Editorial: What's Shaking in the World of Ingredients

By Len Monheit

“Just how deep will the current ingredient crisis cut” is the question of the month at industry events. Predictably, companies are attempting to leverage what might be an opportunity and to differentiate themselves from sub-standard competition. Over the past few weeks, I’ve been asked repeatedly what the crisis really means, what opportunity it might constitute, and perhaps most significantly, if, when combined with new US GMPs, there might not be the ingredient shakeout many of the world’s ingredient leaders had been awaiting.

Let’s start with the question that opened this column – “how deep?” The answer, I believe, is quite deep. Dietary supplement and natural health product ingredients have so far not really seen the spotlight in what is still largely a food quality crisis. We know ourselves, that this quality issue concerns us, and that consumers and retailers both are now asking the inevitable question “Where does it come from?” Of course the natural evolution to this line of thought leads to the follow-on question – “Is it China?”

Let’s back up a few steps.

Many of the companies we perceive as leaders in the ingredient supply industry have for many years been frustrated not only at the buying practices of manufacturers, who refused to give them credit or value for producing higher quality materials, but also at the regulations which did not adequately enforce ingredient quality standards. The situation has been so bad that some companies have stopped pursuing North American business. This environment would obviously prevail until some shake-up to the status quo materialized, forcing a change to the sourcing and buying practices, and to the equation used to calculate ingredient value.

Into this environment, in the United States at least, we have two fundamental developments.

While purity (rather impurities) has always been a legitimate quality compliance issue affecting ingredient suppliers, the GMPs now begin to focus attention on identity and Certificates of Analysis (with actual test results and methods) and squarely place responsibility for this aspect of quality, on manufacturers. Presumably, (one would hope) this will lead to more and better questions, better sourcing practices, and ultimately, much more defined and structured supplier / manufacturer relationships etc. with accompanying expectations. I’d suggest that the upper echelon ingredient suppliers welcomes and is excited by the prospect of higher expectations so long as the associated perceived value of these expectations comes alongside.

The second critical development is the emerging awareness of international trade implications, especially regarding inputs. Global trade, to many, implies global standards and this principle is not only improbable, it is fundamentally impractical. We can’t even get a universal industry standard yet alone a global standard across multiple sectors.

What we currently have is heightened awareness of problems that have been in existence for many years. As is the case in many circumstances, when you look for a specific result or observation, chances are you will find the data and occurrences to support your quest. If you are looking for problems you will find them; if you look for positives, similarly you will find those. Right now, people are looking closely at products and inputs made in China and finding frequent defects and deficiencies. In fact, even Chinese companies are (and have been for some time) looking closely at inputs, realizing that in some case, non-Chinese inputs provide a higher degree of confidence in a general sense.

Despite the headlines, this is fundamentally not a China issue. This is all about economics and profit, global realities, business practices and process. This past week, at least one made in the United States announcement was released. Unspecified was whether the inputs were exclusively sourced from the US. Current reality suggests that if we exclude certain sources of supply, we lose the product diversity we have come to demand. Trade restrictive practices are therefore not a fundamental solution and not without consequences we might find too high to pay. Trade standards however are a practical recourse to take and implement. Quoting from Loren Israelsen, Executive Director of the United Natural Products Alliance, “This is an issue of not where, but how.”

Demanding the ‘how’ should be the fundamental sourcing question. If, as an ingredient supplier, your clients are not asking you this question, how much do you want their business and do you think your business position with this client is sustainable? If you’re a manufacturer/buyer and not asking this question, how confident are you, fundamentally, that your product won’t be the subject of some future recall for an as yet unspecified deficiency. If you’re a retailer and not asking ‘how’, not only the product was made, but also how the inputs were selected, how sure are you that the product you’re providing to consumers is efficacious, consistent, and of adequate quality to preserve your reputation, credibility and moral obligation?

Going back to the top – How will these issues and pressures affect the ingredient marketplace? I think (and hope) we’re at a point in time where the industry value chain begins to tilt a bit. While not an overnight phenomena, I believe we’re at that point in time where the patient will begin to prevail and where quality and investment in input will mean more than just a higher price.

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