Nutrition Business Journal
Can krill oil double sales over the next five years?

Can krill oil double sales over the next five years?

Heralded as the ingredient to beat in 2011, krill oil has yet to live up to its promise. What will it take to launch this promising source of omegas into the spotlight?

Krill oil comes from tiny, squashed crustaceans. It can cost more than twice as much as fi sh oil. It’s also plagued by a steady front of bad PR, bitter in-fi ghting between industry players, and a stark lack of consumer awareness. Despite these profligate challenges and a rocky start in the marketplace, krill oil appears to be on a serious roll.

“Krill is still a small part of the omega-3 market, but it’s growing rapidly and the future looks strong,” says Adam Ismail, executive director of the Global Organization for EPA and DHA Omega- 3s (GOED). “In the broader omega-3 market, we are starting to see consumers upgrade to higher-end products. That really supports the potential for krill oil.”

According to data from SymphonyIRI Group, sales of krill oil supplements in the food, drug and mass channel (FDM, excluding Walmart) reached nearly $22 million between July 2010 and July 2011, up 65% from the previous year. Nearly $17 million of that came from Schiff Nutrition International’s overnight blockbuster, MegaRed, which is now the no. 1 omega-3 seller in the FDM channel, according to SymphonyIRI.

Figures for the natural channel are harder to come by, as the category is so new that neither Nutrition Business Journal nor SPINS breaks out krill sales specifically. By some accounts, however, sales in that channel have slowed significantly since mega-retailer Whole Foods Market announced in May 2010 that it was banning krill oil products due to concerns that it could not be sustainably fi shed. “The Whole Foods ban defi nitely cast a big shadow,” says James Townsend, a journalist and blogger who has covered the krill market for several years.

According to a May 2011 report by Frost & Sullivan, global sales of EPA and DHA ingredients reached $1.45 billion in 2010, with just $82 million, or 5.6%, coming from krill oil. From a volume perspective, krill represents just 1.1% of the omega-3 market, says Ismail. But thanks to a wealth of new research and Schiff’s multi-million-dollar advertising campaign (including TV commercials that bill MegaRed as “small and easy to swallow, with no fishy smell or aftertaste”), many believe the market is poised for big growth.

“I can see the industry taking 10% of the omega-3 market within three to five years,” says Mickey Schuett, director of sales for Boulder, Colorado–based krill distributor Azantis, which posted sales of $3.8 million in 2010, up 25% from 2009.

Meanwhile, Aker BioMarine—which supplies its Superba brand krill oil for Schiff’s MegaRed—posted a 33% annual gain in the second quarter of 2011; krill pioneer Neptune Technologies & Bioressources reported a 32% increase in revenues for the fiscal year ending February 2011; and Israel-based krill supplier Enzymotec—which purports to control 30% of the U.S. krill market— also reports double-digit gains. “We expanded our capacity three times in the past two years,” says Volkan Eren, director of operations for Enzymotec USA.

An Ocean of Controversy


Krill are tiny shrimp-like invertebrates that float in swarms in the ocean, feeding on algae and accumulating fatty acids, such as EPA and DHA. Of the roughly 85 species, the largest and most abundant species (Euphausia superba) live in Antarctica—the only place in the world where they are regularly fi shed for use in dietary supplements and aquaculture.

Because Antarctic water is among the cleanest on earth and krill are at the bottom of the food chain, krill oil is billed as having fewer toxins than fish oil. Krill also contains mild amounts of the potent eye-health antioxidant astaxanthin (which gives krill its red color and serves as a natural preservative of the oil) and phosphatidylcholine (often associated with brain health).

Yet the most unique aspect of krill, industry experts say, is its molecular structure. Rather than delivering its omega-3 fatty acids on a triglyceride backbone (like fi sh oil does), krill delivers them bound to a phospholipid backbone—one that more closely resembles the human cell wall and disperses better in water. As a result, some industry-sponsored studies show krill oil to potentially be better absorbed and better tolerated than its fi sh oil counterparts.

“What we know from human studies is that a phospholipid omega-3, milligram to milligram, is about 60% more efficiently delivered to the cells than a triglyceride- based one,” says Eric Anderson, vice president of sales & marketing for leading krill ingredient supplier Aker BioMarine. “You also get no oily aftertaste ... no fish burps.”

Krill oil first hit the shelves in 2002, courtesy of Quebec-based Neptune Technologies & Bioressources, which is widely credited for not only pioneering the market but also doing much of the research legwork. In its early years, Neptune conducted studies on everything from premenstrual syndrome to arthritis. When it first launched krill, the ingredient was marketed mostly in the natural channel as a unique new compound with condition-specific attributes. Sales growth was modest, and for years Neptune was the lone fish in a small but growing pond. Then, in 2007, Enzymotec entered the market, followed by Aker. That’s when things got ugly.

In November 2009, according to Functional Ingredients magazine (a sister publication to NBJ), a German bailiff confiscated all printed materials at the Aker BioMarine booth at the Food Ingredients Europe tradeshow in Frankfurt, after Neptune filed a patent infringement lawsuit in U.S. district court. Meanwhile, Schiff—which quietly launched MegaRed in 2006 and initially used Neptune as its ingredient supplier —opted to jump ship and switch to Aker due to what it says were supply and quality issues. More lawsuits flew, and many have yet to be resolved. (Neptune could not be reached for comment in this article).

Then, in May 2010, Whole Foods blindsided the krill industry by announcing it would discontinue krill products due to concerns about sustainability. In a statement posted in-store for every customer to see, Whole Foods expressed the following concerns: “Krill are an important source of food for marine animals ,including penguins, seals, and whales, in the Antarctic. Declines of some predator populations in the areas where the krill fishery operates suggest that fishery management needs to better understand how to evaluate the prey requirements of other marine species in order to set sustainable catch levels for krill.”

While few, if any, other retailers followed suit, the decision gave a black eye to the krill market, and with only a half-dozen players in the business (some of them at clear odds with one another), there was no united front to fight back. “The market shifted, and you now find less of it in natural food sales and more in the conventional markets,” says Townsend. “Overall, krill hasn’t fallen, but it hasn’t grown nearly as much as it might have.”

The market’s saving grace would have to be Schiff, which began to get serious about marketing its krill products with a multi-million-dollar campaign positioning krill oil supplements as more potent, smaller, and easier-to-digest than fish oil.

“Other companies did it all wrong in the natural channel,” says Luke Bucci, PhD, vice president of research for Schiff. “They followed Neptune’s lead and talked about PMS and helping with joints. And then they offered $40 products.”

Schiff, on the other hand, positioned krill oil as an alternative for “people who want to take fish oil but just can’t tolerate it,” says Bucci. “We struck a chord.”

Since then, Walgreen’s has rolled out its own private label product, and club stores and groceries across the country have begun offering low-cost krill oil lines. In April, Bayer Healthcare rolled out its Arctic Wonder krill supplement using Neptune’s proprietary NKO ingredient. “We are seeing a re-invigoration in the krill market, and that’s really exciting,” adds Anderson.

How Sustainable Is This?

Anderson points out that krill is the “largest biomass on earth” with up to 500 million metric tons in the Antarctic alone. While the Commission for the Conservation of Antarctic Marine Living Resources (CCAMLR) currently restricts the annual krill harvest to 5.61 million metric tons in designated fishing areas, and pegs the cautionary “trigger level” at 620,000 metric tons, the current annual catch hovers around 200,000 metric tons, or one third of the trigger level. The cumulutative krill catch for the past 37 years is estimated at 7 million metric tons.

“What is produced today is sustainable. No question,” says GOED’s Ismail. “All of the leading environmental scientists agree on that.” But, as researchers begin to look at drug applications for krill, more consumers give it a try, and more companies jockey for a piece of the action, that could change. “Existing companies have made an effort to assure they are sustainably harvesting krill,” says Ismail. “As new entrants come in, there is a challenge that they may not adhere to those same values. That is a big challenge.”

To address sustainability concerns, Aker—the only krill ingredient supplier that owns its own fishing vessel—is touting its “Eco Harvesting” trawling technology, which limits the number of other fish species that get caught in the net and sends fishing reports to CCAMLR every 24 hours. With its vessel, Aker has implemented several research programs—at it’s own expense—aimed at surveying the existing biomass and building strategies for how best to preserve it. Andersen puts it this way: “The concern is this: What if the krill industry experiences unrestrained growth? We recognize that, and we want to be part of the solution.” In June 2010, the prestigious Marine Stewardship Council (MSC) even certified Aker as environmentally sustainable.

But some were not so impressed. Greenpeace campaigner Casson Trenor blogged that the MSC had given “an unofficial nod to the basic idea that vacuuming up the tiny life forms forming the foundations of the oceanic ecosystem is an acceptable practice.” And in October 2010, Gerald Leape, director of the Pew Environment Group’s nonprofit Antarctic Krill Conservation Project, called on CCAMLR to conduct a new krill biomass survey.

“Krill catches in the Southern Ocean have doubled in the last three years, and there’s no sign of it slowing down,” says Leape in a statement. “CCAMLR must adopt precautionary measures to protect krill and the iconic ocean wildlife that depends on it.”

As of August, Whole Foods had not made up its mind about whether or when it might reconsider the krill issue. “We have not yet had the opportunity to fully review the marine oil supplement category, as it entails a complex set of questions that we are continuing to research,” says a spokeperson. Krill industry leaders, however, aren’t holding their breath, and a new era of product development is now underway.

The New Era

Both Aker and Enzymotec have earned Generally Recognized as Safe (GRAS) status and are hoping to soon begin working with customers to roll out new functional foods containing krill. Neptune has teamed up with NeuroBio Pharm to pursue pharmaceutical applications in neurology. According to a June release from Neptune, “a clinical study for a medical food product with a multinational partner is already initiated.”

Azantis is preparing to launch a new liquid krill ingredient this fall. Enzymotec recently teamed up with Mercola to launch a line of brain health supplements, Krill IQ, derived from krill oil with bolstered amounts of astaxanthin and brain-boosting phosphatidylserine.

“The science behind krill just continues to grow,” says Eren, “and there are more studies on the way. We may even discover some benefits we aren’t aware of yet.”



Talking Krill with Tarang Amin, CEO of Schiff Nutrition


Back in March of this year, Tarang Amin took the reins at Schiff Nutrition after 20 years in the CPG space with such industry titans as Procter & Gamble and Clorox. Schiff launched its popular krill oil product, MegaRed, three years ago only to watch that SKU quickly rise to the No. 1 spot in omega-3 retail sales through mass channels. According to Amin, Schiff’s top three customers for MegaRed are the power trio of Costco, Walmart and Sam’s Club.

The nature of krill’s phospholipid absorption is a key to this success, as the ingredient compares favorably to its fi shy counterparts in delivery of omega-3s, smell and taste. Speaking of MegaRed, Amin says, “It’s one of those great consumer-preferred experiences. I’ve done this in my first five months a few hundred times now. In one hand, I’ll hold two large softgels of fish oil, and in the other, one small MegaRed softgel. Then I give people a choice. Which would you rather take, and by the way, the small one doesn’t smell or give you any of that burpback you might get with fi sh oil. I’ve yet to fi nd somebody who picks the two large softgels that smell fishy.”

Amin spoke quite highly of Schiff’s sourcing partnership with Aker BioMarine. “The great thing about Aker krill oil,” says Amin, “is that certification with the Marine Stewardship Council. It’s the only one. We’re very supportive of Aker going through the extra steps to follow strict sustainability standards and make sure there’s no bycatch.” As for threats to the krill market, what does Amin worry about? Blended products billed as krill oil but diluted with fish and lower-grade, less-sustainable oils. Says Amin: “I frankly don’t worry as much about competition now as those companies who might sully an otherwise fabulous category with strong consumer interest.”


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