UNPA’s Israelsen: Supplement firms ‘are being careful with cash flow’

Companies in the dietary supplement industry “are being careful with cash flow” and are likely to “keep a close eye on the balance sheet” in the next few quarters, United Natural Products Alliance (UNPA) President Loren Israelsen said in a recent interview.

During an interview at the SupplySide East trade show on April 19, Israelsen addressed macroeconomic forces facing an industry that achieved blistering growth during the pandemic and unprecedented supply chain challenges.

“From a UNPA standpoint, I’m certainly sensing there are signals of caution,” he said. “I think companies are being careful with cash flow. There’s still a lot of inventory sitting in warehouses. Post-Covid… we’ve come off record highs, and so we are seeing kind of a glide path of slower sales.”

“That makes sense,” he continued. “I think people want to get on with their lives [following the pandemic] and reducing their supplement regimes would be a part of that.”

According to estimates from Nutrition Business Journal (NBJ), growth in the supplement industry rose to an all-time record of 14.5% in 2020 to $55.75 billion, said NBJ Senior Manager of Data and Insights Claire Morton. Growth slowed to 7.5% the following year, according to NBJ, which like Natural Products Insider is owned by Informa PLC.

“Coupled with impacts of inflation, the market growth has now dropped to 1.9% for last year rising to an estimated 2.6% this year,” Morton said. According to NBJ, the industry generated over $61 billion in 2022 sales.

“The impacts of Covid are still very real, however, with sales projections for 2023 still $1.5 billion higher than 2019 expectations,” Morton added.

Inflation is eating into Americans’ paychecks, said Israelsen, who characterized supplements as “relatively” expensive for most consumers.

“Throughout the [sales] channels—whether it’s direct selling, practitioner, retailer, e-commerce—we’re seeing the same signals,” he added. “I do expect if interest rates were to drop, that would be an encouragement. As we move toward later in the year, get to Q3, Q4, I think it will pick up.”

Economic concerns have increased lately over fears that the U.S. could default on its obligations to pay its debt.

Meanwhile, many companies in the natural products industry are sitting on inventories, which is a far cry from the height of the pandemic when manufacturers struggled to obtain raw materials to meet blistering consumer demand.

In terms of the supply chain, Israelsen generally agreed that it’s business as usual, with a caveat: “Companies are holding a lot of inventory so the demand on the supply chain is not as intense as it might be normally.”

“We don’t feel the stresses, but once there’s a pick-up, and burn down those inventories, then we’re going to find out what the real situation is with the supply chain,” he said.

In the video clip below, Israelsen also discussed his perspective on future supply chain issues. In addition, he addressed challenges facing multilevel marketers of nutritional supplements, as well as an evolution in the types of direct selling distributors entering the MLM space.

[Below, Josh Long (left) discusses the economy and other issues with UNPA President Loren Israelsen at SupplySide East].