The unsustainability of the botanical supply chain: Why botanical supply chains are so strained today, and why they are in danger moving forward

Sebastian Krawiec

Sebastian Krawiec is Editor at Nutritional Outlook.

Experts during this week’s AHPA Botanical Congress discussed why practices, and values, up and down the supply chain need to change, all the way down to the consumer.

When buying raw materials such as herbs and botanicals, are you taking into consideration where the material came from and the people responsible for harvesting it? Ensuring sustainability from an agricultural or environmental perspective is one thing, but what of the sustainability of labor? This was the overarching theme from the final session of the American Herbal Products Association’s (AHPA; Silver Spring, MD) 9th Botanical Congress: “Maintaining a Sustainable Supply Chain.” Speakers discussed the challenges facing the botanical supply chain, including due to the COVID-19 pandemic, and the impact they’ve had not only on the market but on the growers themselves.

Pandemic and Other Factors Stress Supply Chain

Issues that are taxing the botanical supply chain are both old and new. On the newer front, the COVID-19 pandemic, with its harsh lessons on supply chain bottlenecks and demand outstripping supply, has laid bare industry shortcomings. While a global pandemic is not something one can predict, and industry has been able to survive—and, in some cases, thrive—shortsighted industry practices have left many in the botanical supply chain in a vulnerable position.

“Industry cannot sustain this type of growth in such a short time,” said speaker David Solomon, president of BDS Natural Products (Gardena, CA), during his presentation. “There was excess inventory going into 2020, but that has now been absorbed into the market, which leaves the cupboard bare. With lockdowns, farmers and wildcrafters have faced many obstacles. Farmers have had problems getting seed and labor and, so, new crops. With demand being unsatisfied, that will put huge pressure on crops coming in. We need also to remember that there is a worldwide demand of botanicals. The wildcrafter on the global stage has found it hard to collect and sell to the local dealer, or markets, as many have been closed around the world. So, sustainability of supply into 2021 will be hard to sustain. Prices will go up.”

Another central issue is one of economics: labor costs are rising for farming and harvesting, but customers are not willing to pay more for product. As Michael McGuffin, president of AHPA, pointed out during the event, there is often a disconnect between the value of raw botanical material and what it’s sold for in the marketplace. “You have to do this balance between controlling your costs and trying to evaluate what your customers are willing to pay,” he observed. This leaves smaller and smaller margins for suppliers upstream. And with COVID challenges thrown in, the problems have only grown.

These global economic problems force us to better understand, especially now during this time of crisis, the true cost of our commodities and supply chain practices.

Farm to Shelf: Need to Plan Ahead

On the agricultural end of the supply chain, there is a great deal of planning required. For example, crop rotation for certain crops, such as mint, is important to reduce the risk of verticillium wilt, explained speaker Danielle Kruse, West farm site leader and manager for the organic herb producer Trout Lake Farms (Trout Lake, WA). What this means is that once mint has been grown for five years, it must be removed from the ground and cannot be planted for another 10 to 15 years. Therefore, Trout Lake Farms is planning five years out to figure out what crops will replace the mint taken out of rotation.

On top of this, there is an inherent unpredictability to farming. So, while farmers can take measures to ensure that crops will be healthy, there are things that are out of their control, such as the weather—or a pandemic that significantly impacts labor—which can have negative impacts on yields.

Another fact: unfortunately, when there is a particularly great yield, farmers cannot always take advantage of it, said Kruse. “Our new policy is to stop harvest once we hit demand, because the vast majority of our customers do not want older than one-year-old product,” she explained. “Historically, the industry standard shelf life was three years, but if we don’t have a contract, and the vast majority of customers aren’t going to take product older than a year, as farmers, we miss out on these bumper years.”

If Trout Lake Farms cannot sell the excess product, there will be no return on the cost of labor to harvest it, and therefore it must forego some of its crop. Not only is there less product to go around now, but the following crop year may have a much lower yield as well, further exacerbating shortages, such as those experienced during the pandemic.

Planning ahead more consistently up and down the supply chain can help farmers achieve better outcomes. For instance, Kruse lamented “just-in-time” inventory practices, mainly in reference to the spot market, putting a strain on farmers. “The spot market fluctuates too much year to year,” she explained. Her company is now “focusing more on long-term relationships and contracting with our customers.” Long-term relationships and contracts create a stable source of income and allow farms to plan their crops, rather than waiting for customers to order product at unpredictable intervals and quantities.

Buyers also need to be more willing to take on risk when it comes to anticipating trends—or, indeed, any declining demand. If you believe a trending ingredient will have long-term success, order it in advance, the speakers urged. You may end up with a surplus, but you may also have guaranteed product availability, as opposed to a just-in-time approach which may have very well caused shortages for companies during the pandemic.

“From a farming perspective, it is really hard to adjust to consumer trends,” Kruse underlined. “One year, demand is high. We plant something in the expected acres we’ll need, and two years later, demand completely drops. So, we’re focusing less on the trendy botanicals and focusing instead on consistent-demand products, because it’s becoming too hard to manage otherwise.”

Changing Behaviors to Ensure Sustainable Supply

The just-in-time approach when it comes to botanicals points to a lack of perspective about where ingredients come from. These aren’t simply commodities sitting on the shelf waiting to be purchased. They need to be farmed and harvested—or, in the case of wildcrafting, land must be leased and crews hired and trained to harvest wild botanicals. In many regions, this is a traditional practice that is dying, and there are few incentives for new generations to take on the task.

“Sustainability means many things to many people. My concern is not so much on the plant protection and stewardship—that I take for granted—but to the traditional human side of the industry,” said Solomon. “Here in the U.S., we have seen a continued shortage of wildcrafters, who now have very little incentive to collect wildcrafted botanicals. With government handouts and an aging collecting pool, we’ll find it harder still to meet the demand for the domestic items we are so used to having access to on a fairly regular basis. The herbs and roots are there, but we have no one to collect them and maintain them. On the international front, we are also seeing traditional collecting disappearing as the younger generation move away from the villages to the cities for cleaner and better paying jobs, with less physical demand. This is true in both India and China, which make up nearly half the world’s population. How do we encourage people to do something to sustain our industry?”

This is also true in Europe, with Eastern Europeans migrating to Western Europe. In the absence of a local workforce, migrant workers have usually been able to fill the void, but the pandemic made that particularly difficult as countries locked down and closed their borders, pointed out speaker Brandon Stolar, sales manager for Indena (Milan, Italy)

Of course, while COVID-19 may have exacerbated labor shortages for the collection of herbs, labor shortages are not a new challenge. One herb that is particularly vulnerable to labor shortages is slippery elm because it requires labor-intensive collection. As speaker Edward Fletcher, president of Native Botanicals Inc (Banner Elk, NC) pointed out, even when you pay a fair wage, it is not competitive enough to maintain a workforce. He explained that he had a small number of crews, which the company had trained to harvest slippery elm, and after three years of consistent harvest, Native Botanicals lost that labor force because the workers had to take on better paying jobs to support their growing families. Unfortunately, the company couldn’t pay the workers more, or insure them, because customers were unwilling to pay more for product.

“We have to move away from this cost-first model and manage the expectations of our customers more,” said speaker Josh Schneider, CEO of Cultivaris Hemp (Encinitas, CA). Of course, every link of the supply chain has valid concerns about the price of goods and what their customers are willing to pay, but if price sensitivity continues to drive the market, it will be detrimental to the supply chain at large.

Part of the solution may be to educate customers as well as consumers about farming and wildcrafting and to take control of the narrative. “I think the marketing and communications is really critical; being able to tell the story of your supply chain,” said Schneider. “I know that on my breadfruit project, price sensitivity went away completely when people could see the story on the website: that this gluten-free breadfruit flower is being grown and manufactured by women’s farm groups in Jamaica, Barbados, Haiti. So, I think part of telling the story is less about the plant and more about the narrative.”

If people understood where a product comes from and care about the people who harvest the raw material, they may be willing to pay more. Think of Fair Trade certification and the positive connotation it has for the end-consumer. Everyone knows the value of a fair wage, and we all want to feel good about the products we buy. Buyers might take more convincing than the end-consumer to spend more money, but as the pandemic endures globally and the supply chain continues to be strained, they may not have a choice.