Unstable Gelatin Supply Harming Downstream Businesses

Write before the gelatin supply chain

Healthcare is now people’s biggest spending on a daily basis and its market cap is ranked very high among industries in the world. No matter where you live, health issue will always be there, hence the demand for drugs and nutraceutical products keeps growing in high speed regardless the global economic climate and we see no sign of turning for this trend.

Gelatin is a critical supply for making nutraceutical & pharmaceutical products and its major application is to make capsules, hard and soft ones. Raw material for making gelatin is majorly animal collagen derived from bovine or marine tissues, skins and bones. There are manufacturers of vegan capsules who use plant based raw materials such as carrageenan to provide an alternative on the market for vegan consumers, but the industry is still dominated by gelatin because of its lower cost.

The COVID-19 pandemic outbreak in early of 2020 has disrupted the global supply chain for which we see shortages in capsule supply in North American pharmaceutical market. The situation is a vivid showcasing of how badly the industry is rely on suppliers in Asia and EU and the unbearable outcome if such supply chain has been intervened for whatever reasons.

So, cultivating alternate suppliers and building tiers of supplier in multiple countries may improve the stability of supply chain for good.

The real situation of gelatin imports

World’s raw gelatin producing capacity are located in America, Europe, and Asia where most of the capsule manufacturers are buying from. US is the No. 1 buyer of raw gelatin which bought over $258 million worth of gelatin in 2018, with a diverse source. (Figure 1)

During the pandemic, meat processers were either reducing the production capacity or shut down entirely upon request by government for the purpose of stopping virus spread. This counter measure has limited the availability of raw materials for producing gelatin. Indian capsule industry, the largest in the world, has cut production by 30 ~ 40 percentage wise due to a lack of raw materials, and pricing of capsules are also driven up because of similar reason [2].

The major threat to the stability of supply chain in pharmaceutical industry is pandemic-related issues which also driven up the cost drastically. The overall supply chain operation has been shattered by COVID-19. Indian pharmaceutical companies, which import 70% of its ingredients from China, have to limit their exportation on dozens of pharmaceutical ingredients [3]. Moreover, Shipping and transportation delays are happening all around globe due to closed borders of many nations. All those problems are shadowing over global pharmaceuticals supplies.

Also, concerns over quality are increasing with COVID-19. Due to a travel limitation, quality inspection agencies around the world are not performing at their best. Buyers managing a multinational supplier pool are working in blind which also raises questions more than ever about the status or reliability of global supply chain.

Increased use of gelatin

The reduced gelatin supply for pharmaceutical industry may not be a temporary or recent phenomenon, we are afraid to say but the demand is only increasing as the population is aging rapidly in many industrialized countries because of life expectancy increases and birth rates decline. Senior adults are more likely to have various kinds of condition which requires a variety of prescription medications. Therefore, the pharmaceutical industry will need to produce an increased number of drugs to keep up with the demand.

Because of gelatin’s wide application, other industries are now competing with pharmaceutical industry for supply of gelatin. Increasing demand in food and cosmetics business is stretching the supply even thinner. Gelatin and its derivatives are popular as a food additive because of its antioxidant capabilities, cryoprotectant and food-stabilizing properties [4]. Plus, cosmetics manufacturers are using collagen and gelatin in skincare products increasingly for their perceived anti-aging benefits.

Importance of reliable gelatin supply chains

COVID-19 is clearly having continued impact on companies’ day-to-day operations for the foreseeable future, indicating that ingredients shortages may come and go as the pandemic rise and fall around the globe. Experts predict the situation would be a “new normal” in our daily life now which means using reliable and experienced suppliers might help industry leaders sail smoothly in future global supply upheavals.

But you can’t risk handling over the majority operations of supply chain to one single country. Diversification is the key to minimize the instability of supply chain operation. In particular, centralizing supplies in one country, may lead to interruption of the chain due to outside forces, such as a pandemic, human error, or political tensions. Furthermore, when a single country controls a large market share on a particular supply chain, there’s potential risk of it manipulating the prices that the industry and consumers has to pay.

It’s so important to choose suppliers that are focused on quality, transparency, and purchasing ease. This helps protect future manufacturing against ingredient shortages and sourcing problems. Thus, a gelatin supply chain really plays an important role.