This is according to David Solomon, president of BDS Natural Products, and Loren Israelsen, president of the United Natural Products Alliance (UNPA), who spoke to NutraIngredients-USA via Zoom last week.
“2020 has not been too difficult because most of the supply was already in the pipeline,” said Solomon. “We’re now starting to see some of the issues coming up due to COVID. Those start with the logistics side of it: We’ve seen countries shut down through lock down, we’ve seen problems with shipping, we’ve seen political upheaval, and wars. All of these things have created for us a supply issue for the future.”
Companies like Nature’s Way are already reporting of increasing adulteration of elderberry as demand remains strong for immune products.
“A year ago, two years ago, there was limited demand for elderberry [and therefore limited supply],” said Solomon. “And then it becomes popular for various reasons. There’s only so much supply available – you cannot just invent the stuff.”
Solomon added that 25 years ago, there was a spike in demand for St John’s wort. In response, supply ramped up and within five years, “there were mountains of St John’s wort everywhere and you just threw it away because there was no demand.
“Elderberries, I’m hoping will have some legs, but if we can’t supply it to the market, the market will disappear and look for something different.”
“Echinacea is another one. Eight to ten months ago it was a very steady but not a very exciting product, but since March there have been huge demands for Echinacea. It takes two years to produce a good crop of Echinacea. There’s no way we were able to meet demand and supply has run out.”
“There needs to be a generalized understanding that [adulteration] is going to be a problem,” said Israelsen. “Companies should be very cautious when they receive raw materials, extra vigilant in testing really is required. Possibly pushing beyond what you would normally do. We’re going to have to do forensic analytical testing more than we have in the past, and that adds to the cost.
“We live and die as an industry on the availability of nature.
“I’d also point out that, because of travel limitations, auditors, certifiers, regulatory inspectors and investigators, very often cannot get into China. It’s very hard to get into India, and other countries. So, this adds a level of blindness. We simply cannot see what’s going on. And that unfortunately invites mischief.
“In botanicals, we clearly are facing levels of concern in supply… we have to talk about this openly. We have to expect and anticipate that there will be those who violate rules of ethics and manufacturing and there will be cheaters. I would rather we deal with it that see it on the front page of a major national newspaper,” he said.
Changing business practices
So, what should companies do? What changes should they make to their traditional way of sourcing?
“A lot of companies operate on the JIT system – the just in time system – and they cannot just rely on computer readouts now,” said Solomon.
“If you don’t get it during crop time, then decide in month eight or nine that you want it, then there’s a good chance in today’s world that you may not find it. There are products that are literally disappearing from the supply line.
“From a buyer’s perspective, I would suggest – and the accountants in the company will disagree with this – that you should be working from a long position and not a short position or a just-in-demand position.
“Of course, we can build it up, but farmers have been burned many times by our industry.”
Israelsen added that the uncertainty means companies need to look at their cash position. “Those that have access to capital can buy deeper, and we fully agree that is what companies should be doing. Those that are cash-tight, where are they going to get the money?
“Then you’re going to run straight into the feared problem of adulteration, substitution, dilution, which is what we are all concerned about.
“When David first raised the alarm that 2021 could be THE worst year in memory, that caused me a great deal of concern. We need to urgently understand what is likely to happen.
“Good companies – those that have the capital and the GMP competencies – have to plan accordingly. That’s a tough one for contract manufacturers. They operate on thin margins, high volumes, and if you ask them to buy and hold expensive material for three to six months… they’re going to have to find the cash somewhere.”
Israelsen and Solomon also discuss some of the bigger picture issues, from disruptions in shipping and other logistics to geopolitical tensions between India and China, and more. Watch the video above for more.