Capitalizing on the carotenoid identity crisis

Capitalizing on the carotenoid identity crisis

The carotenoids market is a billion-dollar industry with a bit of an identity crisis. We examine this widely variable market for emerging opportunities and strategies for success.

One could call it an identity crisis or, perhaps more precisely, the carotenoids market simply doesn’t enjoy the high degree of recognition among consumers enjoyed by ingredients such as probiotics and omega-3s.

There is certainly potential for growth, especially in certain segments of the North American market. But optimism must be tempered against a global economy that shows few signs of resurgence, even in the somewhat recession-proof world of natural products, which many companies in the carotenoids business appear to be betting on.

Global Industry Analysts (GIA) reported in 2010 that the carotenoid market was worth an estimated $1.07 billion, with predictions it would grow to $1.2 billion by 2015. An update to the report in September 2011 predicted growth to $1.3 billion in 2017.

Not surprisingly, beta-carotene accounted for the largest share of sales at $392 million, as it’s one of the few carotenoids that enjoy name recognition as a healthy ingredient, not to mention its ubiquitous use as a food-coloring agent. The 2010 report also noted that a swell in the number of lycopene producers in recent years caused modest price erosion in the tomato-derived lycopene segment that enabled “moderate expansion in the North American market.”

Compare that against BBC Research’s report, also released in September 2011, which tagged the industry with a $1.2 billion price tag, with a chance to grow to $1.4 billion in 2018 with a compound annual growth rate (CAGR) of 2.3 percent.

The market value of beta-carotene in its data shows quite a disparity compared to GIA at $261 million in 2010.

The market value of lutein was around $233 million in 2010, according to BBC Research, and is expected to reach $309 million by 2018, with CAGR of 3.6 percent (see Table 1). The caveat to these numbers from BBC Research: A general rise in prices drove the increase in overall market value.

Mergers and acquisitions

The key players in the carotenoids market shouldn’t come as a surprise: DSM and BASF accounted for more than half of that $1.07 billion, according to GIA.

DSM dominates in synthetic carotenoids but has made moves to increase its presence in the natural market. In 2011, it acquired Spanish company Vitatene, a producer of natural carotenoids. The year before that it bought Microbia, Inc., which produces natural carotenoids including beta-carotene and canthaxanthin, from Ironwood Pharmaceuticals, Inc.

Earlier in 2010, Microbia announced it had used its “proprietary metabolic engineering capabilities” to develop microbial strains that produce commercially significant levels of lycopene via fermentation—in excess of 5 grams per liter.

Stratum Nutrition also mined Spain to push its way further into the European market with the acquisition of IQF, a Spanish producer of natural carotenoid pigments. Israel-based LycoRed expanded its reach into the natural carotenoid ingredient market with the acquisition of H. Reisman Corp. 

Functional Ingredients magazine recently highlighted the business model of Mumbai-based OmniActive Health Technologies, which in 2010 achieved self-affirmed GRAS status for its LuteMax line to spur growth into functional foods. Fi reported that OmniActive is big on raw material vertical integration. For example, the company formed a co-op with farmers of marigolds, the source for lutein, to ensure consistent farming practices—from supplying the seeds to setting farming protocols. The benefit is ingredient traceability and a consistent supply, Baginski wrote.

Emerging ingredients

The fastest growing carotenoid globally was canthaxanthin, which provides coloring for shrimp and fish, according to the GIA report. Another carotenoid used for similar purposes, astaxanthin, is emblematic of the shift from synthetic sources to natural ones.

Recent sales numbers from Hawaii-based Cyanotech can attest to that, with natural astaxanthin sales increasing 97 percent in the first quarter of fiscal year 2012 that ended June 30, 2011, primarily due to an increase of 94 percent in bulk astaxanthin products. Packaged astaxanthin sales for Cyanotech increased 108 percent.

“The significant increases in packaged product sales are attributed to our focus on the growing consumer market for health and nutrition supplement products, combined with recent media reports regarding the benefits of … astaxanthin,” said Cyanotech President and CEO Brent Bailey.

Queue Dr. Oz’s glowing endorsement of astaxanthin when Dr. Joseph Mercola came on his program for a segment titled “The Surprising Supplement You Need” in late 2011. Cyanotech in nearing completion of a 33 percent astaxanthin production capacity increase to meet this demand. NOW Foods, the Bloomingdale, Ill.-based supplements manufacturer, said demand for its astaxanthin products went up by an order of magnitutde after the show.

Lutein, of course, has become a mainstay in the carotenoid industry not only because its consumer base is constantly growing. The human body does not synthesize this carotenoid, which is important for eye health, and so must obtain it from the diet.

Lutein may be the star carotenoid in the category of eye health, but both zeaxanthin and astaxanthin are receiving recognition as important co-factors, though sales of zeaxanthin remain modest—hitting $7 million in 2010—according to Nutrition Business Journal, barely 5 percent of lutein sales.

The global astaxanthin market is estimated to be worth more than $200 million, according to BBC Research, mostly as a pigment to color fish such as salmon. Astaxanthin in the human nutrition market is growing, too, and estimated at about $35 to $60 million, according to 2008 data from Frost & Sullivan.

Research analyst Sneha Pasricha with Frost & Sullivan compared astaxanthin favorably to lutein as an eye-health support ingredient. “Owing to astaxanthin’s higher anti-oxidant capacity compared to that of lutein, and established by relevant tests, diseases such as age-related macular degeneration, cataracts, retinal, arterial, and venous occlusion, diabetic retinopathy, and depth perception issues are expected to be mitigated by fewer per-day doses of astaxanthin compared to that of lutein. This validates the cost effectiveness and proficiency of astaxanthin as a valuable eye-health ingredient.”

Supplemental uses

Astaxanthin is getting attention for all sorts of health benefits. Researchers from Seoul National University recently reported that astaxanthin may reduce oxidative stress in overweight or obese people. Of course, it’s already finding its way into areas as diverse as joint and tendon health, UV protection of skin and "beauty from within" and anti-aging applications. It got a public relations boost in 2011 from prominent media personalities like Oprah Winfrey and Dr. Oz.

Companies like Hawaii-based Cyanotech hope to leverage that publicity, especially in light of the company’s announcement at the beginning of 2011 that its star astaxanthin product, BioAstin Natural Astaxanthin, has obtained self-affirmed GRAS status. Cyanotech has already obtained 17 structure/function claims for its BioAstin astaxanthin following review by the FDA, covering everything from joint, skin and eye health to healthy immune function, healthy tendons, UV protection for the skin, anti-aging, increased energy, recovery after exercise and a healthy cardiovascular system. GRAS status opens the door for use of its astaxanthin in functional foods and drinks.

Algae Biosciences Incorporated, a biotechnology company in Arizona, is touting its one-two-punch of omega-3 products that contain both EPA and DHA, sourced from multiple species of algae grown in pristine brine water. But the company is wringing everything it can out of the process: “Because we are using a photosynthetic process, we not only extract EPA and DHA, but various other elements like carotenoids, chlorophylls, and vitamin E,” said AlgaeBio President Andy Ayers.

More generally, a new production system, based on the fermentation of a bacterium, allowed the market introduction of a natural astaxanthin at the price of its synthetic sister. This product, much more than the previous organic standards derived from yeast or algae, has the potential to develop a serious threat for synthetic astaxanthin, according to BBC Research.

Natural carotenoids color the future

Spurring the trend in natural coloring is recent government action in Europe that required warning labels on food products containing certain food dyes, particularly over a possible link between food coloring and ADHD in children.

Color giants such as St. Louis-based Sensient Technologies Corp. and Denmark-based Chr. Hansen, which posted 46 percent growth in its colors and blends division in 2010, stand to gain the most from growth in natural color demand, Marshall reported.

But the anti-dye trend has also opened the doors to ingredient companies such as DSM, which recently introduced a natural beta-carotene coloring called CaroCare Nat 10 percent CWS Star; PL Thomas, which launched a lycopene-based red-substitute called Tomat-O-Red; and Louisville, Kentucky-based DD Williamson, which recently expanded its caramel coloring business to include an entire line of natural food dyes and a guide to help companies make the switch.

After BASF swallowed up chemicals rival Cognis in 2010, BASF company officials reported that it planned to leverage Cognis’ portfolio of natural-mixed carotenoids to meet consumer demands for natural ingredients. Sourced from marine algae grown in saltwater lakes in Australia, the carotenoids are harvested free of chemical solvents, and are carefully extracted and formulated using natural plant oils. 

“The move to natural-source colors is essentially consumer driven,” noted John Biggs, global marketing manager at DSM Nutritional Products. “To be successful in this segment, you need products that deliver performance and that are accepted by consumers and manufacturers (who are often looking for ingredients that are kosher, halal, animal- and allergen-free).”

Competition to watch

In more recent news, EID-Parry announced in October 2011 it had acquired of 100 percent of the voting shares of Valensa International. It had acquired 48 percent stake in Valensa in 2008 as a part of its business strategy to move up the value chain in the nutraceuticals business.

“There is a huge synergy in this acquisition” said Sajiv Menon, business head of Bio & Nutraceuticals for EID-Parry, in a statement. “This acquisition provides the platform for Parry to move up the value chain by manufacturing value-added formulations from its ingredients apart from cross-selling opportunities in the US, and in the rest of the world for both Parry and Valensa.”

Parry Nutraceuticals’ micro algal products line includes a certified-organic spirulina, natural beta-carotene from Dunaliella salina, and astaxanthin from Haematococcus pluvialis. In addition to its algal products, Parry also produces and markets lycopene from tomato paste.

Parry will want to leverage Valensa’s Pur Blue SpiruZan tablets, which help mitigate the seaweed taste. Valensa is also developing condition-specific formulations, including an astaxanthin product for eye health, and recently launched an omega-3s product that pairs Superba Krill Oil from Aker BioMarine with boosted levels of astaxanthin from Parry to produce an ingredient Valensa is marketing as Deep Ocean Krill.

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