Written by NutraBio's Founder & CEO Mark Glazier
Remember Tony Montana's last words in the bloody chainsaw scene in Scarface: "Chichi, get the yayo!" Well, a lot has changed since 1983, and today Chichi would shoot back; "Fuck the yayo, I'll get the creatine!"
Before you start thinking I've lost my mind, let me get to the point. You all know I make nutritional supplements. Earlier this year I paid $85,500 for a container of creatine monohydrate. Two months ago, that same container cost me $270,000. Last week, the spot price for creatine mono rose to $630,000 per container. Folks, these are real numbers: $630,000 for a container of creatine. That's a 700% increase since January. Now I haven't paid that price, but the mere fact that serious offers are coming in at such a high level shows how desperate the market is right now.
Bargain prices refer to the price if I wanted to grab a container now. If you're wondering why I'd buy on the fly instead of contracting six months or more in advance, well, normally I wouldn't. But understand it's a different world now. The supply chain is so bad and ingredients are so scarce that contracts and general purchase orders are not worth the paper they are written on.
Months ago, Mitsubishi Foods started the trend of canceling purchase contracts by using force majeure. It is a common clause in contracts that releases both parties from liability and obligations when an extraordinary circumstance beyond the control of the parties prevents them from fulfilling the terms. It doesn't just happen to small CPG players. Recently, the price of sucralose jumped from $32/kg to $58/kg overnight. Shortly thereafter, Coca-Cola received a force majeure declaration from their supplier, forcing them to renegotiate.
I don't blame suppliers like Mitsubishi: if they can't sell the product, they have no choice. Buying now is like the wild west - it seems like anything is possible. Do you think Tony was tough? Today's buyers would eat him alive.
So these are just two examples of recent drastic increases in raw material costs. It doesn't end there: whey protein is up 150%, citrulline is up over 200%, citric acid has doubled and malic acid has tripled in price, the supply of amino acids in general continues to tighten and the list goes on . Costs are increasing daily for just about everything: raw materials, bottles, caps, labels, shovels, pallets, machines, parts, cleaning chemicals, labor. Nothing has been left unscathed. The supply chain crisis is by no means limited to dietary supplements. It is far-reaching and its tentacles extend into every industry: automobiles, transportation, lumber, electronics, food, gas, and so on. It goes without saying that rising inflation is now a foregone conclusion.
So what does this mean for nutritional supplement brands and stores? It's a tough battle and it will get worse before it gets better. Many of the negative impacts of the supply chain crisis are still seeping through and are not yet fully visible to stores or consumers. We see brands raising prices, taking products off the market and of course reorders are getting worse day by day. Depending on where a brand is in their inventory cycle, they may or may not have responded, but what's to come is inevitable, so be prepared. The cost of ingredients, packaging, and transportation has gone up across the board, so be prepared for shortages, delays, and backorders. Prices will go up and in some cases, like whey protein and creatine, they can skyrocket.
So what shall we do? I think Mel Bernstein said it best with his advice to Tony Montana: "any day above ground is a good day." Those who think harder, smarter and outside the box will survive this. Those who let fear paralyze themselves fall to the side. We've been through COVID, the darkest time in our industry's history, so we're battle hardened, we'll get through this too 💪💪💪