By Adam Ismail, Executive Director, Global Organization for EPA and DHA Omega-3s (GOED)10.02.17
In terms of omega-3 sourcing, the market may right now be at an event horizon of innovation. More new sources of omega-3 oils are being launched right now than in the entire first 30 years of the industry combined. There are really two factors driving this: the long-term market demand outstripping supply, and disruptions in one key fishery.
Most new sources of oil, whether they are from algae, genetically engineered plants, or even other fisheries, take years to develop. In many cases, investments were made into these technologies a decade ago, and are now just coming to fruition. At the time that most companies started making these investments, the omega-3 market was growing at double-digit levels and it looked like demand for fish oils would outgrow what the market-dominating Peruvian anchovy fishery could provide, clearly justifying investments in alternative sources.
Supply Challenges
Along the way, these business models gained some extra validation when the Peruvian anchovy fishery faced some challenges. This sole fishery supplied about 70% of all omega-3 oils for many years, usually providing a crude fish oil that was blended to a standardized ratio of 18% EPA and 12% DHA. The fatty acid profiles in the fish are really a reflection of what they are eating in their diet though, and some long-term cycles changed the mixture of nutrients that the Humboldt current delivers to the Peruvian coastal waters.
Suddenly it became much harder to find 18/12 fish oils and customers were forced to change product labels and production processes. Then, a few years later, a series of warming and cooling waves altered the fish habitats, with the anchovy either migrating further out to sea or to deeper waters. This meant that fishing quotas were severely restricted in the established fishing waters because fewer fish were there. These changes made crude fish oil skyrocket in price from around $0.80/kg to over $2.50/kg because the products in demand were only available in smaller quantities.
Crude fish oil is the main raw material for omega-3 ingredient manufacturers, so this led many of them to look at establishing supply chains with smaller fisheries; in fact, the ability to do so has become a competitive advantage for many manufacturers. Also, since a number of smaller fisheries had different fishing seasons throughout the year, rather than just two seasons per year, many companies could reduce their working capital costs. The market has seen crude oil facilities being built in places like Morocco, Mauritania, Turkey, South Africa, India, Argentina, and Japan, all of which are harvesting sardines and other anchovy-like species that have similarly high omega-3 content.
Algae in Bloom
The algae supply market is also starting to bloom, in part due to elevated crude oil prices, but also because Asian infant formula demand is skyrocketing. Several new producers of algal DHA from Schizochytrium have entered the market in Asia, and the expiration of patents in various markets around the world has led to openings for a larger global presence. Algae has always been inherently more costly to produce than fish oils, but as the crude fish oil prices rose, the costs of producing omega-3 concentrates from fish oil have moved closer to parity with algae sources.
This has allowed several new entrants to launch omega-3 oils derived from other strains of algae that have high EPA levels, or even higher DHA levels. Many of these technologies have come from the biofuel industry, and to meet the production capacity expectations of much larger industries, many algae suppliers are starting to look at using the whole algae as part of animal feeds because manufacturing these products has lower costs and offers much faster commercialization times.
Lastly, there is also an algae source from Nannochloropsis that contains phospholipid and glycolipids, which are more similar to krill oils in terms of benefits but also carry very high levels of EPA. Overall, the algae space has probably seen more new entrants and broader differentiation between sources than any other sources of omega-3 supply.
Genetically Modified Plant Sources
One area that is going to get significant attention soon is the plant-based sources of EPA and DHA. Most plants do not produce significant amounts of these fatty acids natively, but they do produce the short-chain omega-3 ALA. Researchers have turned to genetic modification to get the plants to make EPA and DHA instead.
The concept is fairly straightforward: EPA and DHA can be derived from shorter chain fatty acids like ALA omega-3 with the help of specific enzymes, so splicing in genes from algae and other species that make these enzymes allows the plants to convert ALA to EPA and DHA. The technical aspects of achieving this are much more complicated, but there are companies that have figured it out and have already begun growing commercial crops with these oils.
These oils will be controversial since they are genetically modified, but it should open up an interesting debate since the purpose of the modification is to enhance nutritional value rather than to allow the application of certain pesticides. These research programs cost a lot of money and to ease market entry, most of the companies report that they will be focused initially on the animal feed markets that already buy lots of GM canola, soy, and rapeseed for feeds, since it not only enhances the nutritional value of the meat and milk the livestock produce, but also improves productivity on the farms.
The first animal feed products containing these plants should launch in early 2018, but selling the oils as an ingredient for supplements and functional foods will take a little longer. One other unique aspect to these oils is that the cost of growing an EPA/DHA canola plant really does not differ from the cost of growing a regular canola plant, both of which are much lower than fish and algal oils. So if they gain widespread market acceptance, they could disrupt the economics of omega-3 supply substantially.
Interested in learning more about omega-3s? Plan to attend GOED Exchange 2018, the premiere omega-3 conference taking place in February 2018. Registration is now open (www.goedexchange.com).
Most new sources of oil, whether they are from algae, genetically engineered plants, or even other fisheries, take years to develop. In many cases, investments were made into these technologies a decade ago, and are now just coming to fruition. At the time that most companies started making these investments, the omega-3 market was growing at double-digit levels and it looked like demand for fish oils would outgrow what the market-dominating Peruvian anchovy fishery could provide, clearly justifying investments in alternative sources.
Supply Challenges
Along the way, these business models gained some extra validation when the Peruvian anchovy fishery faced some challenges. This sole fishery supplied about 70% of all omega-3 oils for many years, usually providing a crude fish oil that was blended to a standardized ratio of 18% EPA and 12% DHA. The fatty acid profiles in the fish are really a reflection of what they are eating in their diet though, and some long-term cycles changed the mixture of nutrients that the Humboldt current delivers to the Peruvian coastal waters.
Suddenly it became much harder to find 18/12 fish oils and customers were forced to change product labels and production processes. Then, a few years later, a series of warming and cooling waves altered the fish habitats, with the anchovy either migrating further out to sea or to deeper waters. This meant that fishing quotas were severely restricted in the established fishing waters because fewer fish were there. These changes made crude fish oil skyrocket in price from around $0.80/kg to over $2.50/kg because the products in demand were only available in smaller quantities.
Crude fish oil is the main raw material for omega-3 ingredient manufacturers, so this led many of them to look at establishing supply chains with smaller fisheries; in fact, the ability to do so has become a competitive advantage for many manufacturers. Also, since a number of smaller fisheries had different fishing seasons throughout the year, rather than just two seasons per year, many companies could reduce their working capital costs. The market has seen crude oil facilities being built in places like Morocco, Mauritania, Turkey, South Africa, India, Argentina, and Japan, all of which are harvesting sardines and other anchovy-like species that have similarly high omega-3 content.
Algae in Bloom
The algae supply market is also starting to bloom, in part due to elevated crude oil prices, but also because Asian infant formula demand is skyrocketing. Several new producers of algal DHA from Schizochytrium have entered the market in Asia, and the expiration of patents in various markets around the world has led to openings for a larger global presence. Algae has always been inherently more costly to produce than fish oils, but as the crude fish oil prices rose, the costs of producing omega-3 concentrates from fish oil have moved closer to parity with algae sources.
This has allowed several new entrants to launch omega-3 oils derived from other strains of algae that have high EPA levels, or even higher DHA levels. Many of these technologies have come from the biofuel industry, and to meet the production capacity expectations of much larger industries, many algae suppliers are starting to look at using the whole algae as part of animal feeds because manufacturing these products has lower costs and offers much faster commercialization times.
Lastly, there is also an algae source from Nannochloropsis that contains phospholipid and glycolipids, which are more similar to krill oils in terms of benefits but also carry very high levels of EPA. Overall, the algae space has probably seen more new entrants and broader differentiation between sources than any other sources of omega-3 supply.
Genetically Modified Plant Sources
One area that is going to get significant attention soon is the plant-based sources of EPA and DHA. Most plants do not produce significant amounts of these fatty acids natively, but they do produce the short-chain omega-3 ALA. Researchers have turned to genetic modification to get the plants to make EPA and DHA instead.
The concept is fairly straightforward: EPA and DHA can be derived from shorter chain fatty acids like ALA omega-3 with the help of specific enzymes, so splicing in genes from algae and other species that make these enzymes allows the plants to convert ALA to EPA and DHA. The technical aspects of achieving this are much more complicated, but there are companies that have figured it out and have already begun growing commercial crops with these oils.
These oils will be controversial since they are genetically modified, but it should open up an interesting debate since the purpose of the modification is to enhance nutritional value rather than to allow the application of certain pesticides. These research programs cost a lot of money and to ease market entry, most of the companies report that they will be focused initially on the animal feed markets that already buy lots of GM canola, soy, and rapeseed for feeds, since it not only enhances the nutritional value of the meat and milk the livestock produce, but also improves productivity on the farms.
The first animal feed products containing these plants should launch in early 2018, but selling the oils as an ingredient for supplements and functional foods will take a little longer. One other unique aspect to these oils is that the cost of growing an EPA/DHA canola plant really does not differ from the cost of growing a regular canola plant, both of which are much lower than fish and algal oils. So if they gain widespread market acceptance, they could disrupt the economics of omega-3 supply substantially.
Interested in learning more about omega-3s? Plan to attend GOED Exchange 2018, the premiere omega-3 conference taking place in February 2018. Registration is now open (www.goedexchange.com).
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Since oxidation is one of the issues that has the potential to disrupt consumption of EPA and DHA, GOED has invested heavily in monitoring oxidation and efforts to help the industry and public understand the issue. GOED co-published an overview of oxidation in fish oils in Lipid Technology with the Council for Responsible Nutrition that helps explain what oxidation is, what the science says about its health effects, and how to measure it. In addition, GOED has begun an annual monitoring program in the U.S. where it will test the top 50-selling retail products for oxidation and EPA/DHA content on an annual basis and report on the exposure of these oxidative compounds to consumers, since these 50 products account for about half of consumption in the U.S. The first round of this testing is done and is largely in line with what was observed in other countries, and a manuscript is being prepared for submission. In addition, GOED intends to do similar testing when questions are raised about oxidation in other geographies, similar to its work in New Zealand, to find out if there truly is an issue that needs to be addressed. Lastly, GOED believes it is important to look at the big picture with respect to oxidation, and has commissioned a paper by Nutrasource Diagnostics, which has a database of oxidation tests in a variety of different oils, to demonstrate the oxidation status of omega-3 supplements compared to commonly consumed edible oils. This paper is in the process of being published in a peer-reviewed journal but shows that the oxidative status of fish oil supplements is not statistically different than a variety of common vegetable oils, which are consumed in much greater quantities. There are two outliers in this study—krill oils had statistically significantly lower oxidative status than other oils and olive oils had significantly higher oxidative status. |
