Monitor: Brands and consumers confront 2020 supply chain challenges

Natural Products Industry Health Monitor, Sept. 4, 2020
 

A global lockdown might make weeks feel like months and months weigh like centuries, but business allows little room for ennui. As distracting as the daily inundation of the negative can be, the time to look forward is always now. In this feature, Informa Health and Nutrition sister properties provide that right-now-right-here update. Look for the Industry Health Monitor every other Friday to learn the major news that is affecting the natural products market immediately and the less obvious insights that could dictate where the market may struggle or thrive in the months to come.

For most Americans, the supply chain is a black box that exists as a shadowy expanse somewhere short of the grocery store shelf, and the concept of sell-outs and shortages is almost unknown. This is a nation that saw riots when Cabbage Patch Kids ran short in the 1980s. We don't know scarcity.

And then 2020 cast its shadow across the calendar and people downloaded apps to find toilet paper, pushed their carts past empty shelves looking for that last bag of pasta and scoured Craigslist for sourdough starters.

Suddenly, the supply chain became something to worry about.

Consider this: Consumers are paying attention to the supply chain

New Hope Network consumer research shows more Americans are worried about the supply chain than they were a year ago and that concern is shared across multiple issues. For both supplements and food, more than 50% of consumers are concerned about where the ingredients are sourced.

Only a small fraction of consumers said they were not concerned at all.

Some of that likely holds true in any year, but in a year when people are more interested in the supply chain, it could mean they are ready to click through to research what is in the products they purchase and where ingredients came from. Brands have been talking about “transparency” for years and 2020 could put them to the test.

Know this: Supplements are booming and the supply chain is strained

The supply chain for supplements is among the most complex of all natural products. The vast majority of ingredients are grown and produced overseas and can change hands multiple times before they reach the U.S. facility where the supplements are made.

And that’s in a normal year.

The pandemic has provided a historic surge in demand for supplements with much of that demand focused on a few product categories, most notably immunity, general health, stress and sleep. That means demand for ingredients in those categories has skyrocketed. Overall, the Nutrition Business Journal is projecting raw material sales to rise by 11.2% in 2020, not far behind the 12.1% predicted for the entire nutrition industry. But for certain high-demand ingredients, the increase in sales for finished products is projected as high as 200%, with raw materials undoubtedly not far behind.

In NBJ’s The Raw Material Issue, stories include an examination of how travel restrictions are impacting the ability to vet ingredients, what manufacturing changes required by COVID-19 might persist after the pandemic, and whether scarcity of high-demand ingredients in a crisis could be an argument for more biosynthetic materials.

This shakeup in the supply chain is not happening in a pandemic vaccum either. Rising awareness of racial inequality and a call for more diversity in the natural products industry has some questioning why a supply chain that’s internationally diverse by default is dominated by white men when the ingredients come ashore.

Natural Products Industry Health Monitor indexes

Consumer behavior indexes measure consumer behaviors through weekly surveys that are compared to a 2017 benchmark before COVID-19 emerged to see how the novel coronavirus is changing consumers. Behaviors seeking environmentally and responsibly made products, high-quality ingredients, nutrient density, transparency, and natural products have recovered since the onset of social distancing back in mid-March and continue to surpass and grow beyond 2017 pre-COVID benchmarks. Seems consumers are taking more time to scrutinize products, changing their behaviors to seek nutritionally superior and eco-socially responsible products.

The natural products industry engagement index tracks social and mass media engagement of the top 50 trends defining and shaping the natural products industry. The index tracks weekly keyword engagement of these top trends that are compared to a Q4 2019 weekly average benchmark before COVID-19 emerged. With five months of tracking since the outbreak of COVID-19 in the United States, engagement in these trends have spiked and dipped and currently are in line with pre-COVID benchmarks.

Nutrition Capital Network tracks financial activity in the natural products industry. Investment activity continues with dips and spikes but ultimately investors are not abandoning the natural products industry. 

Hear this: Frozen and chosen

It's a cold world. With restaurants still challenged by COVID restrictions and a wary public, fast food is being replaced by faster food–now spinning on a microwave turntable near you. But that popularity and convenience is not without challenges for the supply chain. Now Forbes says workplace conditions dictated by the pandemic coupled with the new demand is complicating the colder links in the American supply chain.

Reward the good guys. At a recent supply chain roundtable hosted by New Hope’s Inside the Bottle program, Trust Transparency Center CEO Len Monheit called out the need for the major online and brick-and-mortar retailers to coordinate on vetting brands and their supply chains. The system, Monheit says, “has to appropriately award the companies that are not cutting corners.”

Enjoy this: Surreal on the home front

Sometimes the stars align and produce something too weird not to share. In this case, it’s the story of an Ohio girl who created her family watching the governor’s daily coronavirus briefings … in Lego.