Manufacturing Herbal Supplements for a Demanding Market
- By: AHPA
- On: 02/13/2023 12:30:34
- In: Industry News
Strong relationships between contract manufacturers and their suppliers and clients support innovation and help meet growing consumer demand.
February 10, 2023
By Michael McGuffin, President, AHPA | Nutraceuticals World
In the three years since COVID-19 first upended seemingly all areas of life, all over the world, makers of herbal products and dietary supplements have adapted to the changed industry landscape.
Able to operate through pandemic restrictions as essential businesses, contract manufacturers weathered disruptions to the global supply chain—such as ingredient shortages and significant packaging price increases—to meet the increase in demand for botanicals to support health and wellness. What began as a spike in demand has become consecutive year-over-year growth in retail sales of herbal dietary supplements by upwards of more than $1 billion annually.
Contract manufacturers, including many American Herbal Products Association (AHPA) members, largely consider strong relationships with both suppliers and clients as key for meeting the growing demand for the product category and innovating as market trends change.
All Eyes On the Supply Chain
Over the course of the pandemic, everyday consumers and businesses have grown increasingly aware of the global supply chain as they experienced the impacts of disruptions to the supply, production, and transportation of retail goods. While household items like toilet paper and hand sanitizer often sold out, herbal dietary supplements also flew off the shelves.
In particular, more people wanted products containing herbs associated with boosting immune health and helping the body manage stress—such as elderberry and ashwagandha, respectively. Global supplies of these herbs quickly diminished and were slow to be replenished, reflecting in large part the limitations of where, when, and the speed at which these generous plants grow.
This herbal supply shortage left many companies unable to fulfill orders due to out-of-stock ingredients and the cost-prohibitive nature of reformulating. Contract manufacturers that had strong relationships with their suppliers, however, fared better in sourcing high-quality botanical raw materials needed to keep production going and products in stock.
“Because we have such great, long-term relationships with our vendors, while everyone was trying to buy echinacea, goldenseal, etc., our suppliers called us and said, ‘Here's what we have,'” recalled Mitch Coven, CEO of Vitality Works.
Based in Albuquerque, NM, Vitality Works has manufactured herbal, vitamin, and other dietary supplements for over 40 years, partnering with growers and suppliers from across the globe to source freshly harvested botanicals. Coven credited the strength of the company's relationships with suppliers, coupled with maintaining a healthy cash flow and minimizing financial leverage, for Vitality Works' growth that has continued through the challenges of the pandemic.
Now that herb supplies have stabilized and many marketers can maintain plenty of inventory to meet existing demand, contract manufacturers are working closely with their clients to innovate as herbal dietary supplements remain popular across mainstream and natural retail channels.
Trends to Watch
After adding herbs to their health regimens, consumers are now increasingly looking for more product variety and more benefits from dietary supplements. Fortunately, herbs contain an assortment of nutrients, traditional formulas combine several botanicals, and dietary supplements come in many forms to meet diverse consumer preferences.
“We are seeing a lot more brands wanting to stack functions and make diversified blends that stand out on the shelf,” said Sarah Vito, director of business development for Yellow Emperor. “People are also more open to different delivery formats and the taste of natural flavors.”
Yellow Emperor strives to meet ever-evolving consumer interests and the resulting demand for innovative dietary supplement products. Based in Eugene, OR, the West Coast contract manufacturer has exclusively produced liquid dietary supplements, foods, and personal care products for more than 40 years.
Though gummies have skyrocketed in popularity and now represent the largest non-pill share of the dietary supplement market by consumer sales, liquids have seen a resurgence as well. “We're working with brands that are looking for unique liquids to complement their other dietary supplement offerings,” Vito added. “We're also seeing a shift toward alcohol-free formulas that taste good, too.”
Products in development but shelved at the start of the pandemic also may soon reemerge, which would create new dietary supplement trends to watch. The demand for products to support immune system health has slowed due to market saturation and other factors, making space for dietary supplements to support other areas of health, such as mental acuity and digestion.
“We are seeing the very beginning stages of backlogged products and ideas coming back,” explained Mike Finamore, CEO of Gemini Pharmaceuticals.
Headquartered in Commack, NY, Gemini Pharmaceuticals has been developing and manufacturing dietary supplements and over-the-counter pharmaceuticals for over 40 years. As a contract development and manufacturing organization (CDMO), Gemini Pharmaceuticals works closely with its clients from concept to finished product.
“Successful companies are the ones that have ideation pipelines,” Finamore added. “Brands revisiting products that they had expected to launch in 2020 are starting on second or third base with those ideas now, as consumer health interests shift away from COVID response.”
Just as strong, long-term relationships with suppliers were crucial to navigating ingredient shortages, contract manufacturers who have developed trusted partnerships with their clients are in the best position to help companies plan, adjust, and innovate for the future.
“We should feel like a part of your team, and communication should be consistent,” said Vito of the partnership between contract manufacturers and brands. “For instance, you can reach out to us if you're seeing a trend and want to increase your order, and vice versa; we will keep you informed along every step of the manufacturing process, sharing lead times and projections.”
“By working with brands on product design and development, not only do we help determine things like how much of an herbal ingredient to use, but we also get to help tell the story of herbs as we work with our partners to refine their marketing concepts,” said Finamore of the added benefit of engaging a CDMO from the start of the ideation process.
By outsourcing production and building these close, collaborative relationships with contract manufacturers, dietary supplement companies free up their valuable in-house resources, while staying in control of their products and leveraging the expertise and experience of their manufacturing partners. Though there are many businesses that produce herbal tinctures and capsules, brands are ultimately responsible for the quality of products they sell.
“Complying with federal regulations, like GMPs [good manufacturing practices], is the lowest bar to be in this business; brands should visit their contract manufacturers to perform a full qualification audit,” explained Coven. “I have observed an emerging trend for companies to overreach and dig all the way back to the keys of the kingdom.”
In discussing this further, Coven emphasized the need for strong collaboration to avoid redundancy without compromising quality assurance.
With the market expected to continue to grow as more people embrace herbs for their health and wellness, it is an exciting time to be in the herbal products business. To make the most of emerging opportunities for herbal dietary supplements, established and new marketers alike should look for experienced and knowledgeable contract manufacturing partners—many of which are AHPA members.