The natural and organic products industry, which includes natural food, beverages, dietary supplements and now cannabis products, has grown over 20% since 2014, reaching over $200bn in revenue. And there are no signs of demand letting up. A recent study conducted by New Hope Network’s Nutrition Business Journal estimates that sales will continue to grow steadily into 2021.
Consumer demand for natural products does not come without significant supply chain challenges: a key one being a finite supply of farm-grown ingredients, of which a significant amount are imported from countries such as China and India. This is especially true of the supplement industry. This opens the door to the threat of adulteration, which occurs when an undeclared substance is introduced into a product or ingredient which either improves profitability, or performance.
It’s easy to see the inherent dangers of adding unknown ingredients; in 2015, FoodSafety.gov reported the discovery of peanuts in cumin seed products which could have been fatal to those with nut allergies. While this is an extreme example, the incorporation of unreported products deteriorates industry reputation and consumer trust. Additionally, these infractions will likely lead to FDA scrutiny, penalties and possible civil lawsuits.
Technology: “Un-leveling” the Playing Field
In a bid to prepare for the future and to stay ahead of competition, dietary and herbal supplement companies have started looking for ways to improve their supply chain transparency process. As they are doing so, they are realizing that they need to update their existing systems and technologies to support this future.
New cloud-based systems like TagOne that integrate mobile devices, IoT and blockchain are redefining the limits of supply chain transparency. Smart devices can now capture key data elements from users, like farmers, in remote parts of the world, and then leverage the global cloud infrastructure to instantly store and share the information, all while ensuring data integrity using blockchain technology. This means that complex and traditionally opaque global supply chains are becoming increasingly clear.
These systems are changing the game not only because they address the supply chain transparency challenge, but also by helping to transform operations within an enterprise. Multi-functional single-systems, which are replacing multiple outdated systems, have become a single source of truth for all your business data and documents. For example, one of our clients had five employees trying to manage multiple business functions like receiving, invoice reconciliation, inventory availability, ingredient quality verification, product documentation and delivering audit reports for specific lots. After executing our transparency roadmap and implementing TagOne’s Software as a Service solution, our client was able to streamline these processes and gain access to all the ingredient movement, available inventory, lot numbers and product documentation, which was available at the click of a button. This data is additionally stored securely on our private Hyperledger blockchain and can be shared with select business partners or auditors as needed.
The addition of blockchain can be critical to the natural product industry transformation because now we have an encrypted, decentralized digital ledger that preserves all transactional information. In other words, companies with a blockchain-enabled solution can present concrete data to prove the safety of their ingredients which is crucial not only in audits, but also highlights their brand’s commitment to quality.
Taking the Plunge
The challenge for natural products companies is not very different from the pharmaceutical industry which came under heavy regulatory and consumer scrutiny almost fifteen years ago. The early adopters who embraced new procedures and technologies built stronger brands, ran more efficient operations, avoided lawsuits and easily addressed brutal FDA audits.
We believe that in the natural products industry, the benefits of early adoption are even higher. Companies that can differentiate in a highly commoditized market with comprehensive supply chain transparency can sell as a premium brand (increase revenue), run businesses more efficiently than competitors (reduce costs) and dramatically reduce business risks (recalls & returns/FDA audits).
At the point of sale, if the customer is empowered with more data about the product origins and its life cycle, they are bound to feel more secure about what they are putting in their bodies and more loyal to the brand. In the bigger picture, this can only be good for the company selling the product and the industry as a whole.
About TagOne LLC: TagOne is a supply chain management advisory and technology company that delivers transparency to the natural foods industry through expertise and innovation in supply chain management. TagOne’s expertise and technology empowers B2B customers with End-to-End (E2E) track and trace processes and capabilities, resulting in increased operational integrity and leadership visibility. Learn more at www.TagOne.com.