Coronavirus Disruption Likely In Supply Chain, Stockpiling Spikes Consumer Health Sales

Coronavirus fears are sending shockwaves globally through health care product sales as consumers stockpile face masks, hand sanitizers and vitamins and through supply chains as manufacturers expect disruptions to ingredients sourced from China.

The US Food and Drug Administration has said the outbreak could lead to interruptions in drug and medical device supplies, though it hasn’t specifically addressed dietary supplements or OTC drugs in updates it has posted, most recently 2 March.

Additionally, the FDA, authorities in otther countries and state regulators expect companies will attempt to capitalize on Covid-19 with exorbitant product prices or bogus prevention and treatment claims, and Amazon and Facebook also are on the lookout(see sidebar article).

Natural Products Association CEO Daniel Fabricant says supply of certain ingredients is one of the main concerns of natural health and wellness marketers.

“There’s a lot they are worried about. Is there going to be price gouging for commodity ingredients, especially for contract manufacturers? I think that is a legitimate concern,” Fabricant said on 4 March.

The Consumer Healthcare Products Association says it not aware of an impact on the supply of OTC medicines sold in the US and it continues to monitor developments.

“Though we can’t speak to company-specific activities, CHPA member companies have extensive experience in supply chain planning and are leveraging this deep experience to help maintain consumer access. We are aware that members are actively taking steps to ensure a reliable supply of raw materials used in the manufacture of OTC medicines, such as monitoring supplies, verifying stocks and orders with suppliers and bringing in materials in advance,” the trade group said on 5 March statement.

The Personal Care Products Council addressed potential Covid-19 impact on supplies of products its members sell during its annual meeting, 1-3 March in Palm Beach, FL. PCPC Chairman George Calvert, chief supply chain officer at Amway Corp., said although supply of a lot of materials is available currently in warehouses, secondary supply will be an issue. For instance, he noted a recent 500% spike in demand for vitamin C, equivalent to the global volume for the rest of the world. (Also see "PCPC Leads Off Annual Meeting With Coronavirus Remarks: “A Significant New World Overnight”" - HBW Insight, 2 Mar, 2020.)

HEALTH CARE CONSUMER PACKAGED GOODS SALES, TOP CHART, DURING THE 1- AND 4-WEEK PERIODS ENDING 22 FEBRUARY INCREASED ACROSS CATEGORIES FROM THE SAME PERIODS IN 2019. IN THE LOWER CHART, THE INDEX MEASURES, FROM A BASELINE OF 100 FOR HAND SANITIZER, THE LIKELIHOOD FOR HAND SANITIZER BUYERS TO ALSO PURCHASE PRODUCTS IN ADJACENT CPG CATEGORIES, SUCH AS 29% MORE LIKELY THAN OTHER CONSUMERS TO PURCHASE DISPOSABLE DIAPERS.

Top, Nielsen Retail Measurement Services; lower, Nielsen Spectra

Fabricant says NPA member companies also are concerned about whether FDA is doing enough to ensure ingredients they receive from China are safe.

For example, he questions whether FDA is focusing on imports from Chinese manufacturing facilities where there have been Covid-19 outbreaks and whether the agency is ensuring those facilities have a plan in place to mitigate any threat of viral spread through the transfer of products.

He added commodities that are of primary concern are sourced mostly, or exclusively from China. These include B vitamins and certain amino acids, ingredients for which supply has been affected by the recent US-China trade war in which the US has placed tariffs on $250bn worth of imports from China. (Also see "Tariff Hikes On Chinese Imports Still In Play As US Plans December Increase" - HBW Insight, 15 Oct, 2019.)

On 6 March, President Trump signed legislation Congress passed earlier in the week providing $8.3bn in emergency spending to combat Covid-19. It includes $1bn allotted to state and local agencies for medical supplies such as masks.

In numerous updates educating consumers and industry on what it knows about the virus and its impact on the supply of drugs and medical devices, FDA says it is working with US Customers and Border Protection to target products intended for importation that violate applicable legal requirements for FDA-regulated products.

It also suggests risks of spread from products does not appear likely.

“We are not seeing the impacts of this outbreak resulting in an increased public health risk for American consumers from imported products. There is no evidence to support transmission of Covid-19 associated with imported goods and there have not been any cases of Covid-19 in the US associated with imported goods,” the agency says in a 24 February update.

In a 27 February “Supply Chain Update,” the agency said it is “not aware of any reports at this time of human illnesses that suggest Covid-19 can be transmitted by food or food packaging.”

Supplements, Energy Drinks Part of ‘Pandemic Pantry’

While basic food stuffs such as canned goods, flour and bottled water are the go-to products for preparing for potential outages, “concerns are having a ripple effect into non-food essentials,” stated market researcher Nielsen Co. LLC in a report it released 2 March.

In the US, for example, sales of supplements, fruit snacks and first aid kits are all on the rise, according to “Nielsen Investigation: ‘Pandemic Pantries’ Pressure Supply Chain Amid Covid-19 Fears.”.

Tracking all US channels combined, sales of dietary supplements were up 7.8% and unit growth 9.7% for the week of 16-22 February in comparison to the same period in 2019, Nielsen reported.

Sales of energy beverages, oat milk, first-aid kits and bath and shower wipes also are up considerably over the year-ago period in the US(see chart).

Supplies have been in demand since the Covid-19 virus, first detected in the Wuhan region of China in December, has spread outside the country to infect almost 98,000 people worldwide, with 164 cases and 11 deaths reported in the US as of 5 March. On 28 February, the World Health Organization put the global coronavirus risk level at “very high.”

The most dramatic increases in emergency supply purchases are in the US, China and Italy, with “significant spikes” in emergency supplies as consumers build “pandemic pantries” that have rippling effects to other categories, Nielsen says.

“We expect the rush to stock up to have an almost immediate impact on supply chains for manufacturers of the most sought-after goods. Stocks of hand sanitizers and face masks have already dried up in some markets, with no clear indication of when supplies will be replenished,” the New York-based firm said.

In the US, revenues jumped 73% from hand sanitizer sales and 319% from medical mask sales for the four-week period ended 22 February, according to Nielsen measurements(see chart).

Department of Health and Human Services Secretary Alex Azar told members of Congress on 25 February that the US could need up to 300m protective face masks, 270m more than the current supply.

In drug stores in San Francisco, sales of medical face masks in 2020 through 28 February have exceeded the total for 2019, Nielsen said.

UK market research company Kantar Group reported sales of hand sanitizer in the UK grew 255% for February compared to a year ago, while soap sales grew 7% and household cleaner 10%.

In Malaysia, hand sanitizer sales hit $237,175 for the week ended 26 January, 800% higher than average weekly totals, and in Vietnam, 45% of consumers surveyed say they’ve increased what they are stocking and 20% are buying more items online, Nielsen said.

The largest number of Covid-19 cases outside of Asia were reported in Italy in February and consumers’ concerns generated a 20% jump in hand soap sales and 24% increase in thermometers. But there is a high level of confidence the outbreak will be contained, largely due to the proactive efforts of consumers to wash their hands and prevent the spread of germs when coughing and sneezing, according to Nielsen.