Canada's business magazine for traditional natural health retailers

3 minutes reading time (671 words)

Margin for error

Margin for error

A big reason natural food and medicine took so long to become mainstream, as it is today, is that most of the growth was through word of mouth, either through family, a friend telling a friend, or from people working in a health food store.

Remember, ALL natural health products were first sold in a health food store. No mainstream company would have touched internal oregano oil, for example, if it was not already a top seller in health food stores with Dr. Cass. This is the same with food.  Early soy drinks and veggie meats, as an example, launched only in health food stores.

I believe natural medicine is UNDERVALUED.  Let’s compare natural medicine’s number one competitor, pharmaceutical drugs.

Of the top selling drugs, Lipitor to lower cholesterol, has annual sales of $14 billion.  This is not a misprint.  A recent report showed the price is 47 times the cost. A $5.80 cost sells for $272.37.

At this margin, Lipitor contributes $11 billion after cost of the drug to the company. Oh, but hey, they do spend hundreds of millions on questionable clinical trials, so perhaps only $10 billion after cost of testing included. And this is just one drug!

Imagine a natural remedy for cholesterol (safer and probably as effective) and the  rep tells you it retails for $272.00.…yeah…right!  The cholesterol lowering drug category sells more than all natural medicine in North America…for a suspect condition.

But it is no wonder, as they have the best salespeople of all time to push their products  – MD’s – far and away the best sales people in history. “If you go off it, you will die,” or, “I will be unable to remain your doctor if you go off the drug.” And then there is the classic “It is only expensive urine to put natural medicine in its place.”  Talk about some great closers. Imagine a rep telling you “If you do not buy my product, you will go out of business” 

So let’s look at our industry margins.  A quick and dirty formula for determining retail price, working from cost at manufacture is: The manufacturing cost multiplied by five = suggested retail.

Natural medicine is safer

So for the same condition, a $5.80 manufacturing cost product would sell for $29.95 not $272.  It is definitely safer, so why is natural medicine not the first remedy prescribed by MD’s?

Natural health retailers average a 40 per cent margin so the retail cost is $17.97.  Distribution requires at least a 35 per cent margin so their cost is $11.68. Distributors often work on very low margins.  This leaves the manufacture/brand developer with a 50 per cent margin, to build the brand. A one time mark up compared to a 47 times mark up.

Many companies never consider launching unique new products due to the financial risk.  They look to other companies to create a greens, oil, CoQ 10, oregano, etc. category and then if the product/category does well, go in with a low price copycat.

A challenge in the future for natural medicine is the products becoming commoditized. More ‘me too’s’ than unique formulas now fill the shelves. Discounts drive margins even lower, taking up valuable promotional dollars we need to tell our important stories to the public who are inundated with pharma influence.

In 2012, phamaceutical companies spent the following:

• $15 billion on face-to-face sales calls with pharma reps.  It works out to be one rep per nine doctors.

• $5.7 billion on free samples

• $3.1 billion on direct to consumer ads, primarily TV

• $2.1 billion on education and promotional meetings

• $1.2 billion on promo mailings

• $130 million on clinical trials – ONLY  $130 million, not billions

• $90 million on ads in professional and academic journals. This generates more return per dollar than other forms of advertising.

But the one thing pharma margin cannot buy is the difference in how a person feels living a natural lifestyle, represented by you, the natural health retailer.  •


CNHR News Podcast

cnhr radio hour

News, Views and Happenings in the world of Canadian Natural Health.

Check out this month's podcast here

Your customers have spoken.  The numbers are convincing: Canada’s natural health retailers turn to CNHR for your new products.  A survey conducted in June 2020 shows retailers read the ads and Product Profiles, and react to them.  They order products they’ve seen in CNHR.  They look for your new products in CNHR.  Reach your customers via CNHR by print, video and/or podcast.  Various opportunities available to fit any budget. 

• Launch your new products

• Support your sales team

• Be visible as stores re-focus and re-charge

• Stake your position in the “new normal”

• Reach more stores – from coast to coast

• Introduce your company to new potential customers • Combine CNHR’s print, video and podcast options


New!  Product profile package

Retailers want to see more of your new products.  So, we’re making it easier for you and them. 

Introducing our new Product Profile Package:  a three-pronged way to reach retailers by combining print, video and podcast.  You get all three!

PRINT:  Claim a spot on CNHR’s Product Profile pages, mailed to health food stores coast to coast, and read by over 10,000 retail store buyers, owners, managers and staff.

VIDEO:  This is new for CNHR – video product reviews.  You’ll get a 30 second review of your product with product image and voiceover.  Five products per video, then e-blasted to CNHR’s database, to be shared among staff and with the store’s customers.   

PODCAST:  Also a new feature.  Your product will get a mention on the New Products portion of the popular CNHR News Podcast, hosted by CNHR editor Bruce Cole and Deane Parkes.   Your company name, product name, a couple of lines, followed with your company contact information.

Three-platform exposure for your new products, delivered by CNHR, the trusted source of industry information retailers have counted on for 24 years.   Three platforms for $699.00

The Product Profile Package is FREE to all full or half page advertisers!

For more information please contact:

Phone: 800.663.6580