Aker buys bulk krill oil business from Neptune

Aker, based in Oslo, will receive all of Neptune’s existing krill oil and bulk krill raw material inventory as well as the intellectual property associated with its extraction methods. Neptune, based in Laval, Quebec, will keep its lipid extraction plant in Sherbrooke, Quebec. 

Neptune was first to market with krill oil as a dietary ingredient and developed the first commercial scale extraction method and did some of the early science backing the ingredient’s health effects which included cardiovascular benefits. The company filed for a number of patents in markets worldwide. The company launched its signature krill oil product known as NKO, which was the first material used in what was at one time the best selling omega-3s SKU in the United States, MegaRed, marketed by Schiff Nutrition (now part of Reckitt Benckiser).

Aker takes over bulk oil business;  Neptune remains in finished products

Under the deal, Aker will continue to offer products made to the NKO specifications, as well as its own line of Superba krill oils. Neptune will continue to offer finished krill oil soft gels through its Solutions business.

“Neptune were the pioneers of krill and had a very good approach and some good science and good products. The important part of this deal is that now customers no longer have to choose; they can get the best of both worlds,” ​Aker CEO Matts Johansen told NutraIngredients-USA.

Neptune, for its part, will continue to develop the science behind krill oil through its investment in Acasti Pharma, which is developing krill-oil based omega-3 phospholipid therapies for the treatment of severe hypertriglyceridemia.

“We think it’s great for Aker and it’s great for us. We have been talking about this for a long time. We have been transforming this business; in the past two years we have tripled sales and taken Neptune out of heavy losses have turned a profit. We will still be in krill but in a different way. We have now become a customer of Aker,” ​said Neptune CEO Jim Hamilton.

Scale determines success

Aker entered the business later (it began offering extracted krill oil products to the market in only 2009) and from a different angle—the supply end.  Aker BioMarine is part of the conglomerate Aker ASA, which is controlled by onetime fisherman Kjell Inge Røkke. Aker has two high technology krill harvesting vessels and is building a third.  Johansen said the two existing vessels account for 17% of the world’s tonnage of krill harvesting vessels yet bring in 60% of the world’s catch. That efficiency is made possible in part by having a dedicated transport vessel, meaning the harvesting ships can work more or less continuously during the season, he said. All of that activity benefits from economies of scale, Johansen said, and that’s something this deal provides.

“​It​’​s important to have scale, that​’​s the key element of success in the krill business,​”​Johansen said. “​This is part of a strategy we have been working on for two years.  It will give us the scale to be able to invest more in marketing support for our customers, more in science and more in our sustainability efforts.​”​

“​Krill oil is still a tiny part of the overall omega-3s market. It still has the benefits of no fishy aftertaste and greater bioefficiency,​”​ he said.

Work moves to Houston plant

To drive help innovation, something that had lagged while the krill oil suppliers poured money into patent fights, Aker invested in the purchase and retrofitting of an extraction facility in Houston, TX. The facility was originally meant to bring the extraction operations in house, work that had previously been done on a contract basis in partnership with Naturex. This allowed Aker to put in new technology that resulted in better tasting and smelling krill oil that could be offered in higher omega-3 concentrations. But the facility was also meant to anticipate the future growth of the krill oil sector.

“​The original reason was to bring that manufacturing in house, both from a quality perspective but also to allow us to innovate. That facility was built with the growth of the sector in mind, so we have the capacity to absorb the Neptune accounts,​”​ Johansen said.

He added that from the customers’ point of view, nothing will change. Those that are buying NKO can continue to do so, but it will come from Houston. And he said there is no plan to raise prices, something that is often feared when a company corners a big share of a market. He said it’s harder to put a number on where Aker stands as an oil supplier than it is to say where it stands as a harvester, because catch totals have to be reported publicly to the fishery regulators. But he said significant competition in krill oil supply still exists, with Norwegian company Rimfrost, Israeli company Enzymotec and competitors in South Korea and China still in the game.

With the acquisition of Neptune’s IP, the biggest driver of the so-called krill wars is now removed, Johansen said. There is still a patent dispute ongoing with Rimfrost, he said.

Job losses

One aspect of the deal that’s not so rosy concerns employment within the city of Sherbrooke. In 2012 three workers were killed at Neptune’s plant when it exploded and burned. The company managed to weather that storm and rebuild the plant, and eventually was able to hire back the workforce. But it won’t weather this storm in the same fashion.

Hamilton said the plant’s capabilities can be applied to new ranges of lipid-based products and work at the plant will continue, including development on a medical cannabis extraction project. But that activity at the moment can’t begin to fill the void left by the departing krill oil extraction work, so 50 people will lose their jobs.  Hamilton said the hope is that the new projects can at some point pick up that slack.

“​The Sherbrooke facility is a pharma-grade plant. This could become the world​’​s biggest extraction facility for cannabis,​” ​Hamilton said.

Eric Anderson, director of global sales for Norwegian vitamin K2 supplier Nattopharma, has a unique perspective on the market, having been global sales director for Aker during some of the most contentious phases of the krill wars.

“​I am a big believer in omega 3 and I believe krill is one of the richest and most sustainable sources. From my perspective, it​’​s great to see the market continue to develop and to see the capability of developing higher concentrations,​”​ he said.