Companies to Watch: Ocean Nutrition Canada (ONC): Bridging the Food & Supplement World

June 1, 2005

ONC is a company that has grown by leaps and bounds since its inception in 1997. Today it employs nearly 300 people at its headquarters in Halifax, Nova Scotia, Canada, and it is forecasted to grow 60% each year for the next several years. Lately, ONC has been busy pushing its newest technology, which allows for the fortification of foods and beverages with fish-derived omega 3 fatty acids. At the same time, it continues to investigate other renewable resources from the ocean for use in supplements and functional foods.

Integrity is the name of the game for ONC's president and CEO, Robert Orr, who believes this should be the keystone of any business that wants to be successful in the supplement and functional food markets. "In my opinion, trust is built with integrity and openness," he said, adding, "And the first place you need to start is with the safety, quality and efficacy of the products that you produce."

Mr. Orr says he knew from day one what would be required to build a sustainable business in the food and supplement world. "The long-term is about building value and the short-term is always about price. But there is a cost to doing things with a long-term perspective in mind," he explained. "The trick is not thinking about it in terms of cost, but rather the value you are creating."

To put theory into practice, Mr. Orr said ONC spent a disproportionate amount of money on science, R&D and quality. About the quality part of the equation, he said, "Our investment in quality assurance/quality control runs at over 4% of sales, and in the early days of the business it was much higher. Plenty of people called us crazy for that but we made those big investments early on because we did not think it was possible to build a sustainable business absent that commitment."

Well it seems that ONC's "craziness," or what most would call firm dedication, is finally starting to pay off. Over the last year, it has had some real success with bridging the gulf between the supplement and food sectors. In the supplement arena, the company has been working on the development of its new omega 3 concentrates, while in the food segment it has created omega 3 powder for use in food and beverage fortification. It is this latter development in particular that has gained the company significant recognition in the food world. This is because finding a way to stabilize an incredibly unstable ingredient like omega 3's is a feat that has eluded most companies for several years.

To accompany ONC's significant developments in the supplement and food space, it recently commenced a major branding initiative, which centers on an ingredient it calls MEG-3. "Our objective over time is for people to recognize this ingredient as the quality standard in the omega 3 business. More specifically, we want them to know that this product is efficacious, and that the quality and purity are of the highest order," said Ian Lucas, vice president, Marketing & Business Development. "Ultimately, we want MEG-3 to be something consumers seek out on food labels and supplement bottles."

Early this year, the fruits of ONC's labor culminated in the launch of several bread products fortified with omega 3's. In January, Wegmans Food Markets introduced three breads containing ONC's MEG-3 ingredient. A month later, The Baker launched a whole-grain bread containing MEG-3. And in late April, the Arnold Foods Company launched Arnold Smart & Healthy 100% whole wheat bread, also containing MEG-3. Mr. Lucas says the immediate future will bring yogurts and milks fortified with omega 3's.

Although omega 3's seem to be hogging the spotlight at ONC, Mr. Orr doesn't want people to forget the other ingredients the company currently has in the pipeline. "Our R&D team is actively looking at numerous compounds in areas like hypertension and pre-hypertension for application in both food and supplements," he said, adding, "We also have some products in the early stages of development that might be useful in the area of diabetes." So far, ONC has worked with three sources for the development of healthy ingredients, including fish protein, seaweed and microalgae.

Mr. Orr believes the future looks bright in functional foods this time around. "The fact that the functional foods market has had more failures than successes at this point means it is still a young category. The first functional food products were launched by major multinational food companies who were not willing to risk their existing brand equity," he explained. "As a result, they brought to market totally unfamiliar brands that had confusing messages, unrealistic price points and poor taste." But while there have been a lot of mistakes, he said, a lot of learning took place and now the market is ready to move on and grow.

As for the supplement industry, Mr. Orr called for more self-regulation. "The dietary supplement industry doesn't do enough to build trust and integrity with the consumer," he commented. "It isn't prepared to make the investments it needs to make from a quality perspective, so that consumers can have the same trust they have in the food sector, for example."

Despite some of the negatives, however, Mr. Orr continues to maintain a positive outlook on supplements. "The work being done by AOAC and USP to bring analytical methods, standards and GMPs to the industry will be significant in improving the quality of products," he explained. "Even though there may be some anxiety from a cost perspective about implementing some of these things, it will definitely help lay the groundwork in re-establishing trust with the consumer."

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