The speakers discussed how the COVID-19 pandemic is affecting ingredient supply and manufacturing.
Last week’s Vitafoods Digital Week program addressed several topics related to the current COVID-19 pandemic. One podcast, on May 13, featured two speakers from ingredients distributor IMCD (The Netherlands) who discussed how the COVID-19 pandemic is affecting ingredient supply and manufacturing. Bora Turan, group development EMEA director, IMCD UK, pointed out how distributors like his company now face the challenge of forecasting and adjusting the volume and assortment of ingredients they stock in order to meet quickly shifting market demand.
“These sudden changes…and large demand for certain products leads to slow the stock turn for other products, so consequently you have less-needed product that has been ordered in accordance with the customer’s regular demands [that]...end up staying in the warehouses longer and hence they are taking up warehouse space,” he said. His company, he said, continues to communicate heavily with customers and its suppliers to try to balance supply and demand.
Currently, he added, “we hold a couple of months of stock against our customers’ annual demands, and there is no need really for panic buying. And for those higher-than-usual demands from customers, we are communicating regularly and updating the lead times. Communication is really key in these times.”
In terms of supplement categories IMCD has seen growing demand for, Turan said these include immune health, of course, but also digestive and relaxation support. He and fellow podcast speaker Stan Bijsterveld, global supply chain director, IMCD Netherlands, also discussed current supply chain and logistical challenges, including the lack of transportation, higher freight costs, and longer lead times.
In terms of ingredient prices and future supply, Turan gave the example of Echinacea purpurea, an ingredient for which his company has seen skyrocketing demand. “Today, there is not root of echinacea available; there is only the top of the plant. So, we don’t know what the pricing will be for the next harvest…If the demand for certain products continues, certainly there will be an increase in the raw material costs that will inflate end-product prices. We are working, of course, with our suppliers. At IMCD, we are talking directly to the producers of the plants, as we do the extraction ourselves. But often, demand will dictate the raw material price as well as the freight demand.”
Costs will continue to rise as supplies from foreign suppliers constrict, Turan said. For instance, he said that although vitamins and minerals are also produced by Western suppliers, the fact remains that potential shortages of these ingredient supplies from prime suppliers in India and China could result in overall increased prices and lead times for these ingredients. This, he added, could broaden the conversation about shifting where these ingredients are produced in the future.
“Eventually,” Turan said, “this could lead to increasing capacity maybe in Western Europe for certain product. We all talk about this, [about reducing] our liability on India and China, but there are limits to it. As I mentioned, the botanical extract is one of them,” he noted, given that many botanical ingredients are heavily sourced from India and China. “So, indeed, we’ll have to think more locally; however, I doubt that we can just no longer be a global economy,” he said.
Vitafoods hosted its digital week on May 11-15, featuring educational articles, podcasts, and other resources, in lieu of the live Vitafoods Europe trade show that was originally scheduled to be held in early May but which was postponed to early September as a result of the current COVID-19 pandemic.