Going Viral: How coronavirus is affecting the dietary supplement industry

March 10, 2020

Companies that had proactively purchased more ingredients ahead of the tariffs will be better-positioned than those who didn’t, says Nuherbs’s Wilson Lau.

Wilson Lau remembers the moment when the novel coronavirus-a.k.a. COVID-19-went from being an alarming news story to being a matter of professional concern.

“When the Chinese announced that they were extending the Chinese New Year Holiday in early February,” recalls the vice president of Nuherbs (San Leandro, CA), “we said, ‘Uh-oh. Here we go. This is serious.’”

And Lau’s suspicions were right: It is. But COVID-19 is serious not just for the overriding reason of its threat to public health; it’s serious because importers of Chinese herbs and herbal supplements like Lau-to say nothing of the broader dietary supplement industry, the global economy, and the stock market as a whole-are feeling the effects of the quarantines, work stoppages, and pinched supply lines that the virus has precipitated.

For the dietary supplement and other supply chains, that’s what happens when the linchpin-China-is also the epicenter of the coronavirus epidemic. Worse still, as that disease spreads-possibly becoming a pandemic-industry operators everywhere will experience the same “aha” moment that Lau did. And they’d best be prepared.

 

Spread the News

The only immutable aspect of the COVID-19 story is that it remains a highly mutable story. The U.S. Centers for Disease Control and Prevention (CDC), the World Health Organization (WHO), and others have been updating their guidance protocols daily as cases emerge and experts gain better purchase on just how formidable this disease is.

According to The New York Times, as of February 28, China had reported 79,250 confirmed cases resulting in 2,834 deaths-the highest national tally on both counts1. Hubei province, site of the virus’s first detection, remains under government-ordered shutdown of all nonessential businesses, including manufacturing plants, at least through March 102. That said, Lau notes, “In the rest of China, which has a lower density of cases, controls are less extreme.”

And though the virus-officially named SARS-CoV-2-would have wreaked enough havoc had it remained in China, CDC reports on February 28 that the virus has now appeared in 57 international locations3, including South Korea, Japan, Italy, Iran, and the United States, where at least two of the 63 confirmed illnesses involve patients with no known risk factors, such as travel to China or exposure to an infected person4.

As far as WHO is concerned, the organization is keen to keep the virus from spreading to countries with weaker healthcare infrastructures, Lau notes, and has already identified 13 counties in Africa with links to China that will need help preparing for any viral arrival. Nevertheless, he says, “Even developed nations are likely to see their healthcare systems strained if this continues to spread.”

 

Cause for Concern

Best guesses are that that spread began when COVID-19, a common animal-hosted coronavirus, jumped species to humans late last year-possibly via inter-species contact in a large seafood and live-animal market in Hubei3.

Nevertheless, Lau points to WHO reporting that 80% of those who have contracted the illness develop only mild cases, with the remaining 20% experiencing severe symptoms. And though “it’s too soon to calculate mortality with certainty,” he adds, estimates put it at around 2%.

Fortunately for those concerned about transmission via dietary ingredients imported from affected areas, the virus doesn’t survive on surfaces, and Lau maintains that brands have no cause for concern about Chinese ingredients’ safety so long as they trust their supplier’s quality programs.

Further, an FDA statement dated February 14 states that the agency continues to review Chinese imports using its routine process and has not determined the need for additional measures to protect public health. The agency is prepared to resort to increased import screening if it deems fit, but continues to emphasize that no evidence supports the virus’s transmission via imported goods, including food and drugs for humans and pets.

 

One-Two Punch

Lau actually sees other causes for concern. “A colleague who runs a botanical testing lab said they’ve gotten calls asking if they can test product for COVID-19,” he recounts. “Their reply was that they couldn’t, but that they can test to ensure there’s no adulteration, as can happen when supply chains are strained.”

And that, he concludes, is the principal threat at the moment. Quarantines have stalled transportation, he says, “and that can cascade into many other areas. The tariffs and related uncertainty had already put a strain on some businesses and individuals, and we know that when supplies are hard to come by, adulteration and other quality impacts can follow.”

Indeed, the virus, related quarantines, and sourcing upheaval all come atop the turmoil of the Trump administration’s trade war-a one-two punch that Lau calls “a dreadful coincidence, especially for businesses struggling with the latter’s effects already.”

While companies that had proactively purchased more ingredients ahead of the tariffs will be better-positioned than those who didn’t, he says, “those that use just-in-time inventory practices are going to be hurt the most.”

 

Be Prepared

The lesson: Be prepared. Or work with suppliers who are. “Companies that do business with China were prepared for the annual holiday, and planned shipments accordingly,” Lau says, “so they’re not likely to feel an immediate impact.”

That’s was the case with Nuherbs when news of the virus broke. “Because we’re China experts, we always plan for the Chinese New Year shutdown ahead of time,” he explains. “We had material arrive just before the New Year, so we have enough stock on hand. We also have additional material ready and waiting to be shipped once transportation resumes. We plan far ahead to acquire harvests from our long-term farmer partners to ensure we get herbs that meet our standards. Those herbs were already processed to our specs immediately after harvest. So our customers’ needs are being met.”

Still, industry’s immediate concern will remain getting materials into the U.S. “And what helps suppliers navigating these challenges is for buyers to provide their suppliers as much certainty as possible,” Lau insists. “Contact your ingredient sources to make sure you’re working with them proactively to ensure continuous supply. Help the uncertainty situation by providing certainty.”

Of course, that’s easier said than done in an environment where “there’s still so much that we don’t know,” Lau concedes. “It’s probably inevitable that it will reach the point of pandemic, although as of February 28, WHO hadn’t yet declared that.” (Editor's update: on March 11, 2020, WHO's Director General declared the coronavirus outbreak a "pandemic.")

If, on the other hand, the disease is contained and China exports can resume once transportation comes back online-Lau hopes by April-“then industry will probably be okay. But if it goes beyond that, there will be serious supply challenges. And the negative impact on the global economy could become profound.”

For the time being, “Our first priority is ensuring that all our people are safe and healthy,” Lau says, “and that proper actions are taken to protect the general public.”

References:

  1. The New York Times website. “Coronavirus Map: Tracking the Spread of the Outbreak.” Retrieved February 28, 2020. Accessed at https://www.nytimes.com/interactive/2020/world/coronavirus-maps.html
  2. Xinhuanet.com. Hubei Provincial New Coronavirus Infectious Pneumonia Prevention and Control Headquarters. Retrieved February 28, 2020.
  3. Centers for Disease Control and Prevention website. “Coronavirus Disease 2019 (COVID-19) Situation Summary.” Updated March 9, 2020. Accessed at: https://www.cdc.gov/coronavirus/2019-ncov/summary.html
  4. The New York Times website. “Coronavirus Live Updates: Second Unexplained Case Found in California, This Time in Santa Clara County.” Retrieved February 28, 2020.
  5. FDA Statement. “FDA’s Actions in Response to 2019 Novel Coronavirus at Home and Abroad.” Published February 14, 2020. Accessed at: https://www.fda.gov/news-events/press-announcements/fdas-actions-response-2019-novel-coronavirus-home-and-abroad?utm_campaign=021420_Statement_FDA%E2%80%99s%20Actions%20in%20Response%20to%202019%20Novel%20Coronavirus%20%28COVID-19%29&utm_medium=email&utm_source=Eloqua