Dispatches from SupplySide West 2013

Crops for natural products are tight, and there's an escalation of price across almost every domain, says BI Chief

By Stephen Daniells

- Last updated on GMT

Related tags Natural products

Despite tightening supply chains and increasing prices for many natural products, there exist opportunities to increase efficiency and ultimately cut costs for manufacturers, says George Pontiakos, CEO of BI Nutraceuticals.

“We’re seeing a tightening of availability of crops and an escalation of price across almost every domain in which we operate,”​ Pontiakos told NutraIngredients-USA at the recent SupplySide West expo. “In the US, for instance, because the ginseng price is so high then nobody is really wildcrafting golden seal or black cohosh, so you’ll start an escalation of price across those commodities in the next 12 to 18 months.

“A lot of these crops are once a year harvests, so if you miss that harvest you’re going to be scrambling. If your model is spot-buying, you’re going to be very constrained in the next 12-18 months.”

In the natural products space, the supply chain is very complex, he said, considering the amount of different components that go into a pill or a capsule, the level of efficacy that’s required, and the geographical footprint of these crops.

The nature of production for many natural product crops also adds to the complexity, he said.

“There are no combines going across the amber waves of grain in this industry, it’s all wide crafting. These guys are going into the field, picking what they can; you’re susceptible to a tremendous amount of issues from customs to illegal immigration in regard to your harvesting component. The customer base has to really start looking at becoming more efficient and moving the complexity out.

“Unfortunately there continues to be a philosophy in this industry of defending the receiving dock. It’s some kind of Maginot Line. That’s a really bad way to operate because if something happens in front of their receiving dock like a rejection, then all the downstream processes, all the fulfilment promises you’ve made to your retail base are interrupted. So what our customers are doing is projecting their quality organization into our factory, validating our process.

“Removing the complexity and becoming more efficient is a far more productive use of time than worrying about trying to get three or four different points off on a purchase price variance from the last time the crop was sourced.” 

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