Wilson Lau, and Josef Brinkman, Traditional Medicinals, Vice President of Sustainability talk about climate change, growing herbs, and building a sustainable supply chain. According to Josef, sustainability begins with evaluating and understanding what is needed most to sustain and improve your supply chain.
- 1:30: What do you consider to be a sustainable herbal supply chain? What goes into those considerations?
- 4:30: Sustainability is about not causing detriment to the places you operate in. It also means you’re paying fair wages and people are making a livelihood.
- 8:30: Site selection is extremely important.
- 9:30: Case study on Sustainability and Licorice.
- 13:00: Risk Mitigation in the supply chain and having multiple suppliers to deal with climate change and other geo/political factors.
- 14:30: Developing New Sourcing Practices: Closed-Loop Supply Chain, Diversification, Source to Shelf
- 17:32: Climate change, changes in plant growth patterns, and plant/ingredient chemistry.
- 19:00: Do we need to carry larger quantities of ingredients to combat availability issues?
- 20:30: What to consider in long term storage and maintaining potency.
- 23:20: Planning long term crop availability.
- 26:00: Other Climate Change Considerations:
Wilson Lau (00:03):
Good afternoon, Josef. We're here with Josef Brinkman of Traditional Medicinals to talk about a Sustainable Herbal Supply Chain. And Josef, in my opinion, is one of the most interesting people in the world. I always come away with some new insight after talking to him, whether it be sustainability, historical tidbits, or a new point of view. How have you been?
Josef Brinkman (00:26):
Doing good? Nice to see you Wilson, after 18 or 20 months of lockdown.
Wilson Lau (00:33):
Yes. Yes. It's great to see you, too. As like before we started recording this, I was telling you that just seeing you for this warm, fuzzy feeling in me, just because it's great to see a friend that you haven't seen in so long.
Josef Brinkman (00:51):
Likewise, good to see you.
Wilson Lau (00:54):
So at the recent American Herbal Products Association's Botanical Congress, there was a panel on the Sustainable Herbal Supply Chain, and some of the panelists had multiple definitions of sustainability and some which included the human element, the people actually in the Supply Chain. Just at a very high level, what would you consider components of a Sustainable Herbal Supply Chain?
Josef Brinkman (01:25):
Well, of course it has to be nuanced and it depends on the size of the operation. And, for example, if your brand is using a hundred tons a year of an ingredient that needs to be imported, the definition may be different than if you need 100 kilos a year of something that you can grow or gather near where you're operating. So, there are some vertically integrated brands in the states that have their own farms. Their definition will be different from a brand that needs to import significant quantities of something from different parts to the world.
So yes, I do look at sustainability, including the social and economic criteria along with environmental. You have to factor in the personal relationships, continuity to the operations and country of origin have a succession plan. What standards are they following? What is the governance in the country they're in? Is there good governance over wild areas? For example, if you're talking about wild collection or is there corruption in the government making it difficult to have managed resource management in wild areas?
But basically what I've been looking at since the late 90s are all of the emerging voluntary sustainability standards and looking at what criteria they look at. Initially, some were satisfied with organic certification and looking at the rules for that, whether it's farmed or wild crop and early two thousands, I became dissatisfied with that limitation and realized, at least in my experience, that I needed to look at economic and social criteria as well.
So I take a holistic approach and a whole ecosystem approach while it's conceivable that a farm could be certified or organic, mono cropping hundreds of hectares of the same crop, in my view, that's not really organic. It might comply with the regulations. There are criteria that organic farms are supposed to follow with regard to maintaining biodiversity in the farm and leaving certain areas wild in the perimeter and all of that. And having habitat for pollinators and other creatures. But in practice, if you've seen a few big organic farms, it's not necessarily always the case.
So for me, a big part is whether the operation, whether it's a farm or a wild collection operation, is not causing detriment to the ecosystem where they operate in and the social and economic part is that folks need to be making a livelihood. They need to be making a dignified income, livelihood for being stewards, either of a sustainable farm operation or a sustainable wild collection operation without making a reasonable income for doing it.
It's difficult to expect rural folks to do all the hard work of implementing these rigorous sustainability standards while suffering the costs of time and money of audits and compliance. So, long story short. I think that brands, the way I look at it, a brand needs to have a visible, traceable supply chain for a sustainable supply chain that takes into consideration, not just quality, like implementing GACPs, but voluntary sustainability standards and good relationships at every step of the way from the meadow, the forest, the field all the way through. It's not easy, but that's how I would define it.
Wilson Lau (05:44):
I totally agree with you. It's definitely not easy. And I love the fact that you brought up the point that it's not a one size fits all solution, like your local producer that might be able to craft 50 pounds to make, or even less to make a tincture to serve their local community is very different than a huge operation. And just because you meet the minimum standards, doesn't mean that it makes you sustainable. It can make you organic, but not sustainable and vice versa. And it's a total ecosystem approach. And it's so true.
Josef Brinkman (07:22):
Wilson Lau (07:23):
Hopefully I'll have more to say about that, but thanks for putting me on it and lighting a fire under me to try to get it done.
Josef Brinkman (07:33):
For environmental sustainability standards, the FairWild Standard, even though the word fair is in the title, it's a far more rigorous environmental or ecological sustainability standard than organic wild is. And that's really how I got involved with it because the criteria and the guidelines for the organic wild crop harvesting practice standard were minimal and fairly weak. Over time, the control bodies have come up with their own criteria for doing audits and it's gotten better, but the FairWild Standard is rigorous.
And it has tools, whether you go for certification or not, it has some of the best tools out there for carrying out risk assessment on the species level and resource assessment at the site specific level that also contribute to quality. Site selection is really important, just as it is with organic wilderness. But I have seen some FairWild operations in different countries that have given careful thought to the areas that they go to the government for to get, for example, a 50 year exclusive lease to a very remote area that has low possibility of contamination or pollution from unknown sources and also low possibility that others will enter the area. Therefore it's easier to implement a plan where only a known number of people have limited access to the controlled wild collection area.
About the earlier point though, of large quantities, there was an article that I contributed last year to the journal of medicinal plant conservation, United Plant Savers Journal that was done together with the ISCN working group. And I wrote about our licorice supply chain there. And that's a case where the company I'm with, Traditional Medicinals, uses a significant amount of wild licorice. And most licorice in global commerce is wild, although more and more is being cultivated. But that's a case where we spend a good amount of time looking for producers interested to implement these difficult standards. Licorice occurs in very remote places in the world. Well, the remote area in California, if all your licorice comes from places like Uzbekistan, Kazakhstan, Afghanistan, Pakistan and China, and then all way to the Caucuses or Georgia, where a lot of licorice comes from, it's far away from here and it's difficult to have the visibility to what's happening on the ground.
Josef Brinkman (10:26):
We spent a long time working on that. And the other part of sustainability that can be a complicating factor if you work looking for a bigger company is the business need. It's a smart need to spread risk. As you get bigger, you can't be single sourced. You can't rely on a single producer group. Anything can happen. And these are things I've seen happen. The owner of the operation suddenly dies and there's no succession plan. The business is gone. What, the next order's not coming? There's a revolution in the country. There was no revolution last month, but there's a revolution this month. And all, all trade is disrupted. Oh, there's a 500 year flood. Oh, it happened two years in a row. You can't get into the collection areas. So these things are happening with more and more frequency, which really necessitates for a bigger company to have at least 2, if not 3 distinct producer groups for each important item that you balance your contracts against and keep all of them engaged with a certain amount of the business.
And in the case of something like licorice we may add a fourth. Well we have four. Now we get some from China that is actually processed into an extract. But our licorice is coming mainly from Kazakhstan, Uzbekistan and Georgia. And most of the licorice in global trade these days comes from Republics of the former Soviet Union, like the three 3 or 4 mentioned countries, as well as Afghanistan and Pakistan. And these newly established republics have only been countries for 20 years and before that they were in the Soviet Union and there's still a lot to sort out and it's not always easy for American companies to have the access you need, but we've been able to work with really good producer groups in these countries, but you are also a bit vulnerable.
When I was in Georgia last time and I asked the licorice collectors there what they worried about, on the list was the Russians invading Georgia again? So these are real situations. And some of the places of worries are the weather. Licorice is well collected in flood plains and some years the flood waters don't recede quickly enough to get into the area to be able to dig roots. So, I'm going on and on here, but it's important in the context of sustainable resource management to also spread risk and have really good relationships, not only if you're importing and you're a brand you're likely working with an intermediate company that is processing ingredients for you rather than procuring directly from small producer groups that might be cooperatives or small brigades of 10 or 12 people in a far away country, you're likely working with an intermediary company who has the relationship. But I would maintain it's really, really important to know everybody in the value chain and then you can work things out as they happen.
Wilson Lau (13:56):
Yeah, I totally agree with you. You gotta diversify your risk by having multiple suppliers, especially there's geopolitical risks and then right now we're seeing in California even, where we're located, we're seeing a lot of extreme weather patterns and other environmental conditions associated with climate change. And we're seeing, like you said, the impact of that on the supply chain and availability, ingredients, quantities of ingredients. So you're seeing this throughout the world and it's really...
Josef Brinkman (14:35):
Did you see the Chinese news today? The flooding in Hunan Province?
Wilson Lau (14:40):
Josef Brinkman (14:41):
Wilson Lau (14:43):
Yep. We have flooding in Hunan Province. We have flooding in Germany and Belgium. I think, globally, these extreme weather pattern changes are going to impact everywhere around the world. This is not no longer the case over there, right? Wherever over there is, could be here or there.
Josef Brinkman (15:07):
Right. So that's important for long term planning. As science evolves, there's more and more papers being published on plant's ability to adapt to changing climates and whether plants in the wild are migrating, or whether they can survive. So these climate change predictive models are important. If you have a long term relationship where have to plan with a producer group, this is particularly important with plants that require many years of plant maturity before you can harvest so roots that might require 5, 6 years or tree barks that might be minimum 8 to 10 years, where you have to be looking ahead many years for your supply, but if the climate change predictive models say this plant is not going to be able to be grown in this area 50 years from now, then it's important to look ahead with the families or the communities that you're working with to find out what will grow, where you are, if you can't grow this anymore for continuity of trade aid relationships, it's really complicated, but we unfortunately have to think about these things. Some plants are moving higher in altitude and encroaching on species that didn't have competitors before at higher altitudes. It's really remarkable.
Wilson Lau (16:31):
Yeah. I agree with you. It's almost like they're invasive species now, as they move up altitude or down altitude, or through longitude or latitude, depending on the situation. I think one of the things that we're seeing is how do we support our local producers? How does New Herbs support them as weather changes so that we can, like you said, if they're doing this now, can we get them to do something else, start thinking about doing something else, because the traditional crop may no longer be suitable for that. And along with that, what whole different topic than sustainability is the chemistry of these plants also changed slightly as in some cases, more than slightly as the regions they're grown in and the [inaudible 00:17:25] they're grown in and the conditions that change, it also changes the chemistry of the plant in a way that it may not perfectly match up to what it traditionally looked like.
Josef Brinkman (17:35):
Yeah, that's such a disturbing thought, but I have thought about it because your traditional use, your thousands of years of observation of safety and efficacy of a certain urban, of course, in the traditional Chinese medicine theory or concept of Dowdy of geo authentic, there's a reason that certain regions were preferred based on clinical observation of efficacy. And when the material comes from another area, right, the chemistry composition may be different and the therapeutic or clinical outcomes could be different. So it has to be monitored. Hopefully it's not significant, but, but it could be. We certainly know that wild plants that have been domesticated outside of their native habitat and then have escaped or naturalized different eco chemotypes developed, the chemistry is different. It might still be a good medicine, but you have to do the science to determine if it can be used in the same way, at the same dosage as the geo authentic material that is described in the list in the traditional medicine literature. That's fascinating.
Wilson Lau (18:46):
Whole different topic and serves to return back to the topic of sustainability and the Herbal Supply Chain. Just wanted to ask you one last question. Do you think companies just need to start building bigger inventories, maybe even across seasons and years to prepare for these extreme weather events or geopolitical events, especially as you get bigger, right? You are not able to always satisfy your needs from that particular year, if something happens. What's your thoughts on the idea of maybe stocking a little bit more material to help smooth out your supply chain in addition to having multiple producers, because maybe all the stands have bad weather that year.
Josef Brinkman (19:36):
Yeah, yeah, exactly. It's difficult. It depends on the available cash of the company to hold more inventory in the space, the warehousing space and the stability of the botanical. We look at that and if you can hold a raw material in a dried, relatively unprocessed form, not cut it too small. If it's an herb that's efficacy is dependent, for example, on its essential oil content, it's complicated, really light flowers and leaves dependent on their essential oil content. Companies don't generally want to buy beyond the most recent harvest depending on the form it's stored in and the storage conditions and whether you have a controlled environment and tightly closed containers. Because if you are using materials where it needs to stay in specification for your entire shelf life of your product, then you have to add on the year or year and a half in warehouse or two years in warehouse to that and do stability studies longer than that to see if it'll still be in specification. This is much easier with plants that have more stable chemicals. It's more complicated in things like chamomile or peppermint, but it's easier with a lot of roots. But even some roots, valerian root, are also dependent to a certain extent on essential oil content.
And some herbs like that, the European Pharmacopoeia has a limit for whole dried valerian and for cut dried valerian, the essential oil content drops by 25% assuming a loss of a quarter of the oil content just by particle size reduction. So, yes, what some companies do, ingredient suppliers like yours, I'm not saying your company does this, but some ingredient suppliers, if they have rolling over contracts with the brands and they know roughly what the annual amount is and they have enough experience with occasional spikes, they'll come up with a buffer that generally works. In other words, if you generally need 10 tons a year, some years it's 9, some years it's 11, maybe they'll hold 11 to 12 and they have other customers for the same quality. So they won't be stuck with it at the end of the year as a new crop is coming in.
You can work that out. You're right. It's smart. If you can do it, it's smart. If you can afford it, you have the space and you have a good supplier who will work with you on, it's a smart idea, because there's just too many uncertainties from whether you can even book a container. If you can book the container, how long it'll take to get here. And this is the sort of thinking, people in our industry have been thinking like this really since 2001 with the bio terrorism act. I don't know if you recall back then, but after that was passed 2001/2002, there were such significant delays at the port that we added, I think at that time we added 90 days lead time to everything coming in, due to the uncertainties at the ports. And then, even with that, you have uncertainties as you know of, whether FDA or USDA or customs and border patrol will put an intensive hold on your container while they look at things and who knows how long it's there. So you still have to add several months up front due to those uncertainties. And of course the current situation during COVID, the difficulty to even get containers.
Wilson Lau (23:31):
I totally agree with you. You have to work with an experienced provider to know which ingredients can be multi-year or even longer than that season, right? Some things aren't very suitable for that and other things are very suitable. And I think the key really is, like you said, that you want to work with somebody that can help you build a buffer. And even if you run a little bit over, you can also account for increases in sales and delays at port or origin or any other things that may happen. Any number of things that may happen. So, whenever we would work with anyone, we really want to understand their situation, how accurate their numbers are and really counsel, don't try to go, when you do look at your forecast, don't look at harvest to harvest, look at 2, 3 months after harvest, right? Is what you really counsel at New Herbs, our partners, to look at. Just because it's harvested at origin doesn't mean it gets processed, shipped and arrives the next day, right? It takes time.
Josef Brinkman (24:41):
And then you have to think further ahead. So in our experience, if we know something is a 3 year root crop or a 4 year root crop, we're being reminded each year, how much more should the farmers plant? Should they plant the same amount for harvest 3 years from now? Because the fact is, and here I'm talking about some hard lessons many companies in the States learned in 2020, when there were spikes in demand for any products that had immune modulator ingredients in it. If you have a root and even if you have a long term relationship with farmers, they need to know each year, what quantity you think you need 3 years from now. If it's something like that, if it's rhodiola at 6 years, if it's echinacea it's 3 years. You have to give them a good indication because it's not sustainable to cause a farmer to take all the risk.
You have to make some commitments and say, yes, we want you to plant another hectare because we see our growth rate like this. And in 3 years from now, if you don't do that, when you go back to your suppliers, they're going to say, well, you didn't plan 3 years ahead. There's no carry over stock. Nobody speculated on producing 50% more than you thought you needed. So I think these days I recommend that it gets easier the longer a company's been in business, but let's say you've been in business a couple of decades. You have a couple decades of sales data on your products and formulas. You should be able to work with a statistician to have a pretty good forward model of what you might need based on the past and based on trends. And you have to give your best guess to your supplier who then probably transfers that to the farmer, with what needs to be planned for.
If you're thinking year to year harvest to harvest, you're going to lose. You're not going to get everything you need. Because this is a niche. Medicinal plants, it's not corn and sugar. This is a strange subgroup of plants and farmers and wild collectors don't necessarily speculate, oh let's harvest 50 tons more or produce 50 tons more than we have commitments for and just see if we can sell it. That doesn't happen that much. Usually when I talk to farmers 80 to 90% of their crop is pre-committed and the rest is for the buffer for their good customers and to account for any spikes. So, you need to plan ahead.
Wilson Lau (27:27):
Thank you so much for your time, Josef. I think the thing I heard about is planning and making sure you have good partnerships and plan some more and there's a lot of unknowns out there. So I really appreciate your time and your knowledge, and it's always great to talk to you.
Josef Brinkman (27:46):
All right, Wilson. Thanks for having me. Bye.