Special edition: Omega-3s
Algal omega-3 suppliers say while growth may have lagged, future still bright
Different strains of algae, the single-celled chemical factories of the nutraceutical world, have been under development in various forms for decades for for food and biofuel applications. Among the pioneers of the fermentation forms of algae in the food space was Martek, which was acquired by Dutch ingredients giant DSM in 2010 for $1.1 billion in cash. It was the second biggest acquisition in the nutrition space by DSM, topped only by the $2.5 billion acquisition of Roche in 2002.
Martek was founded in 1985 by Martin Marietta scientists who worked under a NASA contract to develop an algae platform to function as a carbon dioxide sink and a renewable food resource for deep space exploration. That first work was on photosynthetic algae, but after striking out on their own they developed a fermentation algae platform based on a Schizochytrium strain that produced DHA. At the same time they developed a marketing plan, by recognizing the role of DHA in human nervous system development and the fact that most of this development occurs in utero and in infancy. Thus was born the DHA food additive business for prenatal and early childhood nutrition, protected by Martek’s extensive IP suite.
At the time of the acquisition Martek was already working on finding a strain that also produced EPA, and thus the life’sDHA plus EPA brand positioned for dietary supplements was born, now called life’sOMEGA. The Martek name was extinguished and the operations were folded into DSM’s Nutritional Lipids division, which also includes the assets from the acquisition of fish oil ingredients supplier Ocean Nutrition.
Differentiation with algae
Brent McDonald, marketing director of the division, told NutraIngredients-USA that the alternative represented by life’sOMEGA means the brand fills an important niche.
“With the existing demand and supply pressures that exist within the marine supply chain it is necessary to develop alternative sources of EPA/DHA in order to satisfy the world’s nutritional needs, Within the omega-3 category fish oil based products are the most represented source and most familiar to consumers. However, there is an emerging group of consumers—vegans, vegetarians—who require non-fish based alternatives,” McDonald said.
David Hart is marketing director for Qualitas Health, which is developing an omega-3 EPA oil called AlmegaPL from a photosynthetic algae strain. Qualitas, an Israeli company, is growing its algae at a site in West Texas that has ample sunlight and access to the brackish groundwater its marine species needs. He said vegetarian demand is one of the factors propping up the algal omega-3s sector. Hart said using an algal ingredient can also be a way for brands to stand out on a shelf bursting with hundreds of fish oil SKUs.
“It is a very competitive and crowded omega-3 category. Brands are looking for a clear and easy way to differentiate their products from those of their competitors. Being vegetarian and sustainable can supply that very clear differentiator,” he said.
The sustainability story
Sustainability is the trump card played (perhaps a little too often) by the suppliers of algal omega-3 ingredients. It’s true that omega-3 fatty acids are synthesized within algal cells and only bioaccumulated in fish and other marine animals. So it stands to reason that it makes sense to go directly to the source.
The problem is that fish and those other animals such as krill and mussels do a very nice job of concentrating those molecules. Even with all of the cost involved with operating fishing fleets, transshipment arrangements and building extraction facilities, marine ingredients, fish oils in particular, enjoy a marked cost advantage.
“For the sake of argument let’s say there is still about a 10x cost differential,” Hart said. “It’s difficult to be a trailblazer but that’s what we are doing.”
Tech investment interest
But Hart said further development is bringing the cost down steadily, as is competition within the algal space itself. What is needed is continued investment in technology, and in this respect Hart said algae has an interesting upside. It’s a marriage of a technological solution to a food problem that is a hot button for a certain category of investors. It’s a Ted Talk type of moment for the industry.
“At the moment there is a huge interest in ag tech, food tech, clean tech type of technologies and there is a lot of money coming into those technologies from a new source and that is Silicon Valley. These are all popular and important and they have to do with the reality of limited resources and using those resources to feed the world’s growing population,” Hart said.
And for a certain category of consumers, that sustainability attribute is a powerful enough motivator to overcome price differentials, both McDonald and Hart agreed. Recent sales numbers from SPINS seem to bear this out: in a 52-week period ending in late March, algal omega-3 sales were up 10.6% in the US, thought they are still a relative drop in the bucket in terms of the overall market, coming in at a little more than $4 million.
“For these consumers this product is a great alternative and very appealing because it is naturally concentrated, sustainable and vegetarian. This sub-segment of the market is still emerging but we are very excited about its potential for future growth and as a long term alternative to fish oil,” McDonald said.
“There are still some supply fluctuations in the fish and krill markets. Ultimately in the medium and longer term farmed algae will be a much more stable source of omega-3s. And GOED has said that if even just the populations of the Western world were to all start taking omega-3s at the level recommended by the WHO in the fish and krill ecosystems there just aren’t enough servings of omega-3s available. Those will continue to be the big drivers of the category,” Hart said.
“I think there is still a bright future for algae. I think the underlying market conditions that are conducive to growth for these ingredients are still there,” he said.
NutraIngredients-USA Omega-3 Forum
Experts from GOED, 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.