Frost & Sullivan Analyst Briefing: Fishing for Opportunities in the Omega-3 Market

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With escalating incidence of cardiovascular diseases (CVD) in the U.S., which is estimated to have an economic implication of a staggering $431.8 billion, omega-3 fatty acids have emerged as one of the hottest ingredient categories in the health and wellness market. Omega-3 ingredients are one of the most extensively researched and clinically established functional ingredients available in the market place. Omega-3 ingredients are one of the vital functional ingredients delivering significant health benefits, particularly those related to healthy heart. The universal acceptance of the 'heart health' benefits of omega-3 fish oils is ascribed to the enormous scientific evidence that has translated into rising consumer recognition.

Research Analyst, Arthi V., will shed light on the promising growth opportunities for omega-3 ingredients in the application and global markets. She will also analyze the key consumer trends that are influencing the growth of the omega-3 ingredients market.

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Frost & Sullivan Analyst Briefing: Fishing for Opportunities in the Omega-3 Market

  1. 1. Fishing for Opportunities in the Omega-3 Market Chandrasekhar S, Research Analyst Food & Beverage Ingredients December 11, 2008 We Accelerate Growth
  2. 2. Focus Points Key Highlights Product Segmentation Global Omega-3 Market Snapshot Challenges Key Trends Major Industry Participants Last Word Related Frost & Sullivan Research 2
  3. 3. Key Highlights The U.S. Omega-3 PUFA ingredients market was valued in excess of $500.0 million in 2007 witnessing a robust annual growth of around 20%. Experiencing healthy demand across the established sectors, namely dietary supplements and functional foods Largely spurred by enormous scientific evidence and heightened media attention, which has translated into rising consumer recognition and awareness regarding functional benefits The market is also anticipated to witness growth in newly established health markets like cognitive and immune health Highly competitive and relatively concentrated market Market participants include Ocean Nutrition Canada, EPAX, Croda, DSM, Cognis, Martek Biosciences, Lonza, Pizzeys Milling, Bioriginal and Omega Nutrition 3
  4. 4. Product Segmentation Omega-3 Ingredients Marine Oil Flaxseed Oil Algal Oil Application: Infant Product Types: Cod, formula, supplements, 18:12 / 30%, Concentrates Application: Feed, Functional foods, feed supplements, Application: Feed, Functional foods Growth: ++ supplements, Functional foods, medical Growth: + Competition: foods, pharma Dominated by Martek Competition: Medium Biosciences Growth: +++ Competition: High 4
  5. 5. Global Omega-3 Market Snapshot $287.0 Million Growth Rate – Robust About $500.0 Million Growth Rate – Strong $419.0 Million Growth Rate – Moderate 5
  6. 6. Challenges U.S. – FDA’s Proposed Rulemaking EU – Health claim legislation, Hygiene law Rising Technology not Raw Material Cost Supporting Application Penetration Low Medium High Fluctuating Very High Growing Threat From Competing Ingredients Raw Material Quality 6
  7. 7. Key Trends Economic Product Trends Trends Competitive Trends Application Trends Consumer Trends 7
  8. 8. Global Economic Upheaval Economic Slow Down Economic Slow Down Increased Demand for value – Consumer willingness to Mass Market Health Products spend on premium products affected Opportunities Mass Market Ingredients Like 18:12 or flaxseed Demand for cost-effective ingredients Less affected markets like APAC, Developed economies LATAM, BRIC affected 8
  9. 9. Products and Sources Trends Intense internal Substitution EPA and DHA have robust scientific evidence Opportunities Products with approved scientific Growing Condition-specific claim market - Total US Functional Foods market $27 billion (8-10%) Widening Fortification - Ingredients with superior delivery technology 9
  10. 10. Application Trends Pharma Opportunities Medical Foods Higher Value Functional Food Dietary Supplements Animal feed 10
  11. 11. Consumer Trends General Health Condition Nutrigenomics Well-being Ingredients Specific ONC, DSM, EPAX, ONC, GC Reiber, ONC, DSM, Croda, Opportunity LYSI, Cargill, GC Reiber, Solutex, DSM, Denomega, LYSI, Merck, Martek, Martek, Bioriginal Cognis Merck, Pizzeys 11
  12. 12. Competitive Trends Consolidation, manufacturers with better economies of scale at advantage Increased price competition Opportunities Vertical Integration (Increased need for integrated supply chain Pressure on Margins to have control over supplies and quality) Attractive growth rates and scope for penetration Growth prospects for new entrants, particularly in the vegetarian Omega-3 sector 12
  13. 13. Key Market Participants 13
  14. 14. Last Word High level of consumer awareness Cha lleng Mounting focus on preventive es Healthcare Opp ortu n ities Widening Application Profile Technological advances Firm scientific platform 14
  15. 15. On-Going Global Omega-3 & Omega-6 Research Recent Studies Strategic Analysis of the European Omega-3 and Omega-6 PUFA Ingredients Market Omega-3 Nutrients: An Emerging Product Additive among U.S. General Consumers (Consumer Research Study) Flax-Based Omega-3 Alpha Linolenic Acid – Whitepaper Strategic Analysis of the Asia Pacific Omega-3 and Omega-6 PUFA Ingredients Market Upcoming Studies Impact of the Economy on Key Functional Ingredients Strategic Analysis of the US Omega-3 and Omega-6 PUFA Ingredients Market European Heart Health Ingredients Market U.S. Heart Health Ingredients Market 15
  16. 16. Next Steps Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) Register for the next Chairman’s Series on Growth: The CEO's Growth Team™: Research & Development Driving Growth and Innovation (April 7th) (http://www.frost.com/growth) Join us at our 5th Annual Customer Contact Executive MindXchange April 19-22 2009, Bonita Springs, FL (www.frost.com/ccs) Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Follow Frost & Sullivan on-line at: http://twitter.com/Frost_Sullivan http://www.facebook.com/people/Frost-Sullivan/1131686497 16
  17. 17. For Additional Information To leave a comment, ask the analyst a question, download a • copy, or receive the free audio segment that accompanies this presentation, please contact Stephanie Ochoa, Analyst Briefing Coordinator, at (210) 247-2421 or via email, analystbriefings@frost.com. 17

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