The supply end of the omega-3s market is dominated by the Peruvian anchovy fishery, with as much as 70% of the world’s servings of omega-3s coming from this lone—albeit hugely productive—source. Having some many eggs as it were in one basket makes the fish oil market highly sensitive to developments in this fishery.
The abundance of anchovies off Peru naturally varies with various cycles in the eastern Pacific such as El Niño events and the Pacific Decadal Oscillation. The possible influence of climate change on these cycles is yet to be determined.
Quota changes in Peru
Before the start of the last fishing season earlier in 2013 the Peruvian government cut the quota by 34% based on fish population measures. The quota has since been raised, but that supply blip is making its way through the system to the detriment of companies like DSM, which, having absorbed Ocean Nutrition Canada, is now of the world’s biggest fish oil suppliers.
“Last year the winter fishing season in Peru was very low harvest, which led to very strong increases in prices, which we then and other players in the value chain passed on to the final end consumer,” said Rolf Dieter Schwab, chief financial officer of DSM during an earnings call with analysts recently. “We saw that the consumers did not like that at all and reduced basically their off take from the shelf and changed their buying behavior at least for now.”
Higher priced alternative
Krill oil supplements offer an alternative to fish oil that purports to have certain advantages, such as better digestibility and greater bioavailability of its EPA and DHA content due to its phospholipid makeup.
But the ingredient is substantially higher in price than fish oil. Even so, krill oil supplements have shown strong growth, with Schiff Nutrition’s MegaRed brand perennially the best seller among all of the many hundreds of omega-3 skus in the US market. If the price gap narrows, would even more consumers try krill?
“Our point of view is that krill is growing regardless,” said Mike Timperio, vice president of global sales for krill oil supplier Neptune Technologies and Bioressources.
“If you look at the last couple of years you see krill showing very strong growth and outgrowing the category and this is independent of the price,” he told NutraIngredients-USA. “The consumer today is aware of the benefit of one source versus another. But with price changes, those who have been consuming fish oil for years may be tempted to try something else.”
“Any increase in the price of fish oil it may cause the consumer to have second thoughts about those products,” said Todd Norton, vice president of business development for krill oil supplier Aker BioMarine.
“We haven’t seen direct correlation of that yet, but as the pricing gets closer that might make someone say that krill oil is only that much more, I’ll try it.”
Norton noted that the krill oil supply is not as constrained as is that of fish oil. The actual harvest of krill is only a tiny fraction of that of fish, but the fleet operated by Aker and other krill harvesters isn’t anywhere close to hitting its quota limits as routinely happens off Peru. So the supply is potentially more stable, though Antarctica in an inherently more difficult and risky place to fish, Norton said.