Russian invasion unlikely to upend botanical supply situation, but finished goods sales could be impacted

24-Feb-2022 - Last updated on 24-Feb-2022 at 18:03 GMT

Stock photo of a Russian MiG-29 fighter plane taking off. ©Getty Images - guvendmir

The Russian invasion of Ukraine this morning is expected to have little effect on the supply of ingredients to the dietary supplement industry in the near term. The picture for companies selling finished products within the two countries is less clear.

After weeks of aggressive posturing, Russian leader Vladimir Putin pulled the trigger and sent Russian troops across the Ukrainian border today. Yesterday Russia had reportedly sent troops billed as ‘peacekeepers’ into two enclaves of far eastern Ukraine where a low level conflict has been waged for a number of years.

As of publication time today, however, Ukraine is reported to be under full scale attack from the north, east and south. Russian warplanes have bombed sites within Ukraine and a pitched battle is reportedly being waged near the entombed Chernobyl nuclear reactor. Ukraine has reported at least 40 soldiers killed and claims to have shot down two Russian helicopters and seven aircraft.

Few major ingredients come from region

At least two ingredients of interest to the industry are sourced within Russian territory — Rhodiola (Rhodiola rosea) and Eleuthero (Eleutherococcus senticosus, also known in some markets as Siberian Ginseng). According to Stefan Gafner, PhD, chief science officer of the American Botanical Council, those ingredients come from Russia’s far east and so are not subject to immediate disruption from military action.

“There is a lot of cross border trade with Chinese harvesters going over the border to get Rhodiola and Eleuthero,” Gafner said.

Western nations are responding to the Russian invasion with economic sanctions, including major restrictions placed on banking and cross border payments. China, however, while publicly supporting the concept of international territorial integrity, has not sanctioned Russia over the invasion. So the cross border trade can be expected to continue as it has. And in any case, the harvest season is months away, and the international situation might look very different then.

As far as Ukraine is concerned, the country is not a major source of medicinal plants, according to Peter Landes, head of KHL Flavors, a Flushing, NY-based company that is an importer of herbs and medicinal plants from many parts of Eastern Europe.

Landes said Ukraine is mostly known as a supplier of bulk agricultural commodities like wheat and maize. Whatever botanical ingredients of interest to the industry that do come from the country are found in only minor quantities.

Payment interruption to complicate life for finished goods sellers

For finished goods sellers, however, the picture looks grim at least in the short term. Capital flows are interrupted, which will likely make commerce within Russia for importers difficult or impossible.

At least two US-based major multi level marketing companies that concentrate on nutritional product sales, Herbalife and Nature’s Sunshine, have operations within Russia and Ukraine.

In an earnings call with stock analysts yesterday (before the invasion), Herbalife president John DeSimone said, “[J]ust like every other company that has got business in those markets, we are putting contingency plans together. We have distributors and customers who rely on this company.”

“[T]here is risk in Russia, there is risk in Brazil, but the biggest risk is probably in the Ukraine, and it’s not a material country to us,” DeSimone said.

Herbalife did not respond to a request for comment about how those plans might have changed in light of the outbreak of full scale war. Nature’s Sunshine did not respond to a request for comment, either.