Neptune pivots away from krill oil supply toward becoming a 'solutions provider'

By Hank Schultz contact

- Last updated on GMT

Neptune has rebuilt its facility in Sherbrooke, Quebec. Neptune photo.
Neptune has rebuilt its facility in Sherbrooke, Quebec. Neptune photo.

Related tags: Krill oil, Krill, Marketing, Petroleum

On the heels of a positive earnings release, krill oil supplier Neptune has announced a refocus of the company and its brands to reflect that the company goes far beyond just supplying its

Neptune helped to pioneer krill oil as a dietary ingredient and did some of the early scientific work on the ingredient. And sales of NKO still account for almost half of the company’s revenue. But CEO Jim Hamilton said that being a one-ingredient company is now part of the past.

Move away from single ingredient

“We think being a singular products company is not really wise for any business,”​ Hamilton told NutraIngredients-USA. “The sales of krill oil right now is still about 45% of our business.  But ultimately we want to be known as a solutions business.”

The groundwork for the transformation was laid when Neptune acquired Biodroga in January of this year, Hamilton said. Biodroga offers what Neptune called a scalable solutions platform with a broad range of product development opportunities.  Biodroga’s product offerings primarily include omega-3’s, along with other essential nutritional ingredients such as seed oils that are used in specialty formulations. The company is now undergoing a rebranding as Neptune Wellness Solutions.

“We are upgrading our branding to reflect that we are a much more diversified business. Part of our challenge has been that we have is that we have been seen as a single product company where we are now really a solutions provider,” ​Hamilton said.

Neptune recorded nutraceutical revenues of $11.3 million for the three-month period ended May 31, 2016, versus $3.0 million in the first quarter ended May 31, 2015. Adjusted EBITDA was $1,138,000 for the current quarter, compared to a Non-IFRS operating loss of $3.2 million in the prior year. Net loss was $1,250,000 for the current quarter, versus a net loss of $4.5 million in the prior year.

New relationship with customers

Krill supplements © robynmac
Image © iStock / robynmac

Hamilton said the company’s new guise fundamentally changes its relationships with its clients. Whereas before the questions might have revolved around order amounts, prices and delivery horizons, now the discussion shifts to offering ways for customers to solve the problems they face. The nature of the modern market is driving the business increasingly down those paths, much of it driven by the social media revolution that changes how consumers get the information they use to make purchase decisions, Hamilton said.

“You have to have to offer them that is something about them, not about you. All of these companies are operating in a consumer market that is rapidly fragmenting. The pace of innovation is so fast. There are an infinite number of consumers who are looking for products that are specific to them.

“If you are a medium sized company in this space you just don’t have the capacity to plan new launches that fast. And if you are a big brand company your head is spinning because of the speed of the changes. Big product launches are becoming a thing of the past because they take so long and the market is moving too fast and there is too much risk,”​ Hamilton said.

Among the capabilities that came with the Biodroga acquisition is a technology branded as MaxSimil, a monoester-based method to boost the bioavailability of fish oils. Hamilton said the technique will form part of the product offerings that Neptune will be able to present to customers. Another capability is the ability to offer turnkey, contract manufacturing type solutions in soft gels and liquids.

Long road back

Neptune suffered a near extinction level event when its production facility in Sherbrooke, Quebec exploded and burned in November 2012, a tragedy that claimed the lives of three workers. The company struggled to come up with the capital to keep the company going while it rebuilt the facility (much of the cost of the reconstruction was borne  by insurance payments). The facility has been back to full scale production for months now, enabling Neptune to fulfill purchase orders that in recent years it has had to fill with purchased third party material.  That interregnum hurt NKO’s market share, but Hamilton said the company is primarily looking forward, rather than focusing on trying to claw back all of the accounts it held before.

Within that forward looking mindset is a focus on the company’s pharmaceutical developments housed under the Acasti division, and a new direct-to-consumer finished product krill oil line under the Oceano3 brand name.  Hamilton said the company has also started sales in China in the past quarter.

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