Dietary Supplement Industry Supply Chain Update

Unfortunately, I have no good news to report since my last update with regards to the supply chain issues that we’re currently facing in our industry. It’s getting worse folks, not better. The global supply chain is still experiencing disruptions, delays, and shortages that are affecting every aspect of the DS industry. This update will be a bit more robust than previous because many more ingredients need to be watched.

INTERNATIONAL FREIGHT: Freight costs internationally have worsened in August. The cost of shipping a container from China to the U.S. has increased 4-7 times since pre-covid numbers, depending on ports. U.S. and global demand continue to outpace capacity causing wait times of more than 3 weeks and container costs continually increase by $1000 every 2 weeks. We’re now running into the holiday season where companies will be increasing inventories which will further exacerbate the problem.

A container from Shanghai to LA has increased from $2,350 to $14,100 with spot purchases of more than $30,000 per container. The cause: surging global demand, shortage of containers, the Suez Canal blockage, the closing of the Yantian port, COVID issues, lack of employees at ports, shortage of trucks, and the increasing trade imbalance.

Most analysts are predicting it will be between mid-2022 and the end of 2022 before we see any relief. The general consensus is that after the market normalizes, freight will not return to where it was. Higher freight costs will be the new norm.

DOMESTIC FREIGHT: Domestic freight has increased 80-85% in the first 6 months of 2021 compared the same period in 2020.

WHEY PROTEIN: Whey protein presents the most serious of problems for our industry right now. Pricing is rising with no answer in sight as to when it will stop. Whey Concentrate (WPC80) has gone up almost 150% in the last few months and Whey Isolate (WPI90) has almost doubled in the same period.

Manufacturers are getting hit hard and passing price increases on to brands who are in turn seeing a $5 to $10 increase in the cost of their 2-pound tubs. That’s only the increase from the CMO to the brand, add to that the markup from the brand to the store, and then from the store to the consumer. Dairy manufacturers might be pricing themselves out of the industry soon because whey protein products will be hitting a retail price point that consumer are just not willing to pay. This will cause consumers to look for alternative protein sources.

Because of existing inventory and dairy contracts, many brands have not yet increased their price, but it is inevitable. So far, we’ve seen only a handful of brands increase their pricing, so it hasn’t yet fully trickled down to the consumer. But give it 30 to 60 more days and the shit will hit the fan. There will be a consumer revolt that will affect all whey goods including protein powders, weight gainers, protein blends and meal replacements. My biggest fear is what could happen to product quality. We will certainly see a resurgence of protein spiking, WPC34 bait and switch, and many other scams.

CREATINE MONOHYDRATE: Availability continues to be a disaster. Supply is extremely tight and shows no sign of improving soon. Factories are still producing very little material and are not honoring their contracts so many brands are subsequently finding CMOs cancelling their commitments, delaying shipments, and increasing prices. Creatine is currently 3-4 times higher in cost than it was 6 months ago, but even if you are willing to pay the price, good luck finding it.

Yogan and Baosui are rationing their outputs to the entire market while Taiking is fully booked through the end of October. The cause continues to be a shortage of the raw materials needed to manufacture creatine. Yongan, one of the main manufacturers of creatine, controls the supply of HAN (hydroxy acetonitrile). HAN is produced from natural gas which creates excessive pollution, so the Chinese Government has demanded a reduction in the manufacture of it. Hengkang controls cyanimide also needed to produce creatine. Calcium carbide used to manufacture cyanimide is in short supply because it too is a heavy pollutant and utilizes extensive amounts of energy, so China has reduced its production as well. To worsen matters, calcium carbide is a key component used in the manufacture of PVC. PVC production is at an all-time high which further tightens the supply of calcium carbide.

CITRULLINE & CITRULLINE MALATE: Pricing for both has hit an all-time high, up about 60% in last few months, and it continues to rise. Currently supply is extremely tight and very hard to find. CJ, the most significant player in the citrulline market, closed their Haide plaint in China and will continue production only out of Indonesia, but that will not be enough to fill the void because the factory has limited capacity. Currently there is no solution for CM until maybe 2nd to 3rd quarter 2022.

ALBION MINERALS: Albion has experienced problems keeping up with demand for a few months now. Sales of their key minerals have grown dramatically, and they currently do not have the manufacturing capacity to meet the demand. Their warehouse shelves are bare, and all incoming supply is already spoken for through end of year. Current commitments of some ingredients are being rationed off. Purchase orders placed now will not be available for delivery until 1st quarter 2022 on most products.

VEGETARIAN CAPSULES: Capsugel and Caps Canada have zero stock with little or no information as to when they can supply. Caps Canada might have seriously screwed their future business because they shut down all communication with customers. They gave no advance warnings of supply problems, are not giving out estimated times, and didn’t take or return calls. Customers understand the current issues but what is unforgivable is lack of communications and disregard for years of loyal business. Gelatin capsules so far are stable.

CAFFEINE ANHYDROUS: Caffeine took a big hit this year after China shut down production. Material became scarce and the price skyrocketed. Currently price is about 12-18% higher than norm. It seems China has reopened factories so hopefully we’ll see a return to normal.

AMINO ACIDS: Aminos over all have increased from 5% to 25%. BCAAs, arginine and glutamine are on the rise. NAC is stable, probably because of lower demand due to the crackdown by Amazon, which removed all NAC products. Tyrosine needs to be watched because supply is getting tight. Carnitines are getting tight, and price is on the rise due to some manufacturing plant shutdowns. Alanine, taurine, and cysteine are stable.

VITAMINS: Vitamin price and supply is stable for the time being. Folic acid supply is getting tight because p-aminobenzoyl glutamic acid, used in manufacturing, is in short supply. Inositol price is on the rise. Natural Vitamin E is the one to watch here as supply is limited and price is on the rise. Synthetic Vitamin E so far is stable.