The market for omega-3 fatty acids has grown tremendously over the years, although recently there have been challenges to maintaining this growth. Because of the global nature of the business, it’s important to understand what is going on with omega-3 raw materials around the world. As part of its activities, GOED researches and publishes an ingredient market report, which details the raw material segment of the EPA and DHA omega-3 market on a global basis, including data on value (in U.S. dollars) and volume (in metric tons).
Volume & Value
The volume of EPA and DHA oils consumed in 2014 was 84,785 metric tons (mT), slightly down from the 86,208 mT consumed in 2013. There was a corresponding drop in the value of these ingredients, and the decline of the market—both in terms of volume and value—is due to a few factors, including:
- Reduced availability and capture of anchoveta (Peruvian anchovy). During 2014 the Peruvian government suspended one of two annual fishing seasons due to concerns about the number and size of the available anchovy. Biomass surveys are a crucial part of operating a sustainable fishery and this was key to keeping a healthy fishery. However, a large majority of omega-3 oils worldwide are derived from crude oils extracted from anchoveta, and disruptions to their supply profoundly affected the market.
- The decline in the omega-3 dietary supplement market in the U.S. This is part of an ongoing downward trend driven by a variety of factors, one of which is a negative media environment. GOED and a group of interested industry partners just completed a consumer education campaign to try to change the tone of the media conversation around omega-3s and reverse this trend. While the campaign did increase year-over-year unit sales on a monthly basis more than 5%, it was not enough to bring the market back to growth.
- A slight decline in the production of cod liver and menhaden oils. This drop is due to natural year-to-year variations in landings and oil yields, and does not appear to be indicative of a trend in demand.
- A small decline in the demand for krill oils, which had been experiencing double-digit growth over the past several years. This was largely driven by a fast decline in the Australian market.
- In the larger markets, a movement away from refined anchovy oils. These are the typical 18:12 or 30% products that are considered the entry level omega-3 option. The trend now continues to focus on concentrates, with even higher concentrate products growing in popularity as consumers understand the need for higher amounts of EPA and DHA and the benefits of getting this in one pill.
Refined anchovy oils were the largest category of oil consumed, accounting for 49.4% of the global volume. The total volume of these oils stayed the same between 2013 and 2014—the decline in the U.S. was offset by increased demand in other regions, particularly in Asia. In spite of an increase in the price of crude anchovy oils, excess refining capacity created pressure in the price of refined oils.
In term of value, the largest category was concentrates, which, because of its higher prices—particularly for pharmaceuticals—accounted for 48% of the total value and 17.3% of the global volume. In the U.S., Europe and China (the three largest markets), there is an ongoing shift in the preferences of dietary supplement users away from refined anchovy oils, and toward concentrates of higher concentrations. As a result, the global demand for concentrates increased by 3.4%, with most of the gains in the higher concentrates. On the other hand, increased competition in the concentrates market has resulted in a sharp decline in prices and as a result, the total value of concentrates declined 6.6%.
Dietary supplements, as usual, consumed the most volume (77.7% of the global volume), and this category saw a small decline of 1.5% in its demand. This was largely driven by the shift to higher concentrates and by a temporary decline in the production volume of cod liver oils. Because refined anchovy oils and concentrates account for most of the volume in this category, and both saw price pressures, the overall value of omega-3 oils for supplements also declined.
Pharmaceuticals require a small volume (1,885 mT in 2014) of concentrates, but because of the higher prices these ingredients command, they account for almost two thirds of their total value. These ingredients saw a volume decline of 1.6%. This was largely due to the end of incentives that made omega-3 drugs in the U.S. particularly attractive.
The omega-3 market remains a very dynamic one, full of exciting opportunities. But as evidenced by last year’s market contraction, there are substantial challenges that need to be overcome.