5 Challenges Impacting Brands Today

PLUS: How a reputable contract manufacturer can help...and the questions you need to be asking to ensure you choose a quality partner

What is giving brands headaches as we move into 2022? Many of the same issues as always, with the events of 2020-2021 piling on even more stress. And while a reputable contract manufacturer (CM) can help you navigate the problems heading your way, you could put your business in serious jeopardy if you go with the wrong partner. Not to be overly dramatic about it, but it needs to be stated up front that there are bad actors in this space, and you must take great care to avoid them. “The recent ABH debacle showed hundreds of companies that shortcuts in manufacturing can cost the brand everything,” stresses Scott Steinford, CEO, Health Wright Products (HWP). (For background on that “debacle” read “Contract Manufacturer Issues Major Recall of Dietary Supplements” and “Supplements’ Weakest Link” on www.WholeFoodsMagazine.com.)

Put in the work to select a quality CM, though, and you could set yourself up for fewer hassles and more success. Here, a look at pressing challenges and helpful solutions.

 

Challenge: Sourcing
“Raw material sourcing is currently one of the main challenges for brands,” notes Oliver Wolf, Head of B2B Marketing (global), GELITA. “Finding the perfect supplier who can provide the required quality and quantity at a reasonable cost isn’t easy. In today’s complex marketplace, a contract manufacturer (CM) can help companies manage the sourcing and manufacturing process while focusing on other business priorities, and controlling costs. Reputable contract manufacturers have established contracts with raw material suppliers which, in turn, saves time and cost for brands.”

Seconding that, Vincent Tricarico, Executive Vice President for Twinlab Consolidation Corporation and NutraScience Labs, notes, “The pandemic has caused significant delays and unpredictability in the supply chain—everything from ingredients to the components that are used to properly package a product. As a result, brand owners normally accustomed to 8- to 12-week product lead times are now having to wait a bit longer, and unfortunately in this industry, time is money. The longer it takes your product to leave the production facility, the longer you have to wait to bring it to the market. By working with an experienced contract manufacturer, you can leverage their expertise and relationships to make your supply chain operate as efficiently as possible.”

A tip courtesy of Matt Kaufman, Business Development Manager, Paragon Laboratories: “Having a forecast is one of the most important tools for a brand to communicate with their contract manufacturer. If a forecast is not able to be provided, this can impact a brand’s ability to get their product produced in a timely manner and maintain a consistent level of stock.”

Challenge: Ever-changing regulations
“Contract manufacturers have to continually educate themselves in order to stay on top of things,” says Wolf. “They offer a lot of experience in regulatory affairs and procedures, with the ability to provide independent and optimal advice on the best strategy going forward. Plus, contract manufacturers are continuously investing in new technologies to be able to cater to the needs of their clients. This is because the manufacturing process has become more sophisticated in terms of quality control and meeting the rising expectations of today’s consumers.”

Understanding how to formulate a natural product under the proper regulations, and ensuring that you can back up any claims associated with products (such as “organic” labeling) is definitely a challenge, according to Michael Courts, Business Development Project Manager, Lief Labs. “Partnering with a customer-centric manufacturer like Lief Labs that has a strong understanding of the end consumer’s needs, can help brands source ingredients that meet all the natural FDA compliance regulations, are not in short supply, as well as fit a brand’s vision for a natural formulation. Understanding the regulatory landscape, supply chain conditions, and natural product development formulation intricacies are key to a brand’s success in the natural space, in my opinion. A quality contract manufacturing partner can provide guidance in all of these areas and more.”

Challenge: Specialized expertise
“Most brand marketers choose to work with a contract manufacturer because the cost to start their own manufacturing line, along with the technical issues and the experience, make it difficult to start a manufacturing line,” says Steve Holtby, President & CEO, Soft Gel Technologies, Inc. Using softgel capsule production as an example, Holtby explains: “Softgel production is a very unique and complicated process. One of the challenges of making softgels is that the operators who run the encapsulation machine have to be well-trained and competent to learn the techniques for a smooth and efficient operation. The manufacturing process of making high-quality softgel capsules implicates the use of sophisticated technology. During the rotary die process, the gelatin temperature, ribbon thickness, seam width, and fill quantity all need to be monitored and controlled. It involves high precision and requires constant oversight; inaccuracies make production more costly.”

Challenge: Quality
“One of the biggest challenges for dietary supplement brands today is proving the efficacy of their products,” says Jay Cook, Vice President of Sales and Marketing, Tishcon Corp. “Does the product meet label claim in terms of potency and any other claims featured as part of the label? This will continue to be a focus of consumers and sellers, like Amazon, who recently upgraded their criteria for selling dietary supplements on their sales platform. Partnering with a contract manufacturer like Tishcon ensures a brand will receive a high-quality, well-manufactured product that is tested throughout the manufacturing process. Beginning with testing of all raw ingredients sourced, Tishcon also conducts testing for Heavy Metal and Micro-organisms throughout the process. Finished products come with a Certificate of Analysis (C of A) that some brands share with their customer base.”

“Quality vs. price point is often an issue,” adds Holtby. “Many companies focus on price when choosing a contract manufacturer, but forget that quality, service, and on-time delivery are factors that are more important in making a decision.” Competition is fierce, Holtby notes, adding that some customers stay with their current vendor because they don’t like change, while others continually shop around for lower prices. This, he cautions, might turn out to be more expensive in the long run as they end up paying more in opportunity costs, including long lead times.

Challenge: Standing out from the crowd
“The biggest challenge facing brands in today’s market is differentiation,” notes Steinford. “Contract manufacturers can assist with this through formulation recommendations, packaging support, quality, and claims. In today’s complicated world of ever-changing and challenging supply chain issues, it is more important than ever to have a competent and trusted adviser in your corner. A contract manufacturer with robust product development and supply chain expertise can navigate effective and reliable solutions more quickly and efficiently to overcome supply chain disruptions.”

5 Boxes to Check

“‘Trust, but verify’ is very important when it comes to choosing a contract manufacturer,” says Matt Kaufman, Paragon Laboratories. His best case scenario is having a contract manufacturer that checks all five of these boxes:

  • Long-history in business
  • Third-party GMP certifications (NSF, NPA, and UL)
  • In-house manufacturing facilities
  • In-house quality control laboratory
  • Positive third-party reference(s)

Choosing a Partner: Red Flags

“Trust is the key to any business relationship, especially when it comes to the contract manufacturer,” stresses Steinford. “Contract Manufacturers have historically been ‘behind the scenes’ and allowed to exist in an FDA environment that places the entire burden of responsibility on the brand.”

Another strong warning comes from Holtby: “If supplement brands don’t verify their potential contract manufacturers, they could get themselves in trouble by having their finished products manufactured in an adulterated plant and not even know it. Thus, they will be affiliated with this subpar plant and could be subject to recalls—the FDA could take action against them for not qualifying their contract manufacturer.”

Given that, how can brands protect themselves? Consider your communication with the CM from the very first connection. “The first things I would consider are the contract manufacturer’s level of customer service and knowledgeability,” says Courts. “Typically, the initial time you speak to a new potential contract manufacturing partner is via phone call or email. If, in these early interactions, the contract manufacturer is not focused on customer service/brand support, I would flag that as being a potential issue. Brands need a lot of support and responsiveness from a contract manufacturer, especially if the brand is new and relatively inexperienced. If the contract manufacturer is more-so a transactional based business and doesn’t communicate well, make educated suggestions, or is unable to provide answers to any questions you have in a timely manner, I would steer clear. Knowledgeable contract manufacturers should be able to talk about your formulation needs and the claims that you want to make, and tell you whether you’re going down the right path, or whether you may be headed in the wrong direction.”

If those first talks go well, consider making an in-person facility visit. “You should absolutely audit your contract manufacturer on site before producing any product,” Courts stresses. “It’s necessary to take a tour of the facility, so you can see how production flows, how much real space they have and how clean it is, and whether the production line is efficient, to name a few key audit items. If the facility is limited in capacity, dirty, and doesn’t flow well, you can end up putting yourself in a precarious position with any product you produce at that contract manufacturer’s site. By that I mean, your product can get delayed extensively, or your product can be damaged or adulterated, unknowingly.”

Audits should be conducted on a timetable that is consistent with their buying habits—i.e. at least annually, if not more often, adds Holtby. “These companies need to look at the batch records, raw material certificates of analysis, and most importantly, make sure they are doing all the testing required by the GMPs. A lot of money can be saved if a manufacturer is not doing all the required testing…if a quotation looks too good to be true, there is probably a reason.”

Cook seconds that: “Brands looking to partner with a CMO should beware of companies that will over promise and under deliver just to be awarded a project. The other red flag is the price quotes they provide, does that pricing contain everything that the formula spec sheet requires?”

In addition: “I would request a look at all of the prospective contract manufacturer’s Standard Operating Procedures (SOPs),” says Courts. “If the contract manufacturer doesn’t have all the required cGMP SOPs, or if they are out of date and employees haven’t been properly trained, you and your products could be at risk. As new brands enter the marketplace, they may not yet have all the necessary knowledge, resources and experience required to operate in the natural products space. So, brands really need a contract manufacturer that can help guide them through exactly what needs to be done for them to be successful, not only from a revenue standpoint, but also to be successful on the
regulatory side, with the FDA and the FTC quality standards.”

Also “critically important,” says Holtby: “Pay close attention to the Quality Unit and monitor how decision-making is implemented throughout the production process—from procurement of raw ingredients to the final release of finished products. This is the most essential part of a contract manufacturer. If a weak QA/QC presence is observed, the rest of the processes will likely be incomplete and not in compliance.”

To help you gauge a potential CM, Tricarico suggests considering 3 Qs:

  1. Are their price and lead times significantly lower than others?

If so, beware. “Brand owners, especially new ones, need to be reminded that the finished product you’re bringing to the market will ultimately be ingested by another human being—someone’s mom, dad, brother, sister,” says Tricarico. “You don’t want to play games with another person’s life. If a CM is offering you price points and lead times that are significantly different from other estimates you received, chances are that CM is cutting corners to create your product. What do I mean by cutting corners? Using inferior ingredients, not manufacturing the product according to GMP guidelines, not properly QC’ing the product before it’s shipped to you. While you may save time and money on the front end, the after-effects have the potential to destroy your reputation and your business.”

  1. Do they have any 483s?

“Form 483 is used by the FDA to designate a non-compliance issue after a manufacturer’s facilities have been inspected,” Tricarico  explains. “While receiving a 483 isn’t the end of the world, you should avoid working with a manufacturer that has received multiple citations or has failed to address issues.”

  1. Do they “Yes” you to death?

“A strong contract manufacturing partner will push back on you when it’s warranted,” Tricarico notes. When might it be warranted? Tricarico suggests:

  • What you’re asking for isn’t possible. “Even though you might think what you’re asking for is a good idea, it may not be possible. Instead of over-promising and under-delivering, a good partner will tell you right away that what you’re asking for cannot be delivered.”
  • What you want doesn’t make sense from a financial/ROI standpoint. “Ideally, your manufacturer is there to help you and your business succeed, not flop. Having the industry-earned experience and knowledge to know when the numbers will and won’t play out in your favor (and the willingness to tell you when they won’t) is incredibly valuable.”
  • What you want doesn’t comply with industry regulations. “Even though it’s ultimately up to a brand owner to ensure that all aspects of a product are FDA-compliant, having a CM who knows the regulations is a major plus. Sometimes, not getting what you want upfront can be enough to save you from lost resources, time, and money further into the production process.”

Also important, especially heading into 2022: “If the contract manufacturer does not comply with social and ecological standards, it would be unwise to get involved with them,” says Wolf. “Consumers expect sustainable products to be manufactured under fair working conditions. A contract manufacturer becomes part of a brand’s supply chain, so if any problems occur at their end, it can reflect badly on the brand.”

Production capacity is another issue. “Not every CM is able to produce every possible batch size.,” Wolf continues. “While some don’t have the capacity to take on very big productions, others won’t take on smaller product samples. It might also be difficult for some CMs to cater for ‘niche’ products that require test phases, as that would disrupt their ongoing production runs. Also—and this applies to newer companies in particular—brands may want to start with a small batch and, if all goes well, increase production. In this case, a business partner should be in a position to grow with you.”

Glowing Reviews? Do your due diligence

“Don’t put too much stock into Google Reviews or testimonials published on the CM’s website,” Tricarico advises. “While you’d like to think that a CM has legitimately collected reviews and testimonials from their clients, the fact is that this isn’t always the case. As of today, Google does not audit or authenticate the reviews that are published on a company’s Google My Business page. This means that the owners’ family, friends, and employees can artificially inflate their Google Review score and essentially ‘bury’ any negative or legitimate reviews that may have been posted about the business. The same can be said about testimonials published on their website. Having said all of that, there are plenty of companies out that legitimately collect reviews. I’m not saying to completely discount them, but don’t put all of your eggs in the review basket. You could ask them to produce case studies where they’ve successfully assisted their customers with the manufacturing, packaging, labeling, or fulfillment issues. An experienced CM should be able to supply this information to you with little-to-no issues.”

Trendspotting: On Tap for 2022

“We are actually in the final stages of publishing our 2022 nutraceutical industry trends guide,” says Tricarico of Twinlab and NutraScience Labs. “In that document, we’ve covered seven areas that we believe are positioned for phenomenal growth over the next 12+ months.” Those are:

  • Sports Nutrition
  • Collagen (Beauty from Within)
  • Vegan-Friendly Supplements
  • Stress, Sleep & Cognitive Support
  • Vitamin C
  • Vitamin D
  • Immune Support

“Immune Health will continue to be a top growing category as consumers seek natural remedies to stave off the COVID-19 viruses and maintain overall immune health,” agrees Cook. “The interesting aspect of the immune category is that it is very diverse in the number of ingredients that can be considered for immune support. From Vitamin C to Garlic and Echinacea to Vitamin D, research is showing numerous immune benefits from an array of different Vitamins, Botanicals and Herbs that make this a top category for growth.”

The other category Cook sees growing: healthy aging, encompassing joint support, brain nutrition, and heart health, which he feels will see strong growth in items like Fish Oil and CoQ10, including Tishcon’s  HydroQSorb. “In addition, consumers will look for brands that feature innovative formulations that can incorporate branded ingredients that enable the product to make substantiated beneficial health claims.”

Don’t forget the microbiome, says Steinford. “Look for probiotics, prebiotics, synbiotics, digestive enzymes, and more in the microbiome market to take center stage.” For a deep dive into this category, register for on demand access to view all sessions in the Naturally Informed event Driving Opportunities in the Microbiome Space at www.naturallyinformed.net/on-demand/.

Also expect continued growth in the functional food category, “especially with regards to the ongoing healthy eating megatrend and an increasingly ageing population,” says Wolf. “The proper intake or supplementation of vital nutrients is a key factor for quality of life, and growing consumer health awareness is therefore driving innovation in the industry.”

What’s more, consumers are taking an increasingly proactive approach to healthy eating. One way that can play out: “A trend I see coming down the pipeline are concentrated doses of fruits and vegetables in 1-2 capsule servings,” says Courts. “For example, we can formulate a single capsule to provide three servings of vegetables, or two capsules providing two servings of fruits and two servings of vegetables. As many consumers have a hard time achieving the daily recommended amounts of fruits and vegetables, this is a novel way for them to supplement that deficiency and achieve the recommended amounts of fruits and vegetables in a single day.”

Wolf also notes the interest in healthy eating. “They want to better understand the health benefits of their nutritional choices and will continue to look for tailored solutions that fulfil their individual needs. A one-size-fits-all approach will no longer work, and solid scientific support for functional ingredients will therefore be key for successful product innovation.”

Taking that further, Holtby notes: “Personalization has been taking the wellness industry by storm, with consumers increasingly demanding tailor-made fitness programs to accelerate results. With the emerging science of DNA testing, people can now discover the role their genes play in their overall well-being. Various genetic interventions have been shown to increase lifespan. One area of research involves telomeres—the protein-bound structures at the ends of chromosomes. Telomeres shorten with cell division and, in some tissues, with age. The idea of activating telomerase to hasten the anti-aging process remains a powerful one.”

Another trend is a continuation of the consumer shift to seeking out cleaner foods. “Consumers want ‘natural’ supplements—those without fillers or chemicals, products made with natural and/or hypoallergenic ingredients and gentle/buffered formulations,” says Holtby. “Many avoid supplements with artificial colors/flavors. Whole food supplements are a growing segment in this supplement category.”

Also on the horizon for supps: “A new delivery system for supplements is going to be the next thing we see emerge with interest,” predicts Courts. “We all know that gummies really made an impact with people who don’t like to consume tablets or capsules, but now, I can see the next evolution of gummies coming. This evolution would provide alternative delivery formats, as gummies have also had a bad stigma, in some cases, for not being natural, and using ingredients that don’t fit many of the natural or organic consumers’ lifestyles. Here at Lief, we are already working on that innovation by creating a new delivery format utilizing all natural fruit ingredients to shuttle the dietary supplement through your body. The all-natural fruit ingredients will make up the ‘gummy form’ and we will then fortify that with the dietary supplement in need.” Other gummy alternatives, such as freeze-dried smoothie bites, are also on the horizon, Courts adds.

Beyond trending nutrients, delivery systems, and sought-after benefits, another factor that impacts everything each one of us does throughout the supply chain: purpose. “Today’s consumers are interested in corporate environmental and social efforts,” notes Holtby. “They demand purpose-driven products, meaning they want to buy sustainable and eco-conscious products from companies whose values are most like their own. For example, they want a company that keeps jobs in the USA, treats animals humanely, reduces the amount of waste/trash they produce, and/or supports the community. Being a conscious business means being one that demonstrates character—it is authentic, transparent, proactive, and has a clear set of values. There is a growing preference for these types of products and consumers are willing to pay more for them.” WF