Interview: Jan Haakonsen, ArcticSource1
ArcticSource1: Fish oil prices will inch up by 5% a year
Speaking to NutraIngredients-USA after striking a deal to handle US distribution for leading Icelandic fish and cod liver oil producer Lysi hf, ArcticSource1 sales and marketing director Jan Haakonsen said: “I expect fish oil prices to continue to inch up by an average of about 5% per year.
“The demand for omega-3 rich oils increases faster, but the increasing interest is also adding new sources to the supply, which is keeping prices in check.”
Haakonsen, who has held senior positions at Denomega, Omega Tech and Kraft Foods, set up ArcticSource1 in January.
He said: “The market is quite fragmented and it is not driving sufficient innovation in the most mature markets to drive new user groups. It’s just running after volume growth.
“We want to contribute to innovations to drive value added solutions at lower cost. Unless you can offer the market something special, you are playing a losing game.”
Omega-3 market ‘quite fragmented’
He added: “I’m staying well away from the commodity market because a distributor of my size could not make an impact. But I have a very experienced team and there is a role for a ‘middle man’ with technical and market knowledge to help suppliers such as Lysi accomplish their goals.
“I feel liberated. I can go to the market and see what people want and then go back to suppliers and get it. I am not limited by the technical capabilities of the company I work for.
“It’s not easy to make money for anyone in the commoditized part of the market. However, the innovative players that can deliver what consumers want will be able to make a reasonable profit. The best innovations will attract new consumer groups to omega-3s."
Differentiation in the omega-3 market
As the market became more commoditized, firms needed to hang their hats on something specific, whether it was sustainability, purity, concentrations, EPA/DHA ratios, taste, odor or application-specific formulations for categories such as dairy or bakery, said Haakonsen.
While some companies had sacrificed margins in order to secure shelf-space for omega-3 fortified products in the grocery aisles, this was not sustainable in the longer-term, he said. “People are prepared to pay a premium.”
He added: “I am a true believer in the food market for omega-3. It is the healthier, more cost effective way to reach the majority of the market. With supplements, you run the risk of not reaching large market segments, perhaps the segments that need it the most. Medium term, I am bullish on nutraceuticals – supplement-like foods.”
Where do fish oils fit into the omega-3 market in the longer-term?
Omega-3s from microalgae and krill will “complement” the fish oil market although there is “some competitive overlap”, says Haakonsen. “But the competitive strengths are so different that the sources gravitate to different consumer groups naturally.”
He added: “I think the key weakness of the new sources is that they are not natural foods or ingredients in human diets the way fish and fish oil are. Fish oils have been consumed for generations. Humans have not typically consumed microalgae, it’s not part of our evolution.”
The arrival of long-chain omega-3 oils derived from genetically engineered oilseed crops would add an interesting dynamic to the market, although much would depend on whether attitudes towards genetic modification, he said.
“It will depend on several factors including safety, price and consumer acceptance. My bet is that fish oil will maintain the position as the best source of omega-3 for human consumption.”