The COVID-19 pandemic sparked a purchasing frenzy last year that left many retailers with out-of-stocks. Here’s how manufacturers and retailers are adjusting.
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The World Health Organization’s declaration of a pandemic in March 2020 marked the end of business as usual and the start of a sales boom for dietary supplement retailers and brands. Data provided by Netrush (Vancouver, WA) indicates that in March 2020, 17 of the top-20 bestselling products in the vitamin category on Amazon were immune-related, and immune-health products still comprised half the bestseller list in June.
The early months of the pandemic were marked by constant supply shortages, with shelves bare and distributors taking backorders. As the pandemic wears on, questions linger regarding whether the industry has the capacity to avoid future shortages. Will out-of-stocks continue to be a problem in 2021? What can companies do to prepare? Here’s what the industry has learned from 2020’s stock challenges.
Out-of-Stocks Remained a Challenge through the Summer
The sharp increase in demand that occurred in March persisted well throughout 2020. Brian Wommack, senior vice president of communications for the Council for Responsible Nutrition (CRN; Washington, DC), says a significant proportion of consumers not only struggled to purchase product due to stock shortages but also changed their buying behavior as a result.
“CRN’s COVID-19 Consumer Survey on Dietary Supplements, fielded in the beginning of August, demonstrated a number of restriction issues,” Wommack says. He notes that “22% of supplement users reported they were unable to purchase products due to stock shortages. Additionally, 27% reported buying a different supplement brand because of limited product availability, and 21% switched from a branded product to a generic or store-brand product due to limited availability.”
Panic Buying Subsides, But High Demand Persists
The World Health Organization formally declared the coronavirus outbreak a pandemic on March 11, 2020.1 Sales data from market researcher IRI (Chicago, IL) show that in the days leading up to this declaration, sales of nutritional supplements and self-care products started to increase sharply before peaking at a 100% year-over-year increase on March 15, the same day that 30 state governments closed schools and recreational facilities. In the six weeks ending April 5, 2020, immunity products experienced a 188% increase in sales relative to the same sales period in 2019. Meanwhile, IRI reports that the nutritional supplements market as a whole grew by $435 million in the six weeks ending April 5, 2020, outpacing the industry’s growth for all of 2019 as a wave of panic buying swept the world.2
While sales have since fallen from their peak in March 2020, market activity is still outpacing previous years. Retail sales of nutritional supplements in the 52 weeks ending September 6, 2020, experienced 10.9% growth year-over-year.3 Immune-health products now account for 50% of the entire domestic vitamin, mineral, and supplement market, and sales growth for immune supplements is expected to continue until a vaccine for COVID-19 is widely available to the general public.4
Supply Chains Not Equipped to Scale
One significant limitation hampering the industry is that supply chains are not equipped to quickly and easily scale in order to meet sudden, sharp increases in demand. Wommack says the COVID-19 sales boom has been taxing on supply chains, and it is important that companies act in a way that ensures safety, quality, and transparency regardless of external pressures.
“From the start of the pandemic, CRN has been supporting our members and ensuring they are aware of all considerations companies should take into account when addressing legal, regulatory, and country-specific challenges,” Wommack says. “It is critical for companies to continue increasing their quality-control systems, upgrading testing methods, and staying vigilant.”
Wommack says it isn’t just finished products that are out of stock; raw ingredients are also on backorder. This is a time, he says, when suppliers often make substitutions for ingredients that aren’t readily available. Now, more than ever, finished-product manufacturers must ensure they are dealing with reputable and trustworthy ingredient suppliers.
Managing Out-of-Stocks Demands Flexibility, Innovation
Stock shortages are by no means new to the supplement industry, but the COVID-19 pandemic has stressed the supply chain to an unexpected degree. While the initial panic-buying surge caught the industry flat-footed, demand appears to have since stabilized at about 11% above 2019 levels. Formulators, brands, and retailers must be prepared to rethink their procurement processes; for instance, brands may want to consider hedging their bets with respect to ingredient procurement by securing agreements with multiple suppliers, purchasing more stock than is immediately required, or securing deliveries farther in advance than is typical. Finally, navigating and preventing further stock shortages will involve a mix of more robust vetting of suppliers, fine-tuning of predictive analytics, and a willingness to innovate.