While the functional mushrooms category has performed well in recent years, the market faces some potential headwinds.

The overwhelming majority of the world’s mushrooms are produced in China, and with the Trump Administration’s tariffs on Chinese imports, disruptions in raw material costs and availability could be considerable if mushroom materials and ingredients aren’t granted an exemption.

Industry experts have long noted that supply volatility and price increases can lead to unintentional product adulteration due to manufacturers changing suppliers as well as economically-motivated adulteration from bad actors when prices spike.

Meanwhile, disagreements over labeling and terminology and a lack of standardization for validating mushroom ingredients all present potential barriers to market growth. Category experts have called for labeling and terminology agreement to eliminate consumer confusion, and establishing centralized, third-party quality standards.

Supply Resilience and Quality Control Challenges

In the context of trade disruption, raw mushroom materials and ingredient innovation could become expensive, “and to a degree that will force many smaller and even mid-size brands to close their businesses. It’s already happening in other categories of consumer goods which are in the same predicament of Chinese global supply chain dominance,” said Bill Chioffi, COO at Nammex.

Chioffi noted that nearly all (93%) of the world’s mushrooms are presently grown in China. “Their mushroom cultivation and handling knowledge is unparalleled,” he said. A history of cultivation spanning thousands of years is embedded in the culture there, and modern Chinese extraction facilities have decades of experience in creating specialized products. “Last year, Nammex used almost double the amount of mushrooms compared to the entire U.S. fresh organic specialty mushroom market as reported by the USDA, and we are just one company.”

Amid the turbulence, domestic mushroom suppliers are preparing to scale up production substantially. “Mushroom ingredients should be quite scalable, particularly the near-aseptic indoor organic cultivation method. I expect to see an increase in domestic U.S. production of mushroom supplements,” said David Law, founder, president, and CEO of Gourmet Mushrooms.  

In February, M2 Ingredients opened a 155,000 square-foot facility to grow all 10 of its mushroom species in order to ensure a consistent supply and round-the-clock operations in response to growing demand. The site has product development experts on hand, and mushrooms produced at the site will be tested for purity and potency on-location. “We’re already geared for scale and transparency; we can offer clean, traceable, and effective ingredients grown under rigorous standards right here at home,” said Julie Daoust, PhD, chief science officer and chief commercial officer at M2 Ingredients. 

“From a scalability perspective, indoor farming offers a level of control and consistency that wildcrafting or imported materials simply can’t match. At M2, we’ve designed our cultivation systems to be modular and rapidly expandable; if demand spikes, we can triple our growing capacity overnight just by extending shifts and scaling up operations within our purpose-built facility,” she added.

While wildcrafting is perceived as “closer to nature,” mushrooms in the wild can take months or years to mature, making consistent production more difficult. “Plus, mushrooms are bio-accumulators, meaning they absorb whatever is in the environment; if they’re growing in polluted soils or near agricultural runoff, it’s nearly impossible to guarantee purity, said Daoust.

Paul Stamets, mycologist and founder of Fungi Perfecti, a Certified B Corp, takes the challenge of sustainably scaling the mushroom supply very seriously. The company is 110% Climate Positive as it sequesters 10% more carbon than it emits.

“Wild harvesting mushroom ingredients is not sustainable for the rapidly scaling demand,” Stamets said. “Wild-grown mushroom fruit bodies take significant time and resources to grow and then harvest, and unbeknownst to the public, wild fruit bodies often have fluctuating levels of insect larvae, molds, and algae growing on them. Because our processes are all tightly controlled, we can scale to respond to the ever-growing demand for mushroom ingredients. Furthermore, we are a family-owned company that provides jobs for and invests in its local economy.”

Chaga is a unique case, as quality is contingent upon its lengthy natural growth process, said Brian Zapp, director of marketing at Applied Food Sciences. “Our wild-harvested Chaga, for instance, grows for 8-10 years on birch trees in the forests of Finland, slowly absorbing bioactive compounds like betulinic acid and phenolic pigments from its host. This long, natural maturation process simply cannot be replicated in a lab-grown mycelium product, which may only take a few weeks to cultivate, and lacks the terpenoid complexity or antioxidant richness found in the true fruiting body, or, in chaga’s case, sclerotium, extracts.”

To deal with these challenges, “our partners at KÄÄPÄ Biotech have worked with the Finnish Forestry Sector to secure the world’s largest supply of sustainably-sourced chaga,” said Zapp. As part of this partnership, AFS and KÄÄPÄ co-established a new cultivation facility for other species. “Innovations in environmental control and quality assurance at the facility ensure that KÄÄPÄ Biotech can meet increasing market needs while adhering to the highest standards of purity, bioactivity, and sustainability.”

With potential market and supply disruptions, manufacturers should take extra precautions to safeguard the quality of their raw material supplies.

“A good supplier should have established relationships with growers and processors, quality assurance specifications, a known and documented chain of custody, a high level of expertise, and conduct tests for identity, potency, and purity,” said Chioffi. “Since the functional mushroom category is less mature than the herb sector and test method development is ongoing, you want to make sure a supplier is involved in establishing test methods and specifications, because that demonstrates they are accepted by peers as mushroom experts.”

Compared to the herb world, there are relatively few consensus-based standards to authenticate and verify the quality of mushrooms. The industry is still filling in gaps.

AFS works with its supply partners on the front end to ensure that they meet assays for heavy metals, pesticides, and microbial contaminants in third-party lab tests. “AFS is also investing in establishing standardized testing methods for a complete assay of bioactive markers for each varietal,” to improve consistency, species identification, and transparency, Zapp said. “Our goal is to help set a higher bar for quality by aligning mushroom identity and potency with validated scientific standards.”

Ideally, Daoust said, the industry should move toward using “a central third-party resource to validate these quality claims (heavy metals, microbial contamination, pesticides, and other safety markers) across the board, building both trust and accountability.”

“From a species standpoint, there’s really no excuse for ambiguity anymore,” she added. “There are highly reliable DNA-based identification methods that allow us to confirm with precision the species making up our strain library. Every mushroom company should be using third-party validators to run these tests. It’s not complicated, and it’s a powerful tool for transparency and trust.”

While there is a lack of mushroom-specific safety certifications, M2 Ingredients achieved BRCGS AA+ certification, the highest standard achievable through the BRC Global Standard for Food Safety. The company’s multi-step quality program includes testing all incoming raw materials before they enter the facility; maintaining clean rooms after autoclaving and before inoculation; monitoring for contaminants throughout the growing process; and conducting a full-spectrum test post-harvest and post-drying.

These tests are for heavy metals, microbial contamination, pesticides, and other safety indicators at every key control point. Finally, independent third-party labs are brought in to conduct final checks before any product leaves the company’s doors, Daoust noted.

The mushrooms segment is particularly susceptible to adulteration due in large part to companies testing solely for beta-glucan content. “We would like to see the industry go beyond measuring for only beta-glucan content, including other active compounds of interest that are unique to each mushroom varietal,” said Zapp. “This will be critical to differentiate high-quality mushroom products from simple micronized mushroom or mycelium alternatives … We want to help drive the industry toward more consistent, consumer-trustworthy labeling.”

Similarly, counterfeits, particularly through third-party online sellers, are a major risk, noted Stamets. Recently, Fungi Perfecti, LLC took legal action against JT Best Deals LLC for allegedly selling counterfeit versions of Host Defense products on Amazon, Walmart, eBay, and Goodson’s stores.

“Consumers are becoming more cautious and selective, gravitating toward brands that not only prioritize safety and quality but also demonstrate a strong commitment to environmental responsibility, and many consumers are now shifting toward buying directly from manufacturers or trusted brick-and-mortar retail partners,” said Stamets.

Vertical integration also helps to reassure consumers, he added. “Host Defense stands out in this landscape because we control every aspect of our mushroom fruit body and mycelium growing process. We cultivate our own mushroom mycelium and fruit bodies on our certified organic farm in Washington state, ensuring traceability and integrity from spore to shelf. Our rigorous quality assurance gives consumers confidence that they’re getting exactly what they paid for.”

For beta-glucans and species-specific compounds alike, there are no validated testing methods with consistent reproducibility in fruit bodies, mycelium, or mixed ingredients, noted Stamets. “Therefore, if a label includes a mushroom compound, especially beta glucan content, it is not a reliable measurement. Also, because there are so many different beta glucans, current measurement methods do not distinguish between the ones that support immunity from the ones that are dietary fibers with no direct immune response associated with them. Therefore, beta glucan content labeling is a bit misleading overall.”

Other compounds may be easier to measure, he added, “however they have not been determined to be standardized indicators of quality. We don’t know which ones, or how much of each is an indicator of a quality product, as singling out one compound detracts from the many other compounds that are also beneficial. We have a long way to go in the mushroom industry for those kinds of labeling parameters, and at Host Defense, our team of scientists has been continuing research to develop quality testing parameters that will aid consumers in their ability to make informed decisions about the mushroom supplements they purchase.”

Stamets also noted a practice in the industry in which certain ingredients are being promoted as fruiting body extracts, but “the liquid extract is sprayed back on the extracted mushrooms, and then sold as 100% pure extracts. Why does this matter? Consumers think they are getting a concentrated extract when, in fact, it is highly diluted.”

“We think this is deceiving, and I would guess 99% of consumers do not know this,” he said. “When you make a liquid extract from fruit bodies, you typically get 3-8% dissolved solids that go into solution. By spraying this back on the ‘spent’ extracted mushrooms, in essence, the consumers are being tricked into thinking they are getting a 100% extract. The extracts are actually more than 90% ‘spent’ mushrooms. This is mind-boggling to me that marketers would be so bold to deceive consumers that the total mass is an ‘extract.’ I think the ‘extract’ companies should be honest and clearly communicate this to consumers. Our extracts are true extracts, not sprayed back on the extracted, spent mushrooms.”

On the sustainability front, M2 Ingredients partnered with the Regenerative Organic Alliance to develop Regenerative Organic Certification (ROC) specific to mushrooms, working together to “define what ROC looks like for mushroom cultivation. These practices emphasize soil health, biodiversity, fair labor, and carbon sequestration, and we see it as the next evolution of responsible farming.” In March, M2 first began offering ROC mushroom ingredients to the marketplace, and “we are 100% ready to scale up this offering, as well,” said Daoust.

Labeling, Terminology, and Transparency 

The functional mushroom community is in an ongoing debate over the labeling and terminology of mushroom supplements.

Per guidance from the American Herbal Products Association (AHPA), consumers should be able to determine species name and Latin binomial, fungal parts (fruiting body versus mycelium), and growing substrate (if included). 

Law also noted country of origin, production process (hot water extraction, biomass, alcohol extraction, etc.) organic status, and the presence of excipients as crucial details which should be consistently disclosed across labels.

While there’s agreement that products should be clear about what part of a fungus is included, there’s notable disagreement over whether the term “mushroom” should be applicable to mycelium products.

Nammex exclusively produces ingredients sourced from the fruiting bodies of fungi, and has filed a petition with FDA requesting the agency issue guidance that the word “mushroom” on a dietary supplement label should only be used in reference to the fruiting body of a fungus. The petition also called on FDA to create a glossary of mycological terms, and take action against products labeled as “mushroom” if they are mycelium, or if those products fail to identify the presence of grain (the substrate on which mycelium is grown) in a product. A key quality issue, the company noted, is that many mycelium ingredients in the marketplace contain varying amounts of grain starch in the final product. 

“I would prefer the focus to be on the traditional use of functional mushrooms which has stood the test of time,” said Chioffi. “At Nammex, we love that people can buy specialty mushrooms like lion’s mane, oyster, and shiitake right in the produce aisle to cook with as part of a healthy diet … Mycelium fermented grain does not contain the same actives, and therefore benefits, as authentic mushroom extracts from fruiting bodies. It’s important for formulators to understand the difference in the two very different types of material.”

While there are historical references for the use of fruiting bodies of a mushroom, “mycelium doesn’t have any traditional use beyond the example of fermented soybeans, which we call Tempeh,” Chioffi added.

Nammex’s position is at odds with the manufacturers of ingredients that are either partially or fully comprised of mycelium, which contend that the term “mushroom” refers to the whole organism.

While conventional usage of fruiting bodies spans thousands of years, emerging research continues to build out the evidence that the compounds mycelium is rich in confer health benefits, Stamets noted. Research supported by Fungi Perfecti, LLC thus far suggests that substrate (organic brown rice in Host Defense Products), once fermented by mycelium, creates an “immunologically supportive substance … This process is called solid state fermentation and is much like the process of making tempeh and miso, yet uses our functional mushrooms like lion’s mane, reishi, and cordyceps to create an ingredient that supports engaged yet balanced immune functioning, and so much more,” he said.

“Mycelium forms the immune system in the mushroom life cycle,” said Stamets. “This ‘beyond fruit bodies’ approach is the leading edge of research today … Overall, the growing body of research on mushroom mycelium, with hundreds of peer review articles published, is highly encouraging and highlights its potential as a meaningful component in health and wellness strategies.”

According to Law, “The vegetative fungal mycelial phase is the period that a fungal colony is expanding by digesting extracellularly available nutrients, usually from forest waste. This is the time the fungus will be excreting metabolites to digest food and to defend against competition from microbes and other living organisms. At the fruiting body stage, there are less defensive metabolites than during the vegetative mycelial phase, especially for fleshy mushrooms. Perennial mushrooms, like reishi and chaga, will contain certain levels of protective metabolites.”

Though the industry can get bogged down in debate over fruiting body versus mycelium, biomass versus extract, or cultivated versus wildcrafted, “what really matters is whether the finished product delivers the health benefits it’s promising,” said Daoust.

“To help lead that charge,” she added, “I helped found and now serve as the chairperson of the Functional Mushroom Council … Many of us are competitors in the marketplace, but we’ve all come together because we all believe in pushing back against misinformation and elevating the science behind functional mushrooms … As scientists, we’re always open to being proven wrong. But we all need to align as an industry on this: the clinical and functional performance of the finished product is what truly counts, not just how it was grown or which part of the mushroom it came from. That means testing finished products for their real-world impact.”

The Functional Mushroom Council’s member companies now consist of M2 Ingredients, Gourmet Mushrooms, Fungi Perfecti, Monterey Mushrooms, Farwest Fungi, and Aloha Mushrooms.

Daoust noted that mycelium ingredient suppliers can test the degree to which substrate has been fermented. “What’s left is no longer recognizable grain; it’s fungal biomass. Our mycologists verify this complete conversion biologically before every harvest. This isn’t filler; it’s part of a highly bioavailable, living matrix of mycelium and fruiting body.”

Despite this, it’s important to note that without proper quality control measures in place, un-fermented substrate can dilute product identity and result in a less consistent potency. There is no way to separate the fungal biomass at any point in the growth cycle, said Zapp. “Ultimately, the industry should align around clear labeling practices to identify which part of the fungi is used, and equally as important, why it was chosen. This clarity empowers consumers and formulators to make informed decisions,” he said.

“Importantly, we do not suggest that one is better than another for people in general,” said Stamets. “Having completed multiple research studies on mycelium and fermented brown rice together, we have robust data to support the claims that mycelium and fermented brown rice support the full range of immune functioning: immune engagement activity, immune modulatory activity, immune pacification activity, and daily tissue regenerative activity. There are also other benefits associated with lion’s mane that support daily nerve generative activity, cognitive function, memory, and mood. We attempt to speak to the concepts that are important to our customers and the general public.”