February 20, 2016 By James T. Madore
Eight to 10 giant containers — each filled with 24 tons of a vitamin D and calcium supplement — are shipped every month from Hauppauge to China by a local manufacturer, which plans to hire at least 100 more workers by 2018.
The manufacturer, A&Z Pharmaceutical Inc., is among about 25 producers of dietary supplements, vitamins and nutritional ingredients that have operations on Long Island. A&Z, NBTY Inc., Allegiant Health and others are finding a growing market in China, where spending on supplements totals $26 billion per year, the second-largest after the United States.
These exports support hundreds of local jobs and are creating dozens more. The dietary supplement industry, together with pharmaceuticals, is a bright spot in the Island’s manufacturing sector, which has shed high-paying jobs for years.
Employment at makers of vitamins, over-the-counter medicines and generic prescription drugs climbed 13 percent to 9,100 jobs in Nassau and Suffolk counties between 2008 and 2013, according to the most recent data from the U.S. Census Bureau. Total factory payrolls fell during the same period to 69,500 jobs, a loss of 12,800 or 15.5 percent.
Officials said boosting exports of locally made dietary supplements is a priority for the U.S. Department of Commerce and Empire State Development, New York’s primary business-aid agency. Both provide research contacts in China, help with trade shows and, in some cases, grants and loans to novice exporters.
“This is an industry where jobs are being created . . . and Chinese consumers are looking for this industry’s quality-made products because of the health scares they have seen” with Chinese-made goods, said Susan Sadocha, director of the Commerce Department’s Long Island U.S. Export Assistance Center.
She said consumers in China have embraced natural remedies for centuries. But they are wary of that country’s vitamins and drugs because of well-publicized deaths from items found to be toxic, impure or lacking potency.
Capitalizing on concerns
In 2012, for instance, numerous Chinese factories were discovered to be using gelatin containing cancer-causing chromium to make capsules for drugs and dietary supplements. The FDA has banned or limited exports from nearly 40 Chinese plants after reports of contaminants such as antifreeze in toothpaste and cough syrup.
Sadocha said U.S. exporters, seeking to capitalize on these concerns, are touting their goods as made in this country in factories regulated by the U.S. Food and Drug Administration. The agency requires manufacturers to test supplements for characteristics such as purity, strength and composition.
“I have never had one pill made in China,” said Emma Li Xu, chief executive of A&Z. “I won’t buy raw materials from China, and I only ship FDA-regulated products. ‘Made in the U.S.A.’ is my selling point.”
Each year, A&Z produces and ships 1.6 billion tablets of D-Cal, its vitamin D and calcium supplement, from a factory and warehouse in Hauppauge. D-Cal, advertised for bone health and density, is the No. 2 selling supplement of its kind in China, according to Li Xu.
D-Cal has fueled A&Z’s sales growth of 20 percent in each of the past five years. She said exports to China accounted for 98 percent of the private company’s 2015 sales of $45 million to $50 million.
Companies plan expansion
A&Z is in the midst of a $40 million expansion that includes upgrades of a rented factory on Oser Avenue and the purchase of a 120,000-square-foot building on Wireless Boulevard, also in Hauppauge, for use as a second factory and headquarters.
Li Xu said A&Z would double its payroll of 102 U.S. employees within two years as it begins selling other supplements to Asia, including China, and develops generic prescription drugs.
She said A&Z takes it name from America and Zhongguo, the Chinese word for China. The company opened in the mid-1990s as the U.S. subsidiary of a Chinese government-backed pharmaceutical giant led by her father.
More recently, Li Xu has assumed sole ownership of A&Z, and in June 2014 one of its two divisions was spun off as Allegiant Health. The new business is run by her husband, Brian Z. Li.
Allegiant, based in Deer Park, is trying to establish itself in China with OmeCardia, an Omega-7 supplement the company says helps support heart health.
“Our primary objective, year after year, is to push China sales,” said Li, chief executive of the 130-employee company. “We want to grow a portfolio of products for the cardiovascular area.”
Allegiant’s sales were in excess of $30 million last year, the company’s first full year of operation, he said. They were mostly derived from over-the-counter medicines sold in the United States, such as low-dose aspirin, cough and cold remedies, sleep aids and laxatives.
Li said he has no plans to open a plant in China: “The perception of the Chinese consumer is that products made in China are not as good as those made in New York.”
That reputation, and a desire to more closely monitor production of their nutritional ingredients and supplements, led Jimmy and Lisa Wang of MTC Industries Inc. to shut down a factory near Shanghai in 2013 and make plans for a replacement on Long Island.
MTC purchased an 18,000-square-foot building in Hauppauge as part of a $2.5 million expansion that will add 40 people to the company’s local workforce of 11 by 2018, Lisa Wang told the Suffolk County Industrial Development Agency in 2014.
At NBTY, the vitamin-industry behemoth based in Ronkonkoma, most of its $3.2 billion in annual sales come from the United States and Europe. But company executives said China offers potential growth.
“We are only beginning to expand our business in China,” said communications vice president Andrea Staub.
She said NBTY ships its Nature’s Bounty and MET-Rx dietary supplements from factories in Suffolk to China. The company has 2,166 employees locally at 11 facilities.
Dealing with regulations
Success in China isn’t guaranteed. Customs enforcement now presents a major challenge, said Jeff Crowther, executive director of the trade group U.S.-China Health Products Association.
He first got acquainted with the market in 2005, when NBTY tapped him to help open its first office in China. He had just received a bachelor’s degree in China studies from San Diego State University and was working at one of NBTY’s Vitamin World stores.
“There used to be a lot more opportunity here,” Crowther said in a telephone interview from Tianjin, China. “Now it’s going to require a lot more money to partake in it.”
Since 2014 Chinese customs officials have begun enforcing a product registration law called “Blue Hat” after the symbol carried by approved items. Crowther said obtaining a Blue Hat certificate could take up to three years and cost more than $100,000 for each product. The failure rate is 20 percent, he said.
Demand for U.S.-products
Still, U.S. companies are drawn to China because demand for foreign-made consumer goods remains high despite a slowdown in the country’s economy to about half its growth rate in 2010.
Jianshi “Josh” Yang credits the China business of A&Z and Allegiant with giving him his first job and rapid advancement.
In seven years Yang, 30, has gone from working as one of several chemists in a laboratory, to overseeing a lab with nine chemists.
“I couldn’t imagine anything like this when I came to this country in 2008” from Beijing to pursue a graduate degree, said Yang, who now lives in Smithtown.
A job posting in Stony Brook University’s chemistry department led him to A&Z in 2009. He received a master’s degree last May after enrolling in night classes at Seton Hall University. He is pursuing a doctorate in chemistry.
“It makes me feel very honorable to do this work, to help families like mine who need these products,” he said, holding a box of Allegiant’s OmeCardia.
All of the writing was in English, and printed on the back of the box, in the bottom right corner, was an American flag above the words, “Made in USA.” OmeCardia isn’t yet available in this country.
Such packaging is routine among U.S. exporters and is more effective than a splashy advertising campaign, according to Savio S. Chan, co-author of the 2014 book “China Super Consumers” and chief executive of the consulting firm U.S.-China Partners Inc. in Great Neck.
“Even though some local Chinese companies can make the same product with the same ingredients exactly, the Chinese consumer mistrusts their local suppliers,” he said. “The Chinese consumer will look for the English label and the American flag, and they will pay more because they perceive American vitamins to be the best.”