“I think overall the market has been better than it has been for the past couple of years,” Ismail told NutraIngredients-USA. “Globally we are seeing 2.5% to 5% for 2015. But it is certainly not the double digit growth we have seen in the past.”
Sales up 3.2% in US
Recent data from SPINS bears Ismail out, at least as far as the US market is concerned. In all channels that SPINS keeps track of—food/drug/mass, natural, and specialty/gourmet—sales of fish oil concentrates were up 3.2% in the 52 weeks ending on March 20, 2016. Sales hit $345 million in that time frame. Among other omega-3 categories, algae products performed even better, growing by 10.6%, though their overall sales are still a relative drop in the bucket at just over $4 million.
But the krill sector was a big loser. Krill sales dropped by 11.6%. In dollar terms they fell from $97 million to $86 million. One reason that has been postulated for the soft sales is the drop off in advertising support after Schiff Nutrition and its flagship Megared krill oil brand was acquired by British CPG giant Reckitt Benckiser. (There’s more on the krill sector in a separate article in this special edition.)
Sales growth started flattening out several years ago, and the category saw something it hadn’t seen in decades—a drop in the overall number of consumers. At the time Ismail attributed this to both to negative press coverage harping on a few equivocal studies and a dearth of advertising support. Any CPG category has to be supported by consistent marketing or consumers have a tendency to forget when making buying decisions in the store, he said.
Ismail attributed this recent good news on sales to more good news about omega-3s in general and to the strong fundamentals of the sector. Omega-3s are backed by a huge suite of clinical trials and are among the supplement ingredients most recommended by health care practitioners. And the pharmaceutical end of the market continues to cast an efficacy halo over the whole category.
“There is less negative coverage and more positive coverage in the media. The vast majority of omega-3 research seems to be positive,” Ismail said. “It definitely seems like people within the category are more positive about the market.”
Could happy days come again?
Ten years ago, omega-3 suppliers and manufacturers had perhaps become complacent and saw the double digit sales growth as a durable feature of the market. The market has no doubt matured in the meantime, and mature markets tend to settle into single-digit growth patterns. But Ismail said the salad days for the omega-3 sector are not necessarily gone for good.
“I wouldn’t rule double digit growth again out. But it would take a lot of advertising support. In the 80s the market was growing double digits and collapsed and it came back to double digit growth again,” he said.
GOED tried to address the issue with the dearth of advertising starting in late 2014 with two ad campaigns. One was a trial effort in Charlotte, NC, and the other was a modest nationwide ad program. Sales doubled in the Charlotte market after the ‘Always Omega 3s’ campaign ran there. The nationwide effort, which ran in 2015 and was supported by pledges from the GOED membership, was estimated to have halted the decline in overall sales though it was not enough to have returned the market to growth at that time. But perhaps some momentum built up via that campaign is now coming to fruition.
Threats to future growth
One issue that has cast a pall over the entire dietary supplements sector has been the question of quality and supply chain management. Are the things listed on the label really what is in the bottle? Do the manufacturers have procedures in place to ensure that they know what’s coming in at the raw material end and what’s going out to consumers? In this respect, Ismail said the omega-3 sector is perhaps better positioned than other dietary supplement categories.
“I think if (prominent industry critic) Dr Pieter Cohen were to get around to testing omega-3 products, I think he’d find that omega-3 SKUs in general have a pretty robust quality reputation. At GOED we have been doing a market surveillance program for a few years now testing products from around the world and we haven’t found a lot of problems. Omega-3 oils follow standards that are stricter than those for vegetable oils,” Ismail said.
But threat from critics like Cohen or New York Attorney General Eric Schneiderman have served to get companies to up their game, Ismail said. Slight amounts of oxidation which have no implications for the healthfulness and safety of the product make themselves known with an unpleasant rotten bait bucket odor. To compete with higher quality products, more and more producers are taking additional steps, Ismail said.
“The criticism woke people up to the importance of maintaining the manufacturing process, to being careful about the application of nitrogen baths and that kind of thing. And companies saw that a lot of consumers had moved to krill because they couldn’t handle the fishy burp and the fishy taste,” he said.
NutraIngredients-USA Omega-3 Forum
Adam Ismail will join experts from Wiley's Finest, NBTY, Cornell University, and Applied Nutrition Consulting for an hour long discussion of all things omega-3 at the NutraIngredients-USA Omega-3 Forum, April 28. For more information and to register, please click HERE.