How Integrated Dual Sourcing Creates a Climate Change-Proof Supply-Chain That Protects Cosmetic Manufacturers

Supply Security

Climate change imposes new stress on farmers and the industries that depend on them

Climate change poses not just one, but a whole slew of challenges to farmers and the downstream industries that depend on them. From damaging winds during a storm, to erosion and even landslides, major weather conditions have always been a concern for farms and now they are becoming aggressively more common. In spring 2018, unusually heavy rain caused massive flooding across the U.S. Midwest, leaving some areas 10 feet deep in sand. In Nebraska alone, it is estimated that farmers lost $440 million of cattle. As a result of these floods, many farmers had to delay spring planting. Delays in crops aren’t just stressful for farmers – they could lead to significant supply chain disruption for the food and personal care industry, which continues to rely more and more on naturally-derived ingredients.
 
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Beyond the catastrophic and headline-making weather disasters, farmers around the world are starting to notice that seasons aren’t what they used to be. Growing seasons are starting earlier and temperatures are getting higher in already warm climates. While a longer growing season could theoretically have some advantages, it also presents more obstacles in the short term, such as an increase in pest population. Early spring onset can also cause crops to grow before the soil holds enough water and nutrients, or to ruin fruit crops that bud early and then experience later spring frost. Plus, warmer winters can affect other farming practices like grain storage.
 

The cosmetic industry is increasingly at risk of natural raw materials shortages

More erratic and changing seasons pose an inevitable challenge for the cosmetic industry which has embarked on a transformative journey toward using more natural ingredients. As the industry shifts to raw materials that are increasingly derived from natural feedstock, it also becomes more and more exposed to the risk that climate change represents to crops and harvests. Many oils, emollients, emulsifiers and botanical extracts are now partially or entirely derived from natural resources. Vegetable oils have benefited from the natural craze over the past few years and have become increasingly popular to formulators and consumers. These botanically-derived ingredients resonate profoundly with beauty and food enthusiasts, concerned about wellness and healthy lifestyles. Contrary to synthetic ingredients, vegetable oils availability is directly connected to weather conditions, and quality of the harvest among additional factors. Purchasing departments have faced their fair share of challenges in the past years because of this.


Launches featuring natural oils and botanical ingredients have outpaced the overall rate of launches in the Beauty and Personal Care category.
Fig 1 – The number of launches featuring botanical extracts and vegetable oils have grown faster than the number of launches in the overall Beauty & Personal Care category over the past 5 years, and these categories have proven recession-proof.  

In 2013 for instance, a poor rainy season led to a drop of 80% in the Spanish olive production, sending the whole supply-chain for olive and its derivatives, like olive oil, into a whirlwind. More recently in 2020, the US apricot output was estimated to be down 30% compared to previous years, due to a combination of poor weather conditions and limited available workforce. This drastic decrease in production created very tight conditions for apricot kernel oil for personal care formulation. To make up for the limited supply from the United States, oil suppliers and cosmetic manufacturers had to quickly approve alternative sources from the Eastern hemisphere, creating an unwelcomed burden on quality and formulation departments.

“Vegetable oils represent a unique challenge for procurement departments. These oils typically have short shelf life and cannot always be kept in stock for a long time. There is often an intricate interdependency or competition with the food industry, which can add a layer of complexity when harvest conditions are poor and supply tight. Purchasers need to be in constant contact with farmers and processing facilities to keep up with this fast-evolving market” says Brenda Lopez Salas, Strategic Sourcing Manager for Vantage Personal Care™.

The consequences of climate change are still not fully understood, and not likely to impact all continents in the same way at the same time. But as the beauty and personal care industry sees no slowing down in its transition to natural ingredients, it becomes increasingly challenging for purchasers to secure their procurement routes.


 

Tool-kit for a secured supply-chain

Putting in place the right processes can help alleviate the risk associated to sourcing natural ingredients, but they all come with a high degree of added complexity:
  • Full vision over ingredient traceability: in an ideal world, purchasers would like to know the full picture of how the raw material they purchase are sourced, starting from the farm or country of harvest. Combining this mapping with meteorologic alerts can help purchasers anticipate potential shortage risks based on climatic conditions. This approach can however become cumbersome and still requires the approval of alternative sources.
  • Dual sourcing: creating backup strategies whenever possible is another way to mitigate climate-related shortages. This strategy requires that several suppliers exist for a raw material, and that they are located in different regions of the world to reduce the chances that a meteorological event would impact all alternatives suppliers at the same time. While this option often proves to be efficient, it generates more complexity and creates the need for quality approval upfront for all suppliers.
 

Jojoba cultivation as an example of geo-diversified farming

The question of supply safety for natural oils is something we, at Vantage™, come across on a regular basis. When we decided to become the leading supplier of jojoba oil in 2012, concerns about jojoba oil scarcity and potential shortages were very much alive in the mind of the procurement departments we were in touch with. Jojoba grows in very specific conditions and requires a subtle balance of dry and hot weather and reasonably mild winters to avoid the devastating effect of frost on the seeds, so that they can reach their maximum potential in oil concentration. Seeds are collected once a year, so any erratic weather can wreak havoc into the harvest season and the final oil output.

Geo-diversified jojoba cultivation by VantageIn order to protect companies from annual shortages, Vantage™ has invested into jojoba farms both in the Northern hemisphere - in Arizona where jojoba is native, and in the Southern hemisphere, in Argentina, where the Monte Desert provides similar weather conditions as the ones in the North American Sonoran Desert. Jojoba seeds are collected at both sites, and oil can be extracted locally. This geo-diversification in both hemispheres drastically reduces any risk that a bad harvest during an “Annus horribilis” would leave manufacturers around the globe with no available jojoba oil.

Furthermore, by directly operating our farms, Vantage™ keeps full traceability of the oil, from Farms to Formulations™. This integrated supply-chain model, from cultivation to oil refining, allows us to strategically manage our safety stocks of both seeds and oils, further eliminating any risk of shortage. This integration also gives us total control over the quality of our product, assuring that no matter the origin of the product, each batch is delivered within the same specification, year after year. “Operating two farms on two continents has really allowed us to come through for our customers in moments where they needed reliability and consistency to support their global growth. Jojoba oil has become increasingly popular over the past few years, and we take pride in our ability to keep delivering a consistently high-quality product, no matter what unexpected surprises Mother Nature throws at us” shares Amber Schwartz, Jojoba Operations Director for Vantage™.

As climate change creates more uncertainty over seasonal patterns, with potential dramatic impact over crop harvests around the globe, Vantage™ is committed to supporting cosmetic manufacturers with the most reliable level of services. By adapting and investing in this geo-diversification model for jojoba, we provide our customers the security of dual sourcing, along with the simplicity of dealing with a unique supplier, and one oil quality-standard. This leads to complete peace-of-mind, from Farms to Formulations™.

 

 
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