COVID-19 is boosting supplements market and could drive up prices, says PharmaLinea founder

10 Mar 2020 --- Industry expects growth in global consumer demand for supplements amid the COVID-19 outbreak, according to PharmaLinea Chairman and Founder, Blaž Gorjup. In an exclusive interview with NutritionInsight, Gorjup explains that even though new product launches are on hold due to the severity of the COVID-19 situation, the market is still seeing a boost in sales. He goes on to discuss how immunity is becoming increasingly popular in light of coronavirus-related concerns and how the supply chain is influenced, especially in China, with prices potentially going up for supplements.

“In countries such as Korea and Italy, which have been hit hard by the virus, a drop in consumption is to be expected. However, it should not be problematic for the industry or for global players,” Gorjup says. “Different markets will feel different effects – countries with serious outbreaks and shutdowns of cities will see less spending, whereas countries that will only experience a scare will likely see an increase in healthcare spending.”

The company expects the increased demand to raise the prices as well, at least in the short term, for the forthcoming quarter. “This could especially affect spot-buyers at any stage of the supply chain. Companies that are 100 percent price-driven and purchase materials from whoever is currently offering the best price will face both increased prices and possibly a lack of availability of goods,” he notes.

COVID-19’s effect on business development
While the global effect on the industry might well turn out to be beneficial, business development processes are challenging at the moment, Jernej Klopčič, Business Development Director at PharmaLinea, tells NutritionInsight. 

PharmaLinea Chairman and Founder, Blaž Gorjup.“Some of our partners in Europe are temporarily closing offices, certain companies are restricting travel, transportation hubs closing down are also affecting meetings and so forth. During our team’s business trip visiting partners in Southeast Asia in February, some meetings were already affected and even held wearing gloves and masks. Not to mention the series of events being canceled,” he notes.

Major trade shows around the world have been rescheduled or postponed due to the COVID-19 outbreak. 

“Regular visits to clients are key for our business model to deliver sufficient consultancy and education, and maintain long-term partnerships. Consequently, we are quickly adapting to change by advancing digital tools to connect with our partners around the globe in a manner that comes closer to meetings in person. At such a time, it is vital for a company’s business processes to be agile,” Klopčič explains.

“The supplement industry has proven to be resilient in previous crises and it was one of the industries that didn’t suffer too badly from the financial crisis in 2008. Now the situation is even less threatening in terms of consumer habits because a lot of consumers’ disposable income will be saved as they travel less. Instead, these funds are diverted toward health concerns as the threat out there is of such nature. Consumers with chronic issues are paying increased attention to taking care of their needs and maintaining good general health status to be able to cope with diseases,” Gorjup underscores.

Immunity and well-being
NutritionInsight previously reported on how the coronavirus outbreak has influenced the supplements space so far, emphasizing immunity and prevention. Indeed, supplements are already doing very well, Gorjup reiterates. “This interesting effect is already evident,” he says, as orders for PharmaLinea’s immunity supplements are increasing globally. 

“Our clients see an increasing demand even without additional medical detailing and it seems that consumers are increasingly opting for clinically substantiated immunity support. Secondly and perhaps less intuitively, demand is increasing for products addressing other health areas.  This includes anything people consider essential for their well-being or for part of their daily supplementation routine. For example, in Asia, we see increased demand for our iron supplements line, because anemia is typically more problematic there,” Gorjup further highlights. 

COVID-19’s effect on the supply chain
In China, the effects on the supply chain are definitely felt, and the supply chain has been hindered, Gorjup affirms. “This luckily happened in a narrow time window and it coincided with the Chinese New Year when everyone was stocked up and factories were closed anyway, therefore minimizing the negative effect,” he states.

Jernej Klopčič, Business Development Director at PharmaLinea.“According to our information from contacts with direct insight, Chinese raw materials and other resources should be at least 90 percent of full capacity within weeks, with the exception of the Hubei region, which is still faced with limited production levels. The largest portion of the threat of the collapse of the Chinese supply chain was addressed well and is on its way to being mitigated,” Gorjup explains.

He also highlights that if outbreaks are not too widespread and are handled well, then the period of slow-down will not have too much of an effect. Companies who act responsibly and have sufficient stock and critical supply levels can endure such a period without too much damage, he notes.

“The importance of established relationships and long-term, strategic partnerships with suppliers will now be more important than before. It could be a wake-up call for companies to ask themselves – how much does the supplier value our relationship and how can any such situation in the future affect us?” Gorjup asserts.

Surviving every crisis
Gorjup compared the current situation to the post-2008 financial crisis and the 2012 health claim scare were situations. They were of different nature and gravity compared to the situation now, but certain similar patterns can be seen, he says, including larger industry players that are slightly more rigid and have more at stake back up, stop new product launches and wait out uncertain times.

“For challengers in the market, times like this can present an opportunity. To challenge the market a valid strategy we saw our partners succeed with then was with clinically supported products. It’s one way of creating differentiation and it’s especially prudent now since consumers will have more disposable income and more initiative to increase expenditure on health,” he concludes.

By Kristiana Lalou