In the first of our series of Web Exclusives, Fi's European editor Shane Starling talks to Robert Orr, chairman of the Global Organization for EPA and DHA Omega-3s (GOED) about the omega-3 fish oil market.
What is the aim of the GOED omega-3 trade group?
GOED was created because as fish oil suppliers, we recognise there is a lot of work to be done that we are better as an industry doing together. A lot of fish oil companies are relatively small companies. The ability to create effective communications to consumers is limited by smaller budgets. And there is a lot of education that needs to take place. Scientific symposia, RDAs, health claims — to address these issues on a coordinated basis is really the purpose of GOED. It is going very well. We have 40 members and aim for 50 by year's end. We are encouraging brand marketers — both in the food space and supplements space — who haven't invested in the ongoing consumer education and other issues associated with growing the category — to come forward and become members of GOED as well as suppliers.
Some say clean fish oil supply cannot be guaranteed because of over fishing and other environmental issues.
Over 80 per cent of fish oils go to aquaculture. Fish oil is a by-product of fish milling and other industries. There is upwards price pressure but it is being driven by new demand for biodiesels that has become huge, particularly in the US. It is separate from the omega-3 industry. It is a world commodity issue.
Some pundits say the market is peaking. Do you agree?
We think it is still very early days. We don't see the market peaking until 2008-09. Big food players coming into the market is a good thing. We hope they will help solidify and grow the category. We will have to be nimble and smart to compete. If we can't create more value for our customers then we don't deserve to be in the market place. What we are focused on is being quicker, smarter, cheaper than the big guys. The Cargill's of the world entering the marketplace is a good thing.
What has been the effect of so many omega-3 newcomers?
I see it as a positive. The important thing is that omega-3 fatty acids EPA/DHA are critical to people's health. They are probably the largest single nutrient deficiency in the US diet. Everyone thinks the market is hot — and it is hot — but there is a lot of consumer education that has to be done yet. There are still a lot of products to be introduced to the market. There are still relatively few omega-3 products in the market, and only a few registering substantial sales. There is a lot of work to do around developing RDAs for EPA/DHA. There are a lot of things that need to happen in the market. One company is not going to own 100 per cent of the market. We need highly reputable companies like Cargill to enter the market. We need good quality companies to help grow the market.
Is the entrance of a player like Cargill likely to reduce market prices?
A company like Cargill is always going to be competitive on price. We have committed to reducing the cost of our ingredients by 30 per cent in three years. If taste is king, price is queen. Adding any ingredient into a food does come with a cost and although we have proven to be the most cost-effective to date, we have a mandate to become more cost effective year-by-year so we can take those cost improvements to our big food customers that are looking for that all the time. If we don't provide that then somebody else eventually will. Currently we offer a standard 50-75mg EPA/DHA dose for most food servings at about 1-1.5 cents per serve.
What is a typical EPA/DHA dose?
It ranges from about 30mg up to about 150mg. It is more a function of cost than formulation parameters. We have had food bars that contain 250gm or more. We can put 150-250 mg of DHA/EPA into a slice of bread but the cost of doing that, even if you're talking about 150mg instead of 75mg, is three cents instead of a 1.5 cents and suddenly when you look at a loaf with 20 slices you've added 30 cents to the cost of the loaf which can be more than all the other ingredients combined. It can then become prohibitive for the food maker. So the constraint is not our ability to deliver more EPA/DHA to a product but a balancing off of what a consumer is willing to pay for the additional nutrition. It is also about the idea that these foods contribute to omega-3 intake rather than delivering any recommended dose in one hit. In the same way nobody expects to get 100 per cent of the calcium RDA from one glass of milk.
So if a food company came to you asking for an ultra-high omega-3 dose, would you recommend against such an approach?
Well we never want to tell customers what to do but we share our experience of the market place. We understand the market very well so we try and get our clients to understand what we consider the best way to go about these things. It comes back to what consumers want. They want better nutrition but they don't want major changes in their diet. They want the same foods, with the same taste, at the same price, with more nutrition. That's hard to do but if the consumer had their way, that's how it would be. It's about finding a balance between taste, cost and the value proposition for each food category.
Why is omega-3 different to low-carb?
We are betting a lot of money that it is very different. The low-carb craze — whether it was low-carb, Atkins, Zone, South Beach — all those are diet crazes driven by people's needs to lose weight. That's why the low-carb phenomenon went up like a rocket and came down like a stone in the US. Those same kinds of fluctuations didn't happen in Europe and other parts of the world. Quite frankly omega-3s are a completely different arena. If you look at the food side of the equation the consumer is looking for more nutritious foods. There is a huge trend that has been going on for a long time around the health and wellness issue particularly as baby boomers move into their retirement years. They are very concerned about their health and about preventative healthcare. Not taking drugs, not solving the problem after the event. They want to keep themselves healthier for longer. They are looking for edges in their nutrition and I think that omega-3, pre and probiotics, calcium, fibre, antioxidants and others provide that kind of edge.
How is this food and beverage activity affecting the supplements market?
The supplements market is stronger than ever and I predicted a few years ago that as the big food companies get engaged and start to communicate to consumers about the added benefits of omega-3s that that increased awareness will lead to consumers wanting more and supplements are a way for them to do that. The North American omega-3 supplements market has grown 35 per cent in the past year and has been in high double digit growth for at least six years. I believe it will continue to show double digit growth for three or four years.
Is that more particular to North America?
It is a North American phenomenon because North Americans are much more supplements-oriented than Europeans are.
How far off are official RDAs?
GOED is doing a lot of work in this area but it may be 2-3 years before an official government-backed RDA is in place in North America and Europe.
What are omega-3s' marketing strengths?
The huge body of scientific evidence around the importance of omega-3s is going to sustain it. The big differences between probiotics and fibre is that probiotic and fibre are creating a state of wellness of body. Omega-3s are actually substantial building blocks in every cell in your body. EPA/DHA are functional building blocks. Fifty per cent of the lipid proportion of your brain is made up of DHA. You need to ingest this to be well. From a nutrition and scientific point of view we believe this is going to carry them beyond trend status. People ask what happens when omega-3 becomes a commodity? That's what we want. It should be in every food. For 20-30 years the nutritionists have been saying we should be eating oily fish but people don't do that. Yet people know omega-3s reduce CV risk by 30 per cent, all causes of mortality by 35 per cent. We know that these things are important in maintaining proper brain function. The development of the brain among infants. Heart health. This is not a boom-bust fad because there is so much science that shows how important it is to good health.
But isn't omega-3 a harder sell than say, probiotics, where the benefits are more specific and the results more readily seen?
Well, you are not going to take omega-3s every day and instantly see your body transform. But it is a nutritional edge you are buying into. Why do people buy life insurance? You're not planning to die tomorrow. Why do 50 per cent of people take a multivitamin. The science shows they work. It's not like taking an aspirin.
Do you think consumers think that far ahead when they buy functional foods?
They know that fish is healthy for them. They know that there are components in fish, including omega-3s that are important to keeping them healthy and giving them an edge on a state of wellness over a long period of time. I think that people are connecting those dots. There is a certain part of the North American culture that wants everything to be an aspirin; that desire for instant gratification. But consumers are wise enough to know that they should be getting their wellness from their foods. We believe omega-3s are going to be a big part of that going forward but we realise there is a long way to go before omega-3s are a staple food. Philosophically we believe good nutrition shouldn't be the domain of the rich and we see omega-3 foods and beverages as playing a part in providing equality of nutrition.
For more on Omega-3s — see Julian Mellentin's comment in our Blogs section.