Paul Altaffer & Grant Washington-Smith07.01.06
Product Development in Australia & New Zealand
Geographic isolation and biodiversity leads to new opportunities for nutraceuticals.
By Paul Altaffer & Grant Washington-Smith
Geographic isolation often leads to innovation and variation. This is true for species and economies. There are very few regions of the world where this is more evident than in Australia or New Zealand. Images of innovation and variation of species abound from egg-laying venomous mammals to the iconic kangaroo that has bounded through the outback of Australia for millennia. Equally interesting is the unique diversity of flora and fauna in New Zealand.
The innovation in natural design from geographic isolation has lead many organizations, both public and private, to examine the biodiversity of both these countries with a view of commercializing the new and novel. The process continues today, but what has been commercialized to date, remains just a fraction of this untapped potential.
Before examining the opportunities this natural biodiversity has to offer, it is worth reviewing what makes an innovative product successful, how it relates to the natural products industry and once we have it, how one turns this into sustainable competitive advantage. The first consideration is what defines a successful innovative product.
First, the technology or concept should address either an unmet or significantly underserved customer need. It is important to note that much of the great commercial successes over the past few decades came from incremental shifts and re-design within a given market as opposed to major breakthroughs in innovation. For ex-ample, people had been receiving their mail well before FedEx arrived in 1971, but Fred Smith, founder of Federal Express knew that a substantially underserved customer base existed and he eventually proved it. Similar opportunities exist within the natural products industry, albeit on a smaller scale. Addressing an unmet or underserved need doesn’t mean spending millions in the hope of launching the next “blockbuster” natural product into an entirely new market segment. Instead it could in-volve taking an existing product and addressing a single major issue that users face.
Second, the technology or concept should have a well-defined or identifiable target market. Its reach will determine the ultimate success of a product. If the unmet need is well defined, then there is a strong chance the target market will also be well defined. One must ensure, however, that this target market translates into a viable financial proposition.
Third, the concept’s features need to translate into a compelling selling pro-position. The traditional retail sector of the natural products industry has struggled for years with the issue of how to communicate a compelling pro-duct or brand message to consumers. The multi-level marketing channel, however, has enormous strength in communicating a compelling product or brand message to consumers—sometimes even too strong.
Fourth, the product or technology should be unique. In an ideal world, one would want to own the technology or concept or at least control that aspect of the technology or concept that raises the bar on market entry by competitors and discourages mimicry. If imitation is the sincerest form of flattery, then the natural products industry certainly has its share of sycophants.
Lastly, the product or technology should be defensible. A patent with freedom to operate is the ideal situation. But they work best when one has the resources to enforce or defend them. Trade secrets can also be effective if you don’t plan on out-licensing your intellectual property. The most successful defense of your technology or concept is likely to be a combination of disclosing enough information to have a patent granted, while retaining enough trade secrets to make a product “workaround” very difficult. There are many examples of how this can be successfully achieved in the natural products industry.
The Opportunities
Having reviewed the criteria of a sustainable competitive advantage of an innovative product, it is worth considering just a few of the innovative opportunities on offer in Australia and New Zealand.
Both Australia and New Zealand are primary producer countries with a major focus on food. The governments of both countries fund extensive re-search programs in both agriculture and food technology. While both countries have previously undertaken re-search around traditional agricultural staples such as beef, dairy and grain production, there has been a trend toward investigating and characterizing the potential of the indigenous flora and fauna.
The Cooperative Research Centre (CRC) for Innovative Dairy Products in Australia has been working on wallaby (kangaroo) milk, and while a milking shed for a mob of kangaroos might seem somewhat problematic, there is some good science behind the venture. In most mammals, the majority of early development occurs inside the womb with nutrients delivered through the placenta. The tammar wallaby, however, has a brief pregnancy and it seems that all the factors (bioactives) required for growth are found in the wallaby’s milk. The CRC is researching these bioactives in the hope of discovering similar substances in cows’ milk to use in developing functional foods.
Both New Zealand and Australia have a flourishing wine industry, which has fueled innovation in the natural products industry. The New Zealand Grape Seed Co. has studied the seeds from some of its local award- winning wines and found the antioxidant capacity of the extracts differed depending grape variety. The company finally identified its award-winning Sauvignon Blanc grapes as having the greatest antioxidant potency. It believes this potent antioxidant activity can only be found in its New Zeal-and grown Sauvignon Blanc grapes. While this claim might sound a little parochial, there could be some strong evidence supporting it. In the late 1990s, New Zealand had a burgeoning green tea industry. Unfortunately, the tea crop didn’t fare well in the very high UV light conditions that exist in New Zealand and so failed to attract top Japanese yen for each bushel. A startling finding occurred when a company examined this low grade Japanese tea for any antioxidant activity. The results were “off the scale.” It appears that the botanical response to UV stress elevates its anti-oxidant defenses by producing excess levels of oligo-meric procyanidin (OPC) poly-phenolic compounds. This is likely the same mechanism for the very high antioxidant activity in New Zealand Grape Seed Co’s product. With the in-creased interest in antioxidants and bioactive phenolics, the research or-ganizations around New Zealand represent collaborative opportunities.
Tarac Technologies of Australia also has a similar story to tell about its Vinlife products, which were recently offered in a “functional” ice cream—said to be the first ice cream to contain added antioxidants. The Australian government funded a $20 million national research program to develop healthy, tasty and convenient foods for its domestic market—in order to meet the needs for one-stop, guilt-free indulgence.
Keratec, an innovative New Zealand company, has identified a novel bioactive in the wool of sheep. This bioactive has similar functional properties to glucosamine but with the added advantage of being a potent antioxidant. Further, it is effective at a dosage that is a fraction of the quantity re-quired for an ingredient like gluco-samine. At the last census, New Zeal-and reported 40 million sheep (and just 4 million people). With a woolen fleece that needs to be clipped twice a year, it is unlikely that Keratec will ever run short on raw material.
Professor John Tagg from the University of Otago in New Zealand claims to have developed the answer to the ever-increasing concern regarding the overuse of antibiotics and the associated bacterial resistance to life-saving antibiotic drugs. Professor Tagg has been engaged in a life-long study, researching bacteria that might be able to help fight disease-causing bacteria. He has identified and characterized the “Ultimate Probiotic,” which is a naturally occurring bacterium within humans that is completely benign to its host. At the same time, this bacterium is also very lethal to invading pathogenic bacteria. These “Ultimate Probiotics” release their own antibiotics and are referred to as BLIS bacteria. So far they have been shown to inhibit the bacteria that cause tooth decay, as well as kill the bacteria that cause bad breath and sore throats. Most recently, these bacteria were used in topical skin and personal care applications. The French cosmetic industry has a history of using cultured skincare for anti-acne treatment. The BLIS bacteria have the potential to challenge our thinking of antibacterial face-scrubs.
In the past 10 years, patent filing around agriculture and food in New Zealand has more than doubled. During that same period, however, the commercialization of that intellectual property (IP) remains consistently low. The inference of this is that New Zeal-and and Australia remain an untapped hot bed for new and innovative technologies across all aspects of the natural products, natural personal care and functional foods markets. Managed correctly, these markets can offer U.S. companies a sustainable competitive advantage, backed with some solid scientific credibility. NW