Do American dietary supplement consumers care where their supplements come from? They do, and it turns out their opinions don't match the reality of today's global supply chain. To better understand what the U.S. dietary supplement consumer thinks about this question, the United Natural Products Alliance (UNPA) surveyed 1,000 current dietary supplement consumers in November 2007 and again in May 2011.
The findings in both surveys confirmed two assumptions: 1. Where dietary ingredients are manufactured is very important in influencing consumers' buying choices, and 2. They don't know where most of these ingredients are made, which is China.
More than 63 percent of respondents said they would be less likely to buy a China-sourced dietary supplement, while the average consumer believes that less than 10 percent of supplement ingredients come from China.
Reality check for supplement makers
The reality is the opposite. China now produces about 60 percent of dietary supplement ingredients sold in the U.S. These facts suggest an urgent need to develop confidence in dietary supplement safety and quality based on process, not places. The mantra must be "how—not where."
We also learned that U.S. consumers have a general mistrust of foreign-produced ingredients. This view is more pronounced among older users, who are also the most important and durable users of supplements. As it turns out, "Made in the USA" still matters, say these consumers. The commercial reality suggests that most dietary ingredients will continue to be manufactured overseas, and a majority will still come from China, at least for the foreseeable future
What this shows is that the current U.S./China dietary ingredients supply relationship is not sustainable. It must move to a platform based on quality and transparency, or we risk losing the confidence of U.S. supplement consumers. This specifically means a change of policy and practice from buyers who pay rock-bottom prices and then act surprised when things go wrong.
There are many reasons to move to quality over price, including:
Core Labor Costs. China's labor costs have risen dramatically in the last five years—almost 69 percent in the major east coast cities of China.
Regulations. China and the U.S. are both implementing and imposing stricter GMPs and food safety standards on themselves and each other. Recent passage of the Food Safety Modernization Act in the U.S. will be a major force to increase imported food ingredient inspections and testing.
Reputation Risk. The risks of poor quality are rising as supplement companies and their executives risk loss of productivity and reputation caused by import detentions, publication of GMP inspection reports, product recalls and consumer injury litigation.
Analytical Testing. Analytical testing will increase (as will associated costs), revealing quality failures, economic adulteration and failures to meet specification.
Third Party Certification. Third party certification is becoming a key indicator of quality. Trade publications are full of advertisements featuring legitimate third party quality logos, but even more are homemade seals, banners and ribbons of all sorts.
Trade Leadership. The Chinese ingredient manufacturing sector lacks trade associations and executive industry leadership. This is the result of political, cultural and commercial forces. There is a great need to identify and tutor a generation of Chinese manufacturing executives who accept and champion quality as their premier asset.
Brokering Systems. The historic U.S./China brokerage system demanded opacity and protection of source of supply. The key value-add was proficiency in Mandarin and English. Finding the right price for your customer followed these skills. This is rapidly changing, as larger manufacturers are sourcing directly from other manufacturers and establishing direct ties in China and elsewhere.
Branding. Until recently, ingredient branding of Chinese materials was rare. Today, we see a group of premier branded ingredient companies based in China, such as ZMC-USA and TSI Health Sciences, that are highly respected and setting new standards of quality and transparency.
Internal Market Demand. China has the fastest growing middle class in the world, with consumers keen to acquire Western products and fearful of using domestically produced food products. Quality improvements just for this internal market demand will be a key driver, with attendant rise in costs.
Currency Rates. It is widely thought that China will be forced to revalue its currency, making its exports more expensive. This has already happened to some degree. If the U.S. dollar loses value because of shaken confidence on the part of global investors, China's cost advantage could be eroded further.
Research Investments. Commodity markets tend to drive prices to a level that does not support research and development costs. The anticipated NDI Guidance to be issued by FDA (expected now in July) and FTC's growing insistence on clinical trial substantiation of ingredients and finished products are new incentives for suppliers to demonstrate ingredient pedigree and clinical relevance.
- National Pride. China's political leadership has set goals of global excellence in IT, aerospace and medicine. (TCM is seen internally as the cost-effective alternative to overpriced Western synthetic pharmaceuticals.) Without a strong quality platform, this latter goal cannot be realized.
Gaining back consumer trust
The U.S. consumer has demanded everyday low prices, and got them—at the loss of product quality and research investments. These surveys from November 2007 and May 2011 reveal a significant gap between commercial reality and consumer beliefs. The greatest trust gap is with China (a 63 percent negative).
Virtually all indicators suggest a move toward disclosure of manufacturing source, which creates an urgent need to develop a framework of standards, testing, branding and self-governance that addresses the U.S. consumers' need for reassurance about product quality and safety.
The steps to do so are well understood. The will to do so is the challenge. Accepting the premise that the consumer is always right, these survey data suggest we are not currently in sync with their understanding or expectations regarding product quality and origin of manufacturing.
This will best be corrected by demonstrating, in tangible ways, that product quality is about how you do things, not where you do them. We must continue to educate our consumers to trust the process by which we make our ingredients and not the country of origin—whether it be China or elsewhere.
Loren Israelsen is executive director of United Natural Products Alliance.