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The Global Market for DHA and EPA Ingredients for Human Consumption: An Industry Commentary

Introduction

With the prevalence of chronic diseases rising and healthcare costs increasing to unsustainable levels, the emphasis on “prevention over cure” is greater than ever before. This trend has prompted consumers to take a more active role in managing their health, with many turning to diet and exercise as a means to do so. In regard to dietary changes, many consumers no longer consume food simply for sustenance; rather, they are seeking to achieve their Recommended Daily Allowance (RDA) of vitamins, minerals, and other nutrients like protein and fiber, in an effort to reduce the risk or delay the onset of a multitude of conditions and diseases with defined dietary linkages. Additionally, the advent of functional foods and beverages, or food and beverage products that confer health benefits beyond basic nutrition through the incorporation or removal of a particular ingredient, has strengthened this trend of personally-managed health and wellness through diet.

While particular vitamins and minerals may have more universal familiarity among consumers (e.g., calcium, vitamin C), the emergence of arguably less-established functional ingredients, such as omega-3 fatty acids, have greatly influenced the functional foods and beverages market. Bolstered by considerable scientific evidence of their efficacy and a growing amount of media coverage, consumers’ exposure to these nutrients is broadening dramatically. “Omega-3s” have for years been touted in some corners as a panacea for many of the world’s leading diseases, and while the scientific evidence supporting such a bold claim is limited, the benefits of these molecules, particularly docosahexanoic acid (DHA, 22:6) and eicosapentanoic acid (EPA, 20:5), range far and wide across a multitude of disease areas. In an effort to capitalize on this scientific support and the emergence of the “health-conscious consumer,” several food, beverage, and supplement companies continue to find innovative ways to incorporate DHA and EPA into their products.

This report comments on the scientific support for DHA and EPA in addressing several health concerns, the dynamics of the market for DHA and EPA ingredients for human consumption, and the key drivers and hurdles influencing the growth of this market.

Background

Definition and Health Benefits
DHA and EPA, as well as all other omega-3 fatty acids (α-linolenic acid, stearidonic acid, etc.), are termed essential fatty acids (EFAs), since humans are not able to synthesize these molecules in vivo and must therefore be consumed through diet. Furthermore, due to the presence of multiple double bonds in the long carbon chain, these molecules are also known as polyunsaturated fatty acids (PUFAs) and are known to play a critical role in cell membrane fluidity. However, the benefits of these molecules extend far beyond the cell membrane, as research has confirmed the role of DHA and EPA in a multitude of areas, ranging from cardiovascular health to cognitive function to eye health.

There are currently over 8,000 research publications supporting the health claims of both DHA and EPA, with only calcium having more articles highlighting its importance in human health. It has been illustrated in numerous articles that DHA and EPA consumption effectively reduces total and LDL cholesterol, while either raising or having a negligible effect on HDL cholesterol. Additionally, recent studies have suggested that EPA may be involved in lowering blood pressure, albeit minimally. Much of this research played an integral role in prompting the FDA to approve qualified health claims for DHA and EPA, claiming that the ingredients may fight the risk of cardiovascular disease when consumed in supplements (2000) and in foods and beverages (2004). Furthermore, with DHA and EPA being critical components of both the brain and the retina, it should be unsurprising that their role in healthy brain and eye development is quite significant. Research continues to show that intakes of DHA in particular are associated with higher intelligence and better vision in young children. Additionally, with omega-3s playing a predominant role in cell-cell communication in the brain, DHA and EPA consumption has been linked to improved memory retention and delaying the onset of dementia in adults. DHA and EPA are also under investigation for having a role in major depression, bipolar disorder, ADHD, schizophrenia, rheumatoid arthritis, and obesity, though the evidence supporting these linkages is inconclusive.

DHA and EPA in Foods and Beverages
Due largely in part to the average consumer’s diet, most omega-3s enter the body in the form of α-linolenic acid (ALA, 18:3), which is especially common in nuts (especially walnuts) and flax seed and to a lesser degree in soybean, canola, and mustard oils, as well as in tofu. Unfortunately, the body of research linking ALA consumption to many of the aforementioned benefits is not nearly as established as it is for DHA and EPA; nevertheless, ALA is converted to DHA and EPA in vivo, though at a very limited rate (estimated at <10% for EPA, <1% for DHA). Thankfully, DHA and EPA can be consumed directly in several forms, particularly oily fish (e.g., tuna, salmon, sardines, and herring), fish oil, and fortified eggs (hens fed an ALA-rich diet will produce eggs rich in DHA and EPA).

However, these ingredients are not limited to these delivery vehicles. Technological innovations, including microencapsulation to provide temperature-resistance and controlled-release, have facilitated the incorporation of ALA, DHA, and EPA into a number of foods and beverages where these molecules are not naturally present. ALA has primarily seen uptake into a number of grain-based products, such as pastas, breads, and cereals, as well as some health bars and baby food. DHA and EPA, however, are temperature-sensitive ingredients and are not particularly shelf-stable; therefore, they are seeing the most rapid adoption into dairy (milk acts as a chelating agent, retarding oxidation) and other refrigerated products. Nevertheless, recent advances in formulation have facilitated the incorporation of DHA and EPA into a broad spectrum of more challenging food and beverage carriers, including juice (Minute Maid® Pomegranate Blueberry Flavored fruit juice blend), bars (Kellogg’s® Live Bright™), and baby food (Gerber® Baby Food with DHA®). DHA in particular has also seen incredible adoption into products aimed at younger children, particularly infant formula, where a combination of scientific support, FDA approval, and media coverage has allowed DHA to penetrate 75% of the worldwide infant formula market.

DHA and EPA Ingredient Market Dynamics

Market Overview
Scientia Advisors estimates the global DHA and EPA ingredients for human consumption market at $1.29B in 2007 and expects it to grow at a compound annual growth rate (CAGR) of over 15% to $2.62B in 2012. This anticipated high growth is due to a number of factors:

  1. The FDA issued qualified health claims supporting that food, beverages, and supplements fortified with DHA and EPA may reduce the risk of cardiovascular disease.
  2. The advent of formulation technologies to prevent the oxidation of DHA and EPA, thus preventing their spoilage and facilitating their incorporation into a variety of novel delivery vehicles, including dairy products, health bars, spreads, and non-dairy beverages.
  3. The American Heart Association (AHA) recommends a minimum daily consumption of 220mg of DHA/EPA for those at risk of cardiovascular disease.
  4. Nearly universal support from the medical community, where doctors will commonly recommend that patients at risk of cardiac events supplement their diets with DHA/EPA in addition to traditional therapeutics (statin regimen), will further encourage the adoption of DHA/EPA-fortified products.
  5. It is expected that an RDA for both DHA and EPA will be established within the next few years, significantly driving consumer adoption of DHA/ERA-fortified products.
  6. The continued emergence of scientific support for these ingredients, especially in emerging areas, such as obesity, rheumatoid arthritis, neurodegenerative diseases (Alzheimer’s), ADHD, and depression.

Dietary supplements, or vitamins/minerals/herbs (typically in capsule form) used to supplement the diet, are the primary delivery vehicles for both DHA and EPA, capturing over $900M of ingredient sales in 2007. DHA for use in infant formula comprises the second-largest product segment, with over $240M in ingredient sales in the same year. The remainder of sales of DHA and EPA for incorporation into foods and beverages is scattered across a number of product segments, with yogurt, bars, and breads representing the other top product categories. By 2012, supplements and infant formula are still expected to be the two largest delivery vehicles for DHA and EPA, though the growth will be much higher in many of the emerging segments; for example, DHA and EPA sales for non-carbonated beverages are expected to grow from a mere $1M in 2007 to nearly $40M in 2012, exhibiting a CAGR of over 100% during this period.

Unmet Needs
A number of unmet needs for both DHA and EPA are related to the sourcing of the ingredient. For example, a large spur in consumption of DHA and EPA may contribute to the over-harvesting of various fish types to satisfy a growing global demand. Additionally, despite their knowledge of the benefits of DHA and EPA, some consumer groups remain hesitant to purchase these products. With most DHA and EPA for human consumption coming from a fish source, vegetarian consumers will be unlikely to purchase these products since it does not fit within their dietary restrictions. Pregnant women have also voiced concerns over the potential for heavy metal (e.g., Hg) contamination of fish oil and remain reluctant to consume these products for fear of harming their unborn child. Martek Life Sciences (NYSE: MATK) has somewhat addressed this dilemma by developing DHA from an all-natural, non-GMO, biomass (algal) source (Life’s DHA™), a product which has seen considerable uptake into a number of infant formulae, as well as a number of dairy products (e.g., Horizon Organic® Milk DHA). Based primarily on the strength of this product and some helpful legislation (e.g., the FDA has mandated that all DHA for incorporation into infant formula come from a biomass source so as to circumvent any fears of DHA contamination), Martek’s revenues have grown at a CAGR of over 17% from 2005 to 2008. Nevertheless, there is still not a biomass source for EPA available for sale in the U.S., though it is expected within the next few years. One Swiss company, Water4Life, offers V-Pure, a vegan supplement containing algae-derived DHA and EPA, although the product has not yet been evaluated by the FDA for inclusion into foods and beverages to be distributed in the U.S. Nevertheless, should the company receive FDA-approval for this product, it could represent a substantial business opportunity in the functional foods and beverages market.

Although formulation innovations have certainly helped, the instability of both DHA and EPA make them notoriously difficult ingredients to incorporate into some food and beverage types. DHA and EPA are both highly susceptible to oxidizing, causing the oils to develop an unpleasant, fishy odor and taste. Since oxidation is encouraged by a number of factors, including exposure to air and high temperatures, DHA and EPA were long prevented from seeing widespread adoption into a variety of foods and beverages, especially those kept at room temperature or put through heat-intensive manufacturing procedures. Some of these issues are now being overcome with companies like Ocean Nutrition Canada, which sells the Meg-3® DHA/EPA ingredient for use in foods, beverages, and supplements. The company has made this possible by utilizing a double-shell, gelatin matrix (Powder-Loc™) encapsulation to lock the DHA/EPA in the capsule and preventing the odor and taste from leaking into the food. This technology has facilitated the incorporation of this ingredient into a number of unlikely delivery vehicles, including baked goods (e.g., breads, cookies, health bars), spreads (e.g., margarine, peanut butter), and juices.

Another considerable growth hurdle is related to the cost of these ingredients. In comparison to many other functional ingredients, such as fructans, which are roughly $0.004 per gram, DHA and EPA carry a significant price premium, at roughly $0.70 per gram for use in functional foods, beverages, and supplements. Though this increase in price for DHA/EPA-fortified functional goods over traditional products will prevent some consumers from purchasing the products, the hurdle is perhaps greatest in the service business, where cost-sensitivity is at its highest and it becomes very difficult to reach an agreeable pricing level for both supplier and purchaser.

Key Success Factors
In addition to the aforementioned product characteristics such as pleasant taste/smell and reasonable cost, another critical element of success is the educated consumer. Although the scientific and medical communities have greatly supported the regular consumption of DHA and EPA, it is ultimately the consumer who makes the purchasing decisions for DHA/EPA-fortified goods and thus significant efforts must be made to better educate them on the benefits of these ingredients. More than ever, consumers are barraged with a multitude of products relating to health and wellness, so consumer packaged goods (CPG) companies will be challenged to make their product(s) attractive enough to ensure visibility to the consumer. This concern is not specific to DHA/EPA ingredient suppliers; for example, to ensure a successful U.S. launch of their Activia® yogurt (fortified with probiotic cultures to encourage healthy digestion), Groupe Danone spent nearly $60M on marketing to U.S. consumers via in-store promotions, television advertisements, and consumer promotions, resulting in over $100M in grocery sales in the U.S in one year of product sales. While some DHA/EPA ingredient suppliers, such as Martek and Ocean Nutrition Canada have branded their omega-3 products, there has yet to be a DHA/EPA-fortified product with the universal recognition of a product like Activia® and its Bifidus regularis probiotic cultures.

Additionally, some suppliers are funding clinical trials in an effort to generate more health claims for DHA and EPA, further enticing the prospective consumer to purchase their product. Martek Life Sciences, for example, is engaged in a number of clinical trials, with focuses ranging from cognitive decline (memory retention, Alzheimer’s) to autism to infant and child health.

Conclusions

Bolstered by sound scientific support, broad media coverage, and the emergence of the health-conscious consumer, the market for DHA and EPA for use in foods, beverages, and supplements looks to be very promising throughout the next several years. Additionally, if a Daily Recommended Allowance for DHA and EPA becomes established, consumers will more aggressively seek out products fortified with these nutrients in an effort to reach their suggested intake. Nonetheless, there are a number of challenges facing ingredient suppliers. With the many products available to consumers claiming to boost health and wellness, suppliers of DHA and EPA will likely have to employ the use of aggressive marketing methods, such as consumer-targeted promotions and television advertisements, to better educate the customer on their product(s) and its health benefits. Additionally, novel formulation technologies will be required to facilitate the incorporation of DHA and EPA into numerous other delivery vehicles, including aseptically-produced goods (e.g., UHT milk, various sauces and drinks) and baked goods (e.g., dry cereals, savory snacks). Nevertheless, Scientia Advisors believes this market seems is well-positioned for future high growth, though whichever company commands the leading market share moving forward will likely be dependent on how well they address these market challenges.

Acknowledgements: Bob Jones, Principal, Scientia Advisors, LLC.; P.K. Newby, ScD, MPH, MS

Correspondence:
Bob Jones
Scientia Advisors, One Main Street, 7th floor, Cambridge, MA 02142
Email: bjones@scientiaadv.com
Tel: 617-299-3011

John McNamara
Scientia Advisors, One Main Street, 7th floor, Cambridge, MA 02142
Email: jmcnamara@scientiaadv.com
Tel: 617-299-3024

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