Algae-derived omega-3 has historically always been more expensive as companies struggled to achieve economies of scale, with algal oil products selling at up to a 20X multiple over fish oil for equivalent products.
However, the economics of algae are changing, both in terms of process optimization and because fish oil prices have increased. According to DSM, the multiples are now anywhere between 2X-10X depending on the product, market, brand, and channel.
Algal oils over the past 10 years have become a more significant (albeit still niche) segment of the overall Omega-3 category, the company told us.
“At a macro level, as structural supply and demand dynamics will continue to put upward price pressure on fish oils, algal oil producers should benefit from economies of scale over the long run, and this should compress the economic gap between the two sources,” said the company.
On one hand you have the changing economics combined with concerns around some fish stocks, and on the other hand there is the strong sustainability story for algae, and these combined are driving significant increases in interest around algae-derived omega-3s, DSM’s Chris Kalodis told us.
“We see it shifting from fish oil,” he said. “It’s not going to happen today or tomorrow, but that’s which way the market is going.”
To coincide with Earth Day 2022, the company announced the expansion of its ‘life’s’ range of algal-sourced omega-3 products, which includes life’s OMEGA and life’s DHA, with two line extensions. life’s OMEGA O1030DS offers both EPA and DHA from a single, sustainable source, the company said, while life’s OMEGA Ultra is reportedly DSM’s most potent form of algal omega-3.
“As fish get their omega-3 from marine algae, making the switch to 100% algal-sourced omega-3s could save 22 million tonnes of fish per year and have a positive impact on countless diverse marine ecosystems,” said Brent MacDonald, Global Director Marketing, Nutritional Lipids, DSM, at the time of the portfolio expansion.
There is also progress being made with an algae-based joint venture with Evonik called Veramaris that formally launched in 2018. The zero-waste industrial scale production process runs at a state-of-the-art site in Blair, Nebraska.
Initially positioned for aquaculture and pet food, Veramaris recently announced its next phase of business growth, which will see expansion into human dietary supplements.
The need for multiple sources of EPA/ DHA
So, what does this all mean for fish oil in general, and DSM’s legacy (and not insignificant) fish oil business specifically?
The Dutch multinational spent big on Ocean Nutrition Canada in 2012, handing over $420 million for the world’s largest supplier of fish-derived omega-3 fatty acids to the dietary supplement and food and beverage markets. Around the same time, the company wrote an even bigger check for Martek, which it acquired for over $1 billion a decade or so ago.
“There will always be a need for multiple sources of EPA&DHA (fish, algal etc),” a company spokesperson told us. “DSM has the ability to serve the market with multiple sources into many market segments ultimately enabling consumer choice and preference to dictate market structure.
“Ocean Nutrition at the time of DSM’s acquisition in 2012 was the largest refiner of fish oil in the world. The best-in-class technologies and assets that DSM acquired and has since invested significantly in are not specific to fish oil, these technologies can and will be leveraged to bring new innovative products to market that meet evolving consumer and market needs.”
The company also confirmed its commitment to omega-3 trade group GOED, with the spokesperson telling us “DSM has been and continues to be a long-standing member and supporter of GOED.
“Algal sources continue to be a large topic in the industry and in the consumer market,” continued the spokesperson. “Fundamentally, there is not enough fish oil to nourish the world’s growing population with satisfactory levels of EPA&DHA and at the same time serve the rapidly growing aquaculture market. This necessitates the need to develop additional viable sources.
“There will always be room for marine-based and algal-based products. Of course, in a competitive market (which the omega-3 category is) change can always be viewed as a threat by some participants.”
Protecting its I.P.
DSM recently filed a patent infringement lawsuit regarding its DHA (docosahexaenoic acid) algal oil innovations in the United Kingdom, which focuses on three specific patents – protecting DSM’s DHA oil products themselves, the aqueous processes and enzymatic extraction methods used to produce the ingredients. The patents have varying expiry dates until 2031.