Tuesday, November 16, 2010

Herbs & Botanicals-Raw Material Supply Update

Many farmers in North Carolina are interested in growing herbs and botanicals for the natural products industry.  A few want to produce their own value-added products, but most who contact me want to grow raw material and sell it on the wholesale market.  I just finished reading the October 2010 issue of the Nutrition Business Journal which is dedicated to raw materials and ingredients supply.  Thought I would share a few highlights from that issue for those interested in growing bulk raw materials for this industry:
  • Prices were relatively stable for raw material and ingredient supply companies in 2009 and early 2010.
  • Manufacturers are asking for more information and quality assurance on the raw material they purchase in order to be in compliance with the new Good Manufacturing Practices (GMP) implemented by the FDA.
  • These regulatory pressures are actually helping to stablize the market.  Manufacturers and raw material suppliers are having to work more closely together to meet regulations.  This is stablizing relationships; making switching suppliers (to follow the low price) less attractive.
  • Manufacturers are not increasing prices on their products because the market is so competitive.  Yet their costs are going up.  That means they still want to get the best prices they can on raw materials.
  • Raw material supply companies are fighting back by increasing the value of their products.  They are selling branded ingredients, providing better testing and quality controls, and creating their own value-added products.
  • The new GMP regulations are costing raw material suppliers more in lab costs.
  • Raw material suppliers are optimistic about the future.
A few quotes directly from the article:
  • "Ingredient supply sales of herbs and botanicals rose 5% in 2009 to reach $450 million in sales."
  • "Supply shortages hit several crops, including saw palmetto, turmeric, and milk thistle."