confuse us with the educational and philanthropic groups that surround the industry, and these are important groups, but they don't lobby on your behalf. They don't give and support political candidates, and they don't develop a legislative agenda. CRN does. Maybe these companies mistake us for the multiple media companies that also surround the industry and provide news coverage and services and events, and they think, well, I can be a sponsor at a trade show, or I could pay trade association's dues. Which one's going to have the more immediate impact on my sales? The problem is that the media companies, while they perform valuable services for the industry, we should never lose sight that they are for profit companies. They are not going to pay for the lobbyist, and they don't have standing to sue on your behalf. They are conveners, but they are not consensus builders.
So let's look at what trade associations are not. Trade associations are not country clubs. They are not just excuses for the top brass to get together once a year. Not that that isn't important, but only if it's helping to build trust and collegiality among the executives so that they can then come together and work together. And associations are that and so much more because they advance the industry cause. Trade associations are not cliques for promoting tribalism or fostering a who's in and who's out. They bring everyone to the table and they actually celebrate inclusion. They are not consulting firms intended to promote the business of a single member or a small group of members, at the expense of everyone else. I can't tell you how many times I have been in recruiting meetings with a company where I was asked, how is CRN going to bring them a new customer or increase their sales in the next quarter? That is simply not what a trade association is intended to do. They are also not cults of personality. No matter how charismatic the staff may be, trade associations must be for and about their members. All the decisions on governance and policy need to be made by the members. It's the role of the members to run the association and to exert leadership. You know this industry. And so you should be driving the ship.
So as you think about why we need a strong trade association, I'd like to propose three other metaphors that I think are more appropriate. When your bills arrive at the beginning of the month, who gets paid first? What are the things that you can't do without?
A trade association could be thought of the way you would pay your utility bills, or your insurance policy, or your retirement plan. Your trade association membership is like keeping the utilities connected. You wouldn't let the electrical bills go unpaid or risk having your water service cut off. Trade associations are what keep you connected; what provides energy to your organization; what infuses your executives with the insights of the regulatory climate. Your association should be providing a range of educational opportunities to keep your executives plugged in on compliance, market research, and business opportunities.
Second, you might think of your trade association membership like paying your insurance premiums. You wouldn't cancel your property insurance before a storm or allow your medical insurance to lapse. What would happen if a disaster struck? That same thinking should be applying to trade association membership. Your trade association is what you maintain day in and day out so that when a burdensome regulation is threatened or onerous state legislation arises, you have a first line of defense, and you can actually spread the cost of responding across all of the affected companies to fight the restrictions on your consumers access to your products, or new requirements that are going to raise your cost of doing business. And that's the kind of proactive work that CRN is doing on Capitol Hill, in the halls of FDA and the FTC and across the 50 state legislatures, to assure that you have protection from these potential disasters to your business, where your insurance policy against a host of regulatory, legislative and media crisis.
And third, your trade association is like your monthly retirement contributions, just like your IRA or your 401 K, your trade association is protecting and actually creating your long term future. The more outside investment that comes into this industry, it seems that companies are focused on a profitable next quarter to keep their shareholders and more often, their private equity owners, happy. And that's completely understandable. But if that's where the money is going, who's doing the work on self-regulatory initiatives or doing the research projects to expand the supplement marketplace beyond the next quarter profits? Who's playing the long game to be sure that this industry will survive and grow for the next five or even ten years?
If you're a member of CRN, then your answer is CRN: the full time, full service, proactive strategic thinking trade association.
So how do we reset the stage? Well, I do think there is some good news. First, we have lots of room to grow. We have something to offer, and we have a secret weapon. So recently, the CRN staff compiled a list of companies that we would like to have as members. This is not every company in the industry by any means, but just the ones that we think would make the cut for the vetting process, and that would make a valuable contribution to the life of the association.
We had a list of over 145 companies. That's more than we have now in the world. So there's lots of prospects out there, and those are companies of all sizes. Some of them match our largest members in sales. And then there are mid-sized ones and even smaller ones that have great growth potential too. If they all join, CRN would more than double our membership revenue overnight. But then let's narrow that down. Let's just say we identified the top 30 companies. We would add over $3 million to our annual revenue. And think of what we could do with those additional resources. And CRN has something to really offer these non-joiners as well.
Ironically, 20 years ago today I interviewed for this position. On October 11th of 2004, I was asked to make a presentation to the search committee of CRN on what I thought CRN should accomplish and how I would accomplish that vision. And recently I came across the slide deck that I had prepared for that. This is one of their slides. I called it Charting a Future for CRN. I want to share some of those slides with you now, because I think the deck has aged quite well. Because this is what CRN still has to offer. Look at this list of strengths that were developed back then. And CRN continues to provide industry leadership, to offer direct communications with legislators and regulators, to be a credible voice of science, to have an industry agenda, to provide forward thinking initiatives and consistent messages to the media, to be an external resource for our member companies and a network for the industry.
Like I told you, the deck holds up pretty well. And when it comes to fostering confidence, we are as clear today as we were in 2004. To keep a strong scientific focus, develop a vision of how dietary supplements should be regulated, not just what we're opposed to, but a clear view of what we want and how to get there. Devise a proactive strategy to get that message out, and then help regulators clean up the industry. As you think back on the speakers of the last day and a half, how much of that have you heard in our current philosophy? Now here's an interesting slide. In 2004, there was a lot of concern about the fact that DSHEA was then ten years old, and some people were saying it didn't work and it needed to be thrown out. This was CRN's response then, just as it is now. No new DSHEA. Let's give FDA some additional tools, help it to refine its ability to address some of the problems, to keep up with the industry, but keep the fundamentals of DSHEA intact. Our mantra was "the law makes sense, so let's make it work." And when it came to protecting DSHEA, we recognized that CRN needed to be a voice at the table and an advocate for an even stronger FDA.
The industry would be a cheerleader for reasonable enforcement to build the kind of industry that we want. So the slides are holding up pretty well. And now, if you will remember, back in 2004, there was also a debate over whether the industry should agree to something called mandatory adverse event reporting. Ultimately, the law was enacted in 2006, and today we point to it as an example of how we, as an industry, were able to restore faith from our consumers and our regulators, in the wake of the ephedra debacle, from 2003 and 2004, by demonstrating that this industry would accept new regulation and act responsibly. So here's what I had suggested to the search committee on this. But I wonder if this isn't actually a blueprint for mandatory listing as well. It's an inevitability. So you need to be on the train so that you don't get run over by it. We need to determine how the industry will handle it. Let's get into the weeds and figure out how to make that work. That's what our supplement OWL is doing, and if properly managed, a registry will build confidence in the industry. Well, for better or worse, the search committee found a lot to like with this blueprint. And as I said, the rest is history there. Since then, the board of directors at this organization has continued to create a vision for this industry and do all these things and provide the resources for the staff to implement that vision.
And what a strong and committed staff we have assembled. And so I want to take just a moment to recognize the CRN staff because they deserve it. So, staff, if you're in the room, would you please stand up? Thank you. They really are a dedicated and committed team. Every single day I say when I talk to companies, there is no other place where you have 19 people who get up every morning to protect this industry. But of course they all work for you. I work for you.
This is your association. And this association only continues to grow with your support, your voices, and your solidarity. Because at the end of the day, it's all up to you. You are the secret weapon.
If we believe that CRN is charting the right course, then every one of us has an opportunity, actually an obligation to grow our ranks by encouraging your vendors, your customers, and your competitors to join CRN. Let's think about what's possible. If everyone in this industry joins CRN to do their part in creating a desired future.
If everyone selected their trade association based on what it's actually delivering and how it aligns with your company's goals, if everyone joined an association based on the values that it espouses and the and the ones that it lives out every day, one with a clear vision of the future that we want to create. What if we supported an organization that the industry couldn't do without? And what if that happened now?
What if this moment became the convergence when it all comes together? Just think of how much more we could accomplish. Thank you for your time this morning.
