Contract manufacturing for dietary supplements: Lessons from the COVID-19 pandemic

Nutritional Outlook, Nutritional Outlook Vol. 24 No. 8, Volume 24, Issue 8

As the COVID-19 pandemic continues, contract manufacturers are working hard to ensure today’s operations are a success.

Fans of “The Godfather” movie franchise may especially appreciate Michael Corleone’s prophetic words right about now: “Just when I thought I was out, they pull me back in.” We’re not talking about the family business here, but instead revisiting the quote as it relates to the current pandemic situation we find ourselves in.

Just when we thought we were out of the COVID-19 woods, along comes the Delta variant to drag us back down.

Even for the dietary supplement industry, which experienced an uptick in business during the pandemic, the thought of a second wave rushing in conjures all kinds of unwanted memories of the pandemic year that was. But this time around, as leading contract manufacturers explain, their companies are better prepared, their employees are well protected, and their relationships throughout the supply chain are shored up.

As contract manufacturers reflect on what they learned from the first wave—lessons that should carry them through the second—one thing is clear: No one wanted the pandemic the first time, and no one is happy to see it return, despite the bump in business.

“The pandemic was an awful tragedy,” says Adam Ishaq, sales manager, GMP Laboratories of America (Anaheim, CA). “We are very sorry for the devastating impact it has had worldwide.”

And although Adel Villalobos, CEO and founder of Lief Labs (Valencia, CA), acknowledges that the pandemic helped the dietary supplement industry by placing consumer interest in health “at an all-time high,” he reveals that he “would rather grow as we were before the pandemic than see the world suffer as we have seen.”

Eugene Ung, CEO of Best Formulations (City of Industry, CA), remembers how it unfolded. He says, “In the very beginning, there was a lot of uncertainty, unknowns, and frankly many were not taking the pandemic seriously.” That all changed for his California-based company, he explains, when “the mayor of Los Angeles and the California governor announced lockdowns. Then fear and panic set in.”

Lessons Learned, Lessons Shared

In that environment, Ung realized that not just communicating, but overcommunicating, would be key. “Our management team had daily calls for almost two months,” he shares. “We communicated with our customers and suppliers early and often as well. As you can imagine, information came fast and from various sources and opinions, so as an organization we had to calibrate on a daily basis. No one had all the answers, and everyone was doing their best to understand what was happening and how to respond. It was challenging keeping up with the changes, but it was also a great opportunity to see how our team could respond in challenging situations.”

Like Ung, Villalobos had no time for the fear and confusion. He stepped into action mode, explaining that “what I learned was that as the head of our organization, I needed to be a strong leader for those who relied on me to lead.” For him, too, communicating was key. “I needed a unified message to bring us together, and we needed to address whatever issues came our way, one at a time,” he says. “And no matter what, we would put up a unified path to persevere.”

For Sirio Pharma, the key takeaway was recognizing the value of contingency planning and relationship building. Karla Acevedo, marketing manager, Americas, Sirio Pharma Company, Ltd. (California), explains that those two areas are “very important for us.” She credits the company’s prior planning and “great business relationships with suppliers and customers” as two reasons “we were able to work through the many challenges created by the pandemic successfully.”

An important part of contingency planning is being able to foresee the future, or at least have a vision of what the future might hold. Like the crisis of September 11 here in the States, when people around the world were shocked by the attacks, no one fully anticipated what was about to take on the world when the pandemic struck.

But as industry contract manufacturers became aware of what lay ahead, anticipation and seeking solutions took center stage. “The top lesson we learned during the first wave of the pandemic,” says Steve Holtby, president and CEO, Soft Gel Technologies (Los Angeles), “was anticipating potential raw material shortages early on when stay-at-home orders were mandated in March 2020.” His company benefitted from its proactive approach in reaching out to its raw materials suppliers early on to “make sure we had our open purchase orders fulfilled and pricing set for the ingredients we encapsulate frequently,” he adds.

Adulteration Concerns

It became fairly obvious from the beginning that adulteration was going to be an issue, particularly for some ingredients where high demand had not previously been the norm, resulting in ingredient shortages. But for those contract manufacturers who were already attuned to avoiding adulteration prior to the pandemic, best practices were already in place.

Says Ung, “Concerns about adulteration are always there, regardless of pandemic or times of uncertainty. Strict quality protocols and SOPs are in place to guard against adulteration, so it’s business as usual regarding product testing. Generally speaking, you very rarely see adulteration issues with quality suppliers.”

Natural Alternatives International (NAI; Carlsbad, CA) already had in place a vigorous quality assurance system and in-house laboratories testing inbound raw materials for identification and purity prior to release to general inventory. According to Mark LeDoux, the company’s chairman and CEO, “Likewise, in-process materials and finished goods are routinely tested internally with an emphasis on achieving appropriate shelf life and being free of contaminants such as heavy metals.”

He adds, “We also deploy a state-of-the-art microbiological laboratory on site, which can safeguard the materials or finished products from the presence of microbiological contaminants.”

In other words, he was already on top of the product adulteration game.

“After doing this for over 40 years,” says LeDoux, “we have learned that testing quality into a sub-standard product is a fool’s errand—and we will not permit vendors to attempt to pass off economically adulterated products. From deploying multiple HPLC units to HPTLC, gas chromatographs, and atomic absorption units to ICP mass spectrometry, we have a very robust investment in securing the products to meet rigid specifications internally.”

According to Holtby, “It is the responsibility of dietary supplement manufacturers to ensure that their products contain the intended ingredients and are absent of contaminants. This is achieved through a combination of extensive testing, thorough supplier qualification, and ingredient traceability.”

Pandemic Highlights Other Issues

Holtby identified another problem that came to light during the pandemic: the impact of quarantine restrictions on supply. “This created a bottleneck in the supply chain,” he says. He believes it is “problematic to only have one supplier for any given raw material.”

His company has solutions. “We try to qualify several approved suppliers per ingredient,” Holtby says. “We can offer our customers suggestions about raw material suppliers we know who provide higher quality and service. We can also recommend third-party labs with whom we are familiar for testing. Many contract labs only handle specific types of tests, but for those they do specialize in, they are industry leaders. The best lab—and manufacturer—should be used when possible.” In addition, he says his company can provide quality assurance for the client by providing testing through all stages of production, from incoming raw material testing and identification to in-process quality checks and final product testing for potency and quality.

Relationships and partnerships go a long way—and especially for contract manufacturers, it’s their bread and butter.

Ung believes relationships with ingredient suppliers “are everything.” It’s his company’s “long history of working closely with our suppliers for business development and product development opportunities” that has contributed to his company’s success, he says. He is honest in admitting that “while we’ve not been able to fully address all ingredient shortages and supply chain challenges, we believe that we do get some ‘preferential treatment’ based on our long history with raw material suppliers.”

LeDoux, too, values what he calls his company’s “long-term, highly capitalized supplier partners” and advises that “we routinely audit their performance and communicate our findings to maintain good working relationships. So, I would say trust with verification is the only way forward,” he adds.

Increased Business Shined Light on the Value of Employees

As the pandemic brought new and more dedicated consumers to dietary supplements, and increased business for contract manufacturers, it also placed additional stress on everything employee-related.

“With regard to contract manufacturing of dietary supplements, [the pandemic] had a variety of impacts,” says GMP Laboratories’ Ishaq. “For one, the pandemic has increased health consciousness among consumers, meaning that consumer demand has increased dramatically for nutraceuticals.”

“In particular,” he adds, “larger companies that had proven sales channels across e-commerce and retail have seen a substantial boost in sales. With more consumers turning to online shopping to avoid being in close proximity to large amounts of people in grocery stores or malls, e-commerce supplement sales have increased at a fast pace. This has caused more frequent and larger orders for manufacturers like GMP Labs, meaning we are considerably busier than before the pandemic.”

Even in the best of times, employees can make or break a company. But especially during a global pandemic, without a loyal, dedicated team, a company has little chance to survive. Keeping employees and keeping them safe during the pandemic brought a whole set of other challenges—challenges that, as Ung says, were another layer of the pandemic that “really tested a company’s cultures and values.”

NAI’s LeDoux recognizes that his company’s team members are the most valuable component of his business. As such, he says that “we spared no expense in securing protective gear and installed various environmental disciplines and safeguards to protect our employees from exposure. While nobody has escaped isolated instances of COVID or its variants, we have been fortunate to not have had significant deleterious impact for our personnel or their families.”

Ung, too, is proud of his team’s response to the pandemic. “We have a strong culture of integrity, trust, respect, and knowledge, which has served us relatively well,” he says. “We have a great team that has really stepped up during these challenging times. Our PX (People Experience) and Safety departments have gone above and beyond to create a safe environment for our employees and provide resources for mental health and wellness during these challenging times.”

Meanwhile, Soft Gel Technologies’ Holtby says that “the health and safety of our employees remains a top priority.” To that end, the company has taken a number of steps to meet that objective. For example, face masks are provided to all his employees and are required to be worn at all times. Break rooms have limited seating, and Plexiglas shields have been placed on the tables. He advises that the company is encouraging physical distancing, self-quarantine, handwashing, hand sanitizer and disinfecting wipes, as well as avoiding large groups. Meetings are held remotely online, and most nonessential visitors are prohibited from entering the facility.

Additionally, he notes, “We’ve increased the frequency and depth of our cleaning crews. They wipe down and sanitize high-touch surfaces throughout the day and conduct deep cleanings on weekends.”

Holtby finds that “our employees have been very receptive in quickly adopting changes to keep safety top of mind. Due to very good management and great cooperation from our staff, we have weathered the storm very well. We have experienced a high demand for our contract manufacturing services since the pandemic. Since we already had our quality systems in place, we had very few disruptions and have been able to provide seamless customer service.”

LeDoux says that “Our company has always prided itself in not only following cGMP requirements but in exceeding them with an emphasis on product and personal safety. To that end, all of our employees have been trained and re-trained on a periodic basis to follow personal hygiene requirements and properly gown, glove, mask, and wear protective clothing and hair nets, allowing people to work in a carefully controlled environment to reduce the risk of contamination of products or persons.”

He adds that “when our industry was declared essential, we redoubled our efforts to secure personal and product safety by instituting even more disinfecting and safety protocols while meeting the surge in demand for finished products of our various customers.”

As LeDoux puts it: “A healthy workforce is a happy workforce, and our business has risen to the challenge with outstanding results as evidenced by our continued growth in the industry.”

Playing to Your Strengths

It’s times like these when contract manufacturers who understand the value they bring to their customers and how they execute their promises make all the difference in the moment. So does reinforcing long-term relationships. It comes down to knowing what your company does best and where you add value for your clients.

Sirio Pharma’s Acevedo summarizes that role succinctly. “The most important role of a contract manufacturer is to provide quality manufacturing solutions for brands. Quality is a critical aspect of our business. Adequate quality control checks through all stages of production are a must,” she says.

For GMP Laboratories’ Ishaq, the most important role of a contract manufacturer is to partner with its customers and ensure their needs are met while providing quality dietary supplements. He says that “with so many supply chain issues during this pandemic, we have learned more and more how important it is to be a partner for our customers. For us, this means keeping open lines of communication and working together to solve problems that arise from supply issues.”

Ishaq says he is proud that his company under-promises and over-delivers rather than the other way around. “As a partner with our customers,” he believes “it is imperative that we communicate issues as they come up. We have learned that brands can plan around delays if they are given notice far in advance. However, when they are strung along without updates, brands face major issues, as they have sales and marketing commitments tied to the products” that are being manufactured for them. He takes that commitment seriously and says it is unfortunate that too many of his customers have experienced other manufacturers who provide vague updates and delay lead times.

LeDoux agrees that the most important role is to engage in transparent communications with his clients. He says that “Failure to inform these partners of challenges in the supply chain, lack of adequate personnel to provide 24:7 manufacturing and testing coverage, transportation bottlenecks, and concerns about packaging component availability is a certain recipe for friction. Being open and transparent about all these issues with your partners makes for a remarkable, trust-based relationship, which should stand the test of time.”

Best Formulations’ Ung, who as previously noted is also a big fan of communicating, identifies another way to strengthen the customer relationships. “The most important role of a contract manufacturer is to understand the needs of the brand,” he declares. “Is the brand looking for innovation? Looking for long-term supply contracts? Looking to enter certain markets?” he asks, noting that these questions and answers help to align expectations. He adds, “Delivering quality products on time is table stakes. Brands are looking for more strategic supply chain relationships, and that typically starts with understanding needs.”

The Road Ahead: Tackling the Delta Variant

Lief Labs’ Villalobos is “happy to see increasing consumer interest in supplements as part of their overall health strategy. It continues to lend credibility to our industry.” He reminds the industry that while “we have experienced growth,” it comes with challenges, including supply chain and labor issues. “Our organization,” he says, “is handling the supply chain and labor issues, and we will continue to expand.” He views these challenges as opportunities to invest in technology, something his company will dedicate a big part of its resources to, he advises, “as a way to ensure we are much more adept at handling all types of business disruptions.”

GMP Laboratories, too, felt the impact from increased consumer demand, but is committed, even in this next wave, to fulfilling customer expectations. Says Ishaq, “The increase in supplement sales due to heightened health concerns during the pandemic caused huge shortages among nutraceutical raw materials and packaging components. Materials that were readily in stock before the pandemic are now routinely on back order, causing large increases in lead times for manufacturers. In order to handle these supply chain issues, we have had to vet and qualify new suppliers for packaging and raw materials in order to ensure our customers are happy.”

The challenging times are not lost on LeDoux, but he remains dedicated to his company’s success. “We continue the protocols that have been customary business practices in our facilities,” he says. “However, some of the challenges that the industry is facing are within the supply chain, with shortages of high-demand materials now becoming somewhat routine and further complicated by logistical issues such as lack of containers or transport in a timely manner. While this disruption continues, we have taken steps to build safety stocks when available so we can reduce the incidents of supply interruption for our partners.”

“The issue of quality is our foremost concern,” says LeDoux. “Making sure that our customers receive what they have ordered in a timely manner which meets or exceeds their expectations is what we do. We will not cut corners to meet demand, even if it means that supply will be delayed, because to put out a product in which we are not confident is to contradict our core business principles.”

Sirio Pharma is hopeful for the future, acknowledging that demand for nutritional supplements was incredibly robust during the first wave of COVID-19, leading to higher demand for the company’s contract manufacturing services. According to Acevedo, “As a trusted partner, we work closely with our customers to make products that meet changing consumer needs. Sirio’s product development and manufacturing expertise is a great asset for brands looking to launch new products to market quickly and efficiently. The new Delta variant will further reinforce the need for self-care. We anticipate that demand for our services will continue to grow as more brands focus on launching new products that help boost overall health and wellness.”

Ung, too, recognizes that the pandemic created an increase in overall demand for dietary supplements, but he says that “continued and significant supply chain and employee-hiring challenges have really hampered the industry.” Still, he remains positive, adding, “With that being said, companies are really focusing more on their supply chain relationships. Although controlling costs is important, having a certain level of supply chain certainty and ability to scale and grow are also critical. The Delta variant will probably help maintain the increases in demand for dietary supplements in general.”

It comes down to quality, which Ung says is “the cornerstone of any dietary supplement manufacturer. By nature, manufacturing companies will always work on efficiency and output, but it can never be sacrificed for quality. It’s much easier said than done. But it goes back to the culture and values of a company. Long-term success can never be achieved by taking short-term shortcuts.”

It’s one of many lessons learned during the pandemic that will hopefully make the virus’s second wave smoother.