Stressed Supply Chains - True Partnering has Never Been More Important

To say we live in interesting times is an understatement. With several widely impacting conflicts, geopolitics in absolute disarray, and in the US, volatile markets and an uncertain regulatory and business outlook, companies are bracing and taking various risk-management steps to try to stay clear of the shoals and leverage every possible competitive advantage. In the US health ingredients and supplement industry, dependent as it is on both imports as well as exports, this means filtering through a lot of noise to find a reasonably safe course.

Focusing solely on supply chain decision-making, securing inventory at best cost while retaining maximum flexibility is the conundrum. As a brand, if you’ve not repatriated or on-shored at least a portion of your supply chain, you risk significant tariffs, shortages and massive volatility. At the same time, there is significant market uncertainty despite solid volume growth in the industry in many categories over the past two years. Critical decisions regarding new product development, carrying costs and inventory management could stall growth and reduce margins this year, and the impact of North American administration and regulatory policies is largely unknown. 

All these factors are likely to lead to a bifurcation – those that prepare, and those that don’t, with success over the next twenty-four months at stake. In this case, preparation means taking a long and collaborative view with both suppliers and customers along with the investment that entails in inventory, commitments, technology and other resources. On the part of the best supply chain partners, this means taking a longer view, sometimes difficult to achieve in quarterly earnings driven environments, but the long-term investment will prove worthwhile.

What though does that mean for the US supplement and health ingredient applications marketplace? We predict that you will also see a bifurcation in the market. On the one hand, there will be a drive to value – that is, an approach to the mainstream and middle market. This will be addressed by suppliers that are staying one step ahead, appropriately differentiating, but doing so in a smart, cost-effective way. These suppliers have correctly anticipated market opportunities, have optimized inventories, are capable of meeting consumers where they are now, and working with their contract manufacturers and brands to deliver quality, efficacious products generally targeting consumers 30-45 years of age. 

On the other hand, we see a premium market continuing to evolve. The second outcome of this supplement market bifurcation will be a premium, longevity/lifespan and resilience driven opportunity. Already ingredients like NAD+ are resonating with a younger, medium to high spending consumer set that is also taking a long view to their health. Companies supporting this consumer set with premium, differentiated, efficacious ingredients stand to win. 

According to ITC 2024 Supplement Consumer Research(1) of US consumers, 37% of males 18-34 and 30% of females the same age and then 35% of males 35-54 and 24% of females the same age are looking for branded ingredients and willing to pay a premium for them. When asked what it was about these ingredients that drove this response, the top responses in these age groups were quality, trust, clinical research, compliance and efficacy. When asked what drove trust, these consumers noted ‘consistent product quality’ right after the top response – ‘a health care practitioner recommendation’.

The moral of this story is that amidst all the likely supply chain disruption, there remains a long view opportunity that will reward those with transparent supply chains that plan ahead, don’t take short cuts and focus on meeting consumers right where they are with quality, differentiated ingredients and products.