Meeting Supply Demands: Raw Materials Update

How are suppliers handling supply chain challenges, and how will it impact costs? What formulation opportunities show promise now? Get the answer to these Qs and more.

COVID-19 has changed the world in many ways. One of those ways: “The pandemic has propelled us toward an even greater sense of healthy living,” says Joy Hendler, Marketing Associate, Aker BioMarine Antarctic US LLC. “Consumers seek to optimize their health on all fronts—preventative health, health optimization, mental health, happiness. As we continue to navigate the new normal, I foresee a more holistic approach to wellness, which will continue to create new
opportunities for innovation in our industry.”

Seconding that: “The pandemic has brought tragedy for many, but it also brought an appreciation to all that we must take care of ourselves and if possible, our family and friends,” says Francis Foley, President, Xsto Solutions LLC. “Taking better care of our bodies through nutrition and exercise will help us live better for decades. People have had a chance to reflect on where they are both emotionally and physically, and many have made changes for the better. Whether we gained or lost weight, we are all more aware of our condition and (hopefully) taking action as survivors to live a better and longer life. This was at least one positive takeaway from a very difficult situation, and that takeaway will likely last for many years. That increase in awareness—and sales—is great news for our industry and its offerings.”

Foley, too, pointed towards the increasingly popular holistic movement: “Consumers are acknowledging the interconnectivity of our metabolic health and they understand we need strong bones as well as a healthy heart and a functional immune system. People now recognize we can’t simply ‘whip this body’ into shape in a week or two. We never know when the challenge to our immune system or physical health is going to present itself, so we better be prepared. Being ‘prepared’ means eating well and supplementing when needed. In today’s world it may be hard to get enough nutrients from the food we eat, so supplements are inexpensive insurance for better health as we age.”

This is showing up in suppliers’ businesses, as manufacturers look for ingredients that can help them meet the growing demand. Annie Eng, CEO, HP Ingredients, shares: “From our sales perspective, we are encountering more customer inquiries about fulfilling the burgeoning mass market consumer desire to be more vigilant in keeping healthy. Combination products rather than single ingredients are the new norm. For example, although elderberry is widely in demand and is one of the few supplements sold as a single-ingredient product, the idea of it being combined with added support is where opportunities lie. It blends synergistically with maqui berry, Andrographis
paniculata,
vitamin C, and zinc. Whole health, whole immunity, rather than isolated ingredients is the trend. Aspirational product names such as ‘Resilience’ and ‘Fortify’ convey that powerful wellness people are seeking.”

Also noting the desire for holistic health: Amanda Jepson, Sr. Director, Marketing & International Sales, Biova, pointed to a new focus on proactiveness as the main driver. “We have all seen the spike in demand for immune health products, and I don’t think that will go away any time soon,” says Jepson. “The most interesting result of the pandemic is the increase in demand across the board for supplements. Consumers realize that their health is not solely related to immune health and are looking to take a holistic and natural approach to wellness. People want to protect their health and to be proactive in their approach rather than waiting for something to happen and relying on pharmaceuticals to correct it. We have been seeing this gradual shift over several years, however the pandemic has really pushed this forward.”

There are some basics regarding what consumers want from a product—and, therefore, what manufacturers want from an ingredient: “The pandemic has helped transform dietary supplements globally, as more and more people continue to turn to well-known ingredients and products that support immune health, as well as overall health and wellbeing,” says Hendler. “Consumers are looking for products with tangible and measurable benefits, and this is helping redefine what value really means.” She adds that krill oil offers omega-3 and choline, acting as a multi-nutrient supplement.

Looking at supplement usage specifically, Mark Thurston, President, AIDP, points out that immune product demand has altered the market, probably permanently: “Consumers clamored for immune products during the initial phases of COVID. Vitamins C, K2, and D3, as well as zinc, elderberry, and many others experienced huge growth. The long-term effect is that many consumers increased supplement use and continue their new regime. According to a recent NBJ report, the supplement category grew 14.5% in 2020, the largest increase in recent years. AIDP also had record growth in 2020.”

Eng notes that this spike in demand may be in part due to a new consumer base, one that isn’t leaving: “We are seeing this in an uptick of new customers who are confident about entering the market—and so we do see these changes as being permanent. One strong reason why we believe that demand for natural products/dietary supplements will continue to rise, and products and brands will grow in number to satisfy the demand is the overwhelmingly positive reputation that supplementation and natural health have in the media mainstream. Consumers today self-educate through social media and the internet and are interacting with natural lifestyle brands.”

While health benefits are prime focuses as the pandemic continues to have an impact, COVID has also played a role in increasing consumer demands for sustainability. “Consumers value companies that are transparent with their processes,” explains Sébastien Bornet, VP Global Sales & Marketing at Horphag Research, suppliers of Pycnogenol. “They want to know where the raw materials for their products are sourced and exactly what materials go into them. We source Pycnogenol from sustainable forests and oversee all processes from sourcing, to extraction, manufacturing, quality control and distribution.” Bornet adds that the maritime pine trees are a sustainable, cultivated plant, grown entirely without pesticides, and trees are replaced when they are cut down.

This desire for clean and green applies to the food industry, as well. “As COVID-19 changes the world, one thing that remains consistent is our need for a safe and continuous food supply,” says Natasha Dhayagude, CEO of Chinova Bioworks. “The pandemic has really accelerated the trend for food safety and ‘cleaner’ products. Consumers have had more time on their hands through the pandemic and have really voiced their concerns over ingredient labels.”

Support for Brands and Retailers

Suppliers are turning a lot of attention towards their own supply chain—but our experts pointed to the importance of looking in the other direction, as well. Chinova’s Natasha Dhayagude says that suppliers need to remember—and support—their customer base. “Our business is still functioning and operational, but I really do feel for all the food brands and retailers who are struggling to keep their businesses afloat during this trying time. There are people behind these businesses and they are friends and clients we have been closely working with for the past five years that we want to support in any way we are able to. We are aware that many of our clients have needed to downsize and do not have the resources to perform testing internally. We recently expanded our lab space in order to offer complimentary in-house testing for all our clients. Suppliers really have to step up to support these brands to maintain the quality and safety of their products. Adapting to the new ‘normal’ is not going to be easy, but I hope that the food industry will rally together during this crisis and emerge stronger than ever before.”

Wilson Lau, Nuherbs, says that his customers are actively asking for tailored support, in a range of ways: “We’re finding a lot of interest in herbs that can be formulated into alternative delivery formats, or processed to meet specific needs. Nuherbs has the capability to tailor extracts to meet customer requirements, which can be as simple as replacing conventional herbs with organic ones, or choosing carriers or solvents that conform to organic standards to make an organic standardized extract. We can transform a non-soluble extract into one that is water soluble. We can standardize the carriers, bulk density, particle sizes, so that our customers don’t have to manipulate the ingredients prior to use, increasing their operational efficiencies, and lessening delays from shipping to another facility for those intermediate steps.”

Supply Challenges… and Answers

Supply chain challenges were far and away the major difficulty this year. AIDP, for instance, saw challenges as ports shut down, labor was reduced, and countries limited commerce, Thurston says—and, he adds, these challenges aren’t expected to change soon, with freight rates continuing to increase. These issues haven’t stopped AIDP: “Because of AIDP’s long-standing supplier relationships and diverse countries of origin,” Thurston shares, “we were able to meet our customers’ needs.”

Also pointing to shipping as a major challenge: Wilson Lau, VP, Nuherbs. “Many companies were unprepared for the disruption in shipping that began immediately and has snowballed to where it isn’t likely to normalize until late 2022, and that’s if nothing else happens,” Lau says. “Container ship traffic jams have become common at all ports, with a wait of several weeks just to get a berth. What cost $2,000 to ship last fall now costs $20,000, and those increases are going to filter through to final cost of goods. The changes aren’t permanent, but they won’t go back tomorrow. The best advice I can give is to plan early, plan often, and plan long term. Companies should be buying much further in advance than normal, and make longer-term commitments. If brands involve their suppliers in forecasting, they are much better situated to keep production rolling on schedule. The same holds true for retailers, to some extent.”

Abdul Alkayali, VP, Certified Nutraceuticals, agrees: “The ongoing impacts of the pandemic have caused delivery delays, raw materials shortages, a 10-fold increase in price of goods and delivery, and delays in manufacturing, as well.” While the supply chain challenges will hopefully pass, Alkayali says that there are some changes that are here to say: “Changes on a permanent basis may occur on how we conduct business. Today, many of us are meeting by internet connections, contracts and deals are done without face-to-face meeting as was the traditional way of doing business, and many of us no longer required to be at a fixed location.”

Jepson tells WholeFoods that while supply chain issues may subside, the workarounds companies develop likely won’t: “Reduction in available resources, trying to get production time with contract manufacturers, lack of available packaging, shipping delays, and increased costs are all problems we are facing on an increased level since the pandemic started. The supply chain will smooth out again and suppliers will increase their capacity to meet the demand, so I don’t think these changes will be permanent, but I do think they will have a lasting impact on how we do business. Longer lead times mean longer range forecasting and placing orders earlier than before.”

For all that many of these issues were caused by the pandemic, supply chain struggles were exacerbated by climate change. “We have had fewer alternative regions we can reliably source from,” shares Wesley Eveland, Procurement Director, Kerry North America. “Record heat in the Pacific Northwest, a late season freeze in Northwest Sao Paulo, and extreme drought in Thailand are just a few weather occurrences in 2021 that have been particularly challenging for the market to recover from following the pandemic. I foresee permanent changes in areas such as automation, a doubling down of sustainability efforts, and a shift toward more simplified supply chains. It will not come as a shock to see many products that were historically outsourced to be sourced domestically to avoid reliance on importation.”

Botanicals have faced particular challenges, especially in terms of supply, notes Cal Bewicke, President, Ethical Naturals Inc. “While demand for botanical extracts and supplements greatly increased over the last 12 to 18 months, the supply of many raw materials to manufacture them simply couldn’t keep up: This process requires a lot of advanced planning because most cultivated botanicals are planted based upon the previous year’s demand. At the same time, the collection of many wildcrafted botanicals was negatively affected by shortage of labor, lockdowns, and longer transportation times. These supply chain holdups have also driven up many botanical prices.”

On the delivery end, Bewicke adds that delivery times have doubled, or more: “In the past, shipments from China could be reliably scheduled to take three to four weeks, door to door. Over the last year it’s been six weeks, nine weeks, or more, even when materials are available. These hold-ups have been at both ends, China and U.S.; one day recently there were 29 container ships waiting to get into Long Beach harbor to unload; usually there are one or two.” And in terms of quality control, the scramble to obtain materials from anyone that has them has resulted in counterfeit ingredients.

Bewicke’s answer: “For a company like Ethical Naturals, where supporting our customers is key, this has meant doubling or tripling our on-hand, QC tested inventory. That’s been a challenge for us, but we’ve made it work, with about 95% of our customer deliveries on time over the last year. However, this situation has made things very difficult for companies that rely on a just-in-time business model.” And he works with trusted suppliers throughout the supply chain to avoid
these problems.

There is a silver lining to this, though. Greg Ris, Vice President, Sales, Indena USA, explains: “In regards to the supplier-manufacturer relationship, supply chain challenges have resulted in better communications, ensuring ingredients are available to meet the increased demand and can be delivered when needed. As Indena has 100 years of experience in botanicals, we have established long-term supply relationships that have allowed us to meet this demand.”

As always, quality is key. “We see that leading brands and contract manufacturers increasingly find that their suppliers who make the investment in cGMP quality control and reliable inventory are the ones they want to deal with,” Bewicke says. “Just being out of stock on one raw material that didn’t arrive or failed QC, can hold up an entire product run. Much of this viewpoint makes sense, so it will stay with us. However, with the economic and other conflicts on our planet, it’s hard to say when and if things will return to the previous normal. For these reasons, we at ENI continue to plan and order inventory at least six months ahead. It could be that a measure of uncertainty will be the new normal.”

Offering a different view, Lycored’s Head of Global Brand & Marketing, Health, Zev Ziegler, says being vertically integrated made a difference—and that most of their changes were made within the company. “By owning each step in our production processes, we’re able to account for every detail and maximize safety. Like most companies, we made major changes to the way we work, manufacture, and interact. These included the introduction of strict social distancing measures, increased sanitation procedures and new working schedules.”

Face-To-Face Falls By the Wayside

When everyone first started using Zoom, it seemed like a temporary fix—but a year and a half later, here we are still communicating on our web cams. “It looks like our in-person events are still being affected by the pandemic,” says Elise Kaiser, NattoPharma. “Meeting potential customers is incredibly difficult because our in-person events would be a great place to make these initial contacts and be seen. We believe digital meetings are here to stay, so it’s about being able to leverage technology to make the most of those opportunities.”

Bruce Eckfeldt, Founder and CEO, E&A, wrote a column on inc.com with 7 tips for leveraging that technology. One tip that will be useful with hybrid meetings: Eckfeldt requires participants to have one person per login—“When two or more people try to share a computer, sound and video quality goes down considerably,” he shares. “I want one face per login and good, up-close sound and video.” And whether hybrid or otherwise, he suggests using collaborative documents, rather than screensharing: “I like using a virtual document that everyone can access and edit at the same time…it makes for a much more collaborative meeting.” The full article can be found by searching “Virtual Meetings are Here to Stay” at inc.com.

(Post?) Pandemic Trends

While many pandemic trends are here to stay, the world is beginning to look forward again. Thurston points to rising vaccination numbers as the main point of impetus for shifting behaviors—as people are feeling safer, and are able to go out again, their need for immune support is being eclipsed by other daily needs.

This change is, in turn, driving manufacturer behavior, according to Ris: “Where manufacturers were previously just keeping up with supply and demand issues, they’re now starting to focus on product development again, in areas including digestive health, healthy aging, and nutraceuticals for electronic sports and gaming.”

It did seem for a while that innovation was at a standstill, agrees Alex Riesche, R&DA Director, Kerry North America. Now, though, innovation is back. “The demand for certain raw materials spans across a variety of spaces, with no strong drive in one group. Requests for new ingredients continue to be high in the natural space, be it with colors, flavors, or plant derived ingredients. Trends are also continuing in the plant protein space, with demand for ingredients that will help provide consumers with the experience of ‘real meat’ using plant-based alternatives. Be it in the texture, color, and taste of these products, we see demands for new ingredients to be tested in these developing spaces. The food and beverage markets are seeing similar innovation with demands in the ‘better for you’ and ‘natural’ ingredient space, along with a heightened awareness from consumers about the sustainability of our ingredients.”

To formulators (and industry at large), Kartikeya Baldwa, CEO, Ixoreal Biomed, makers of KSM-66 Ashwagandha, offers a caution: “In terms of food supplements, people need those products that mitigate stress, fortify immunity, enhance sleep, improve energy, boost mental acuity and alertness, and enhance overall vitality. The demand for such ingredients is increasing. We need to ensure that these products contain real, legitimate, effective ingredients, and that they work. Our biggest initiative should not be engorging the market with yet more products, but weeding out the ones that do not work and boosting those that do work. People’s health depends on this.”

Trending Now

Active Nutrition. “Collagen demand has increased as people return to the gym,” Thurston says. “AIDP has been a pioneer in collagens, and we offer a range of solutions.”

Maria Stanieich, Marketing Manager at Kyowa Hakko USA, has also been seeing demand in this category. “As individuals are resuming active lifestyles, we are seeing a trend of greater focus on general and everyday health, maintaining an active lifestyle, and self-care more than ever before,” she says. “Nitric Oxide boosting products are of optimal interest in enhancing performance. Kyowa Hakko’s VELOX, a patented blend of clinically studied L-Citrulline and L-
Arginine, and Setria Performance Blend, a unique combination of Setria Glutathione and L-Citrulline, are key ingredients in supporting athletic performance, clinically studied during exercise to support blood arginine levels increasing power output and reducing muscle soreness. These ingredients also support nitric oxide production.”

If active nutrition is your area and you want to learn more, head to www.NaturallyInformed.net and register for Active Nutrition: Mastering the Market. All sessions are on-demand, including a keynote from Jamie Meeks, Director of Sports Nutrition for the New Orleans Saints; a session on personalized nutrition for athletes; plant-based sports nutrition; unmet needs in this space; and more.

Digestive Health. Gut health as a whole is on the rise, but the latest in this area to trend: postbiotics. Nena Dockery, Scientific and Regulatory Affairs Manager at Stratum Nutrition, cites Lumina Intelligence when she says that postbiotics has led to a “nearly 1,300% increase in gut health-related Google searches over the past 2 years.” The scientific understanding of postbiotics is still in its infancy, but in May 2021 the International Scientific Association for Probiotics and Prebiotics (ISAPP) published a statement on the definition of postbiotics, which they defined as: “A preparation of inanimate microorganisms and/or their components that confers a health benefit on the host.” Dockery adds: “Postbiotics are deliberately inactivated microbial cells with or without metabolites or cell components that contribute to demonstrated health benefits.”

Postbiotics, Dockery says, offer a range of benefits—both for the people consuming them, and for the businesses manufacturing them. “Postbiotics provide an entirely new arena for supporting the health of our own individual microbiomes. Because postbiotics do not contain live cells, they are not subject to either the gastric or shelf stability issues of human-derived probiotics, nor do they present the manufacturing challenges of spore-forming bacteria. Most postbiotics are marketed for support of the digestive process, which can be intertwined with immune system support, since our intestinal microbiota play such critical roles in immune system functioning. Though the term postbiotic had not yet been assigned, some of these inanimate microbial preparations have been around and utilized for decades.” One useful postbiotic: LBiome, an ingredient made from two human-derived bacterial species, which Dockery says has been used for the management of childhood and adult diarrhea for over a century, and has been the subject of multiple published research studies.

If you’d like to know more about postbiotics and the ISAPP definition, consider heading to www.NaturallyInformed.net and registering to view Driving Opportunities in the Microbiome Space on-demand: Colin Hill, Ph.D., part of the board that created the definition, gave attendees a first look. Plus, find sessions on making probiotic science applicable to individuals, athletes’ microbiomes, curcumin and the microbiome, and the gut-immune-brain connection.

Food Safety—and Quality. “We are now transitioning into clean-label 2.0,” says Dhayagude. “For brands, keeping food safe is much more than just preventing spoilage: It involves protecting flavor, texture, and color, as well as maintaining the overall quality of a final product over its shelf life. Food security and safety has become such an important aspect for brands and their consumers.”

Plus, Dhayagude continues, consumers want guarantees of quality, and guarantees that a product will fit within their diet. “We see a large shift in consumers’ dietary habits with more demand for kosher, vegan, halal, non-GMO, organic, keto, and paleo. It is important for ingredient producers to be able to supply and fulfill these expectations consumers have for the brands they buy from. This becomes really apparent in the new categories that are rising within the food industry—like plant-based alternatives. This category is held to a higher standard than conventional products. Chinova has been gaining a lot of traction within the plant-based alternative category as we are able to cater to the expectations of brands in terms of food safety and without compromising on taste.”

Mental Wellness. “Stress and mood products are trending, with uncertainty regarding workplace and school reopenings,” Thurston notes. “AIDP offers several cognitive support ingredients such as Magtein, BacoMind, and Ocibest.”

Also pointing to stress, Andrea Bonina, Managing Director, Bionap, adds, “One trend we’re hearing about is the need to address anxiety and mood as the pandemic has created a lot of stress for individuals. An ingredient Bionap offers to help address this is Cognigrape, from red grapes. A clinical study completed with Cognigrape demonstrated that it was able to help with mood status in a healthy older population. Other benefits include improved cognitive function related to attention and language, as well as immediate and delayed memory.”

Along with being tense, people are tired. “We are seeing an increased interest in sleep supplements,” says Elise Kaiser, NattoPharma VP of Sales, Americas, “particularly with overuse of screens and smart devices, as well as Generation Z’s interest in video games.”

Bringing the numbers, Dockery notes: “There was a 37% year-over-year growth in web searches for ‘sleep supplement’ in January of 2021, according to Google trends, and over the past four years, there has been a 49% increase in searches for ‘stress supplement.’ These product categories began to take hold prior to the pandemic, but escalated as the pandemic emerged. As the pandemic lingered on and on, along with the social and political unrest, more consumers began to seek out products that could help them simply deal with the turmoil. Demand for these products is likely to continue and even increase for the foreseeable future.”

Bewicke is seeing the demand as well. “We’ve seen significant growth of volume and customers for our AlphaWave L-Theanine, a key GRAS-affirmed stress-relief ingredient that’s also used in sleep formulas.”

For more on this topic, head to www.NaturallyInformed.net and register for the Mental Wellness: Mastering the Market event on-demand to get access to discussions on nootropics, e-sports, the link between food and mental health, happy workplaces, psychedelic therapy, and more.

Nutri-Beauty. “A surprising trend that started in 2020, and has continued with vigor in 2021, is the beauty-from-within segment,” Thurston says. “It appears that consumers noticed a difference with these products, and have decided to keep it as part of their daily routine.”

Suhail Ishaq, President, BioCell Technology, agrees, pointing to NBJ data in support of this trend: “NBJ puts the U.S. collagen market at $300m in 2020, up from $50m in 2014. The market is expected to reach $400m by 2022. BioCell sees double-digit growth in this segment continuing.” Ishaq opines that the reason for this demand goes beyond the fact that the products work: “The boom in videoconferencing and work-from-home trends bodes well for this segment. Consumers sometimes spend hours on video calls, and they are looking for products that will enhance their appearance.”

Ishaq shares that manufacturers are working with this trend, too—Solgar, for instance, has repositioned its Hyaluronic Acid product as Collagen Hyaluronic Acid Complex, with new packaging that communicates structure-function claims regarding collagen and leverages BioCell’s latest science.

Ziegler, too, saw this trend, and added Lycored’s numbers: “We recently commissioned some research exploring the importance of beauty and self-care in the post-pandemic world. It showed that 48% of US consumers had become more concerned about how they looked during the pandemic. This may be at least in part down to the ‘Zoom Effect,’ with 54% of the Americans we surveyed saying that spending more time on video calls had made them think more about their physical appearance generally. Globally, 32% of respondents said they would purchase more ingestible skincare products once COVID restrictions were lifted.” Lycored offers Lycoderm, a non-GMO, science-backed blend of tomato phytonutrients and rosemary leaf that has been shown to benefit skin health, boost radiance, and reduce the appearance of lines and wrinkles, while helping to protect skin from environmental challenges.

For more on Lycored’s science, register for Nutri-Beauty: Mastering the Market at www.NaturallyInformed.net. Plus, find deep dives on oral health and the microbiome, regulatory insights, and hair health, as well as a fireside chat about collagen with Naomi Whittel.

 

Final Takeaway

Regardless of what trend—or how many trends—your company is investing in, it is vital to remember two things: the human element, and that the world will never be the same. Running a business with compassion for employees, communities, and customers will go hand-in-hand with flexibility and long-term planning. Baldwa tells WholeFoods: “The global pandemic is creating, and will continue to create, very significant impacts that will last for generations. To date over 4,400,000 deaths have been reported to the World Health Organization, and virtually all health experts assume that the real total may be double that many deaths. In many cases, several members of families have died. This means total family disruption for lifetimes. Globally hundreds of thousands of businesses have closed, entire sectors of the economy like travel, hospitality, office work and shipping have been devastated, and the end of this remains nowhere in sight. Huge numbers of people are out of work. Many have lost their homes. Many people who have survived COVID-19 are left with permanent neurological damage and other lasting health problems. Children have been very adversely affected by loss of school and poor socialization, and that will affect many going forward through the remainder of their education. Divorce rates have gone up, and many people are attempting to cope by using substances like alcohol and anti-anxiety drugs that may further adversely affect their health. Health care systems in many countries are broken or nearly so, and health care workers are suffering from extreme exhaustion. Many people report sleeping poorly, and the devastation caused by the intense stress of the pandemic is creating huge numbers of cases of PTSD. Following the pandemic, whenever it ends, the world will never be the same.” WF