Hidden Stakeholder Risk of Increased Supplement Industry Transparency
Increased transparency is great for EVERY supplement industry stakeholder, right?
“Although transparency is a vague term, its benefits can be very tangible.” — Captain Obvious
There’s no doubt about it: When it comes to consumer trust, the supplement industry still faces its fair share of challenges. Generating trust through transparency is a rallying cry in the supplement industry. It seems everybody, from consumers to industry professionals to trade groups are talking about transparency. While the supplement industry has made strides in this area, it still has significant transparency potential to live up to.
As more consumers add supplements into their daily routine, it becomes imperative every stakeholder across the value-chain embraces a greater level of transparency to ensure that only high-quality supplements enter the market, in order to reduce risk to consumers. If a consumer uses an ineffective supplement, they lose trust no only in that product, but also in the industry as a whole. This isn’t good for any supplement industry stakeholder, and it should be easy to see how there’s a clear connection between increased transparency and consumer trust and how that consumer trust translates into commercialization opportunity of the supplement industry.
Evolution of Transparency
The seeds of transparency where planted in the 1980s when “business was strictly business.” With companies in the 1990s starting to see how sharing information with shareholders could fuel growth, those transparency seeds started to sprout. Fueled by internet accessibility, information availability, and globalization making the world a smaller place, transparency attention shifted even further towards stakeholders in the 2000s. Through the 2010s to today, it seems the more companies share, the more people want to know. Though some degree of structure to transparency has emerged over these last four decades, it’s still an evolutionary standard across all business sectors, including the supplement industry.
Consider this basic example…
- 2007 = supplement retail shelves were filled with products from nameless faceless brands that had supplement facts panels filled with proprietary blends
- 2022 = supplement retail shelves are filled with products from accessible owners of brands that have fully disclosed supplement facts panels
What caused that to happen?
- Consumer Demand = In today’s age of information, supplement buyers (if they choose to be) are more educated than any previous time in history.
- Marketplace Competition = The growing saturation of the supplement industry from low barriers of entry has driven brands to use their “level of transparency” as a marketing differentiation strategy.
These will be the same marketplace forces that propel the flywheel effect forward ultimately pushing the supplement industry towards unlocking a great level of transparency. As the most aggressive supplement brands seek to meet the demands of the highest consumer expectations around transparency, it will naturally push all boundaries higher and setting a new standard.
Right now, consumers are starting to think beyond the label, with transparency defined as providing detailed information such as what is in their supplements and how it was made. With consumers demanding greater transparency, supplement brands have an opportunity to educate consumers, communicate values-based information, and clarify sustainability practices, all in an effort to win consumer loyalty.
I have no doubt in my mind that the brand-side of the supplement industry will continually respond to increased consumer demands around transparency and push it to new heights with cutting-edge initiatives, this is the way to foster long-term customer loyalty, but…
…has anyone stopped to really think about if this pursuit could create stakeholder risk?
Transparency Radicalized (Traceability)
To meet consumer expectations around transparency long-term, most supplement brands (since majority utilize asset-light operating models) will need to place more pressure on the supply-side of the supplement industry. Soon, transparency will essentially only be the entry fee to compete in the market, but your only chance of winning the competition will be through traceability.
Like transparency, traceability is currently an evolutionary standard that doesn’t have a consistent definition or standard. When companies talk about traceability, they are really talking about where a product comes from, how it’s made, and the ability to track that process through detailed records. It’s all about the supply chain…
- begins with research and product formulation
- moves on to growing or producing the raw ingredients
- followed by processing and manufacturing
- finally packaging and on to the consumer
For some products, a lot of steps can occur within what appears to be a simple supply chain journey. Important details of safety and quality can get lost within those layers unless a company is diligent about tracing and documenting those details and enforcing key quality standards.
Ultimately, full traceability is difficult to achieve for agriculturally-derived products, but the protocol is already forming inside certain food products because of social purpose or governmental reasons. This difficulty should subside though as various interconnected technology systems becomes more ubiquitous across the supply chain. The supply-side of the supplement industry will respond and eventually provide full traceability to the transparency hungry brand-side, but what happens next might catch them off guard.
Let’s fast forward not too far in the future to a fully traceable supplement market…
Supply-Side Has a Huge Weakness
Have you attended the SupplySide East or SupplySide West trade show?
If not, let me paint a vivid picture in your head…
Imagine a world without color. One where you see rows of businesses that look indecipherable. These businesses have employees that all act similarly as you approach. They will all try to hand you paper and talk to you only in operational, product safety, or science terminology.
You get the point yet?
The supply-side of the supplement industry has always creating a B2B sales story that’s focused on the nuance of their operational efficiency, safety certifications, and/or scientific capabilities. This is a good strategy when you are only worried about B2B communications, but I often wonder how many suppliers in the supplement industry have considered how their business would be valued from the consumer perspective.
Thinking from the POV never really mattered materially until very recently…
Case Study: GHOST Lifestyle
While GHOST Lifestyle hasn’t yet instituted full traceability practices, they have adjusted the longstanding paradigm in the supplement industry that the brand-side shields the supply-side from consumer access.
- GHOST Lifestyle shows consumers the name of their main contract manufacturer
- GHOST Lifestyle shows consumers the name of their flavor company
- GHOST Lifestyle discloses to consumers the names of their ingredient suppliers
- GHOST Lifestyle shows consumers the name of their packaging suppliers
Right now, all of that information could be easily found through a consumer watching the company’s “Behind the Brand” YouTube series. Some of it’s on their physical packaging now, more will likely be included soon, but one day it will likely be fully traceable for the consumer to explore deeply.
Supply-Side Must Adapt Now
Has any supplement industry suppliers fully grasped what that tipping point would mean to their business model?
That implies “Manufactured at Armada Nutrition” needs to mean something to the consumer that aligns with GHOST Lifestyle. If it doesn’t, it opens up GHOST Lifestyle to consumer questions about why they use Armada Nutrition as their main contract manufacturer over a competing contract manufacturer that has more perceived market value. Take that example and replace it with Synergy Flavors over its competitors, Glanbia protein over competitors, Creapure over another creatine, Carnosyn over another beta alanine, or Pretium Packaging compared to another supplier.
As consumers are presented with these supply-side business names that they’ve likely never heard of before, they will naturally start to research and place market value on them like any consumer brand. These consumers will need to understand operational efficiency, safety certifications, and/or scientific capabilities, but in a laymen's way. More importantly, consumers will care about things like;
- What’s that suppliers core values?
- What are the societal causes they stand for?
- Does the supplier have ESG standards?
If there are any noticeable misalignments between supplier and brand, it would put the brand (because it’s closest to the consumer) in a tricky situation. They would need to waste precious consumer attention on justifying why they use XYZ supplier instead of a better aligned competitor. Most brands wouldn’t be willing to stick their necks out on the line, thus situations like this will force them to adjust…causing massive disruption.
While most supplement brands are not at this level of thoughtfulness yet with supplier selections, the time will quickly come when all brands properly audit supply chain partners. It’s extremely important that supplement industry suppliers decide who they are, what value their business is going have with consumers, and start making the adjustments needed inside the organization to align everything together.
Here’s a pro tip for you…you don’t want to be in the boring middle. I’ve seen this happen across numerous industries over the last few years, so heed my advisory now before you are forced to catch up later!
