Euromed, Kaneka, Omya and Glatt speak about how they are dealing with the pandemic and their predictions about future supply and demand
The coronavirus is having a knock-on effect for every industry. The long-term repercussions are hard to predict as of yet, but many key figures in the nutraceutical sector know the importance of discusses what these could look like.
Hearing from Euromed, Kaneka, Omya and Glatt, Nutraceutical Business Review learns what is at the forefront of the business leaders' minds.
When asked what measures their company is taking to ensure the health of employees, all involved stressed the strict adherence to government recommendations.
Senior Manager at Japanese-based Kaneka, Filip Van Hulle, says: "Even before the European authorities announced restrictions, we advised employees to travel as safely as possible - for example, using less public transportation, more private car/taxi - and only to do so if really necessary. In the meantime, we have implemented further measures in line with authority requests such as working from home where possible, and keeping a safe distance from colleagues on site."
There may be short-term demand/supply fluctuations. Customers or consumers may also want to stock up on supplies
This is relatively achievable in a corporate environment, but factory production is far more complex.
Glatt Senior Sales Manager, Jan Kirchhof, says: "We have adapted our procedures in line with these so that personal contact is reduced to a minimum and safe distances can be maintained between people on our business premises."
Euromed's Head of Scientific Communications & Marketing, Andrea Zangara, explains in more detail the protocol in the manufacturing facilities: "Since the early global news reports surrounding the outbreak, management has implemented new enhanced sterilisation practices in our manufacturing facilities. We have segregated staff from different work shifts, with facility sterilisation between shifts to avoid unnecessary workforce exposure. Additional protective equipment has also been provided to staff."
Delivery times and costs are increasing
Zangara says that this protective equipment is provided to laboratory personnel and manufacturing staff who are unable to work remotely as they need to be onsite. "Office staff who can work from home to avoid close co-worker contact have, for the near future, been instructed to do so. Non-essential company meetings are being conducted by video conference call, and non-essential employee travel has been prohibited," he adds.
Contamination is a key concern when dealing with a pandemic, Omya VP of Consumer Goods, Group Sales & Marketing, Stefan Lander says: "With regards to our production, shifts have been reorganised to ensure that the number of people working at the same time is reduced as much as possible. To avoid contamination, we have implemented further internal procedures to guarantee maximum safety levels. For other departments, e.g. technical assistance, we have been able to switch to a largely digital work mode in order to maintain support for our clients at the highest level."
Measures are in place to reduce the impact of the virus on the globe, and therefore, on businesses. Leaders are trying to predict what the short-term and long-term impacts will be, and the supply chain at the top of the list.
Production is the first stage to focus on as the social distancing protocols in place have changed the day to day routines. "We will continue with our business activities as usual and, for example, provide planning services for new production facilities as well as optimising existing lines using proven biotechnological and pharmaceutical processes," Kirchhof says. "We will also continue planning and implementing fluidised bed plants for the production of dust-free, free-flowing granulates from powders and liquids."
A concern of many is that supply disruption might cause other issues such as adulteration
A concern for many is that supply disruption might cause other issues such as adulteration. Zangara says: "Quality-conscious companies have policies that strictly exclude the use of adulterated botanical extracts. However, when there is significant demand for a limited supply of botanical extracts, this opens the door for adulterated material to enter the supply chain."
Van Hulle says that to guarantee supply Kaneka has two operational manufacturing plants on two continents - in southern Japan and Texas. "If global circumstances mean we need to make more in one plant to cover issues in another, we will do that as we have done so in the past," he explains.
"Our planning team is continuously monitoring the market, and takes actions on request," Van Hulle explains, saying that this can include investments in building more manufacturing areas. "Morever, ‘Just in time’ approach should be reviewed and companies and shops should build some safety supplies to avoid running out of stock."
Import and export is the next way that the stock levels can easily be impacted. Euromed's Zangara says: "Recently it was announced that there will be a smaller number of flights between Europe and the US. We will be expediting shipments from our production facilities to the US to try and minimise future logistical delays. We normally maintain a two-year supply of botanical raw materials in our warehouses, with some exceptions where that's not possible. We also have alternative sources of raw material supply in the event of supply chain disruption.
Van Hulle says that for transportation between Kaneka's manufacturing plant and its European warehouse, the company relies on external partners. "We can manage this at the moment, however, both delivery times and costs are increasing. We do not think now is the best time to pass on these extra costs to our customers, and hope that things will level out in a relatively short period."
And finally, on the demand side of matters, order levels can change based on consumer perspectives. Omya's Lander notes that at the moment, it is getting increased orders due to higher demand. "Mid-term, we expect a decline as our clients will likely have to cope with prolonged supply chain effects. But this is just a temporary issue and the situation will normalise long term," he explains.
The impact on demand is entirely dependant on the sector. For example, immune support supplements have been seeing a spike in orders. "The negative economic impact from widespread loss of employment is yet to be felt in the natural product industry," Zangara says. "Immune system-enhancing dietary supplements are currently in great demand. Euromed is experiencing increased demand for extracts such as echinacea in response to brisk sales of our customers' immune health formulations."
Van Hulle says that estimating demand is "not an easy question". He explains: "Personally, I expect stable sales. Although with less new product introduction, but consumers are already satisfied with the products they are taking and will continue to do so. However, there may be short-term demand/supply fluctuations. Customers or consumers may also want to stock up on supplies. Some may also use more Ubiquinol as, like vitamin C, it has a good effect on immunity - and demand for vitamin C seems to have increased greatly recently."
A clear definition of 'essential industries' is needed quickly
"There is also a trend towards more online sales and fewer purchases in pharmacies or shops," Van Hulle adds. "Another point relates to the required packaging or excipients. Brand holders can get Q10/Ubiquinol from us, but other ingredients may come from countries or areas where stocks are limited, leading to supply issues. And Contract Manufacturing Organisations (CMOs) may be closed or working with a reduced workforce."
This may be a time to look at overall business models to see if it is well prepared for these kinds of global situations. Kirchhof explains that Glatt has core competencies in a wide range of industries, such as pharma, food, and feed, and this diversification helps to cushion extreme fluctuations in individual sectors.
Zangara explains that long-standing relationships with farmers cultivating botanicals under contract are essential to reliable supply as wildcrafted herbs are available in limited quantities and, therefore, a good business partnership between extractors and their raw material suppliers is essential. "The natural products industry is cyclical, and this positive economic business environment will last until consumer concern over the risk of coronavirus infection subsides," he notes.
Many businesses are now asking, 'what are governments doing?'.
Lander says a clear definition of "essential industries" is needed quickly. "Calcium carbonate is multifunctional: It is not only used to enhance the health properties of food and pharma applications but is also an additive that eases many production processes and improves the quality of finished products. Therefore, as it is used in a broad range of applications, including pharma, nutraceuticals, food, household and personal care, to name just a few, our ingredient really is essential for several industries."
Shifts have been reorganised to ensure that the number of people working at the same time is reduced as much as possible
This clarity is needed as working from home provides its own set of challenges. Kirchhof says it goes without saying that there is no substitute for interpersonal working relationships. "Projects are made by people, and people have emotions. In this special situation, however, when we are unable to work together in as close proximity as we have been used to, it is important that we all maintain virtual contact. This enables everyone to make their own contribution to protecting ourselves and our fellow human beings and yet still enables us to collaborate with each other fully."
There is a silver lining to every cloud, however, and Lander says: "The situation obviously requires digital collaborations – internal and external." But he explains how this can be a positive. "Technical services, tradeshows and a lot of other things can be executed without the need for a physical presence. This supports even more flexibility in working hours and locations. In my opinion, this will help further the development and implementation of truly global teams, resulting in quicker decisions and actions."