Fishing for Opportunities in the Omega-3 Market

We Accelerate Growth

Chandrasekhar S, Research AnalystFood & Beverage Ingredients

December 11, 2008

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Focus Points

� Key Highlights

� Product Segmentation

� Global Omega-3 Market Snapshot

� Challenges

� Key Trends

� Major Industry Participants

� Last Word

� Related Frost & Sullivan Research

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Key Highlights

� The U.S. Omega-3 PUFA ingredients market was valued in excess of $500.0 million in 2007

witnessing a robust annual growth of around 20%. Experiencing healthy demand across

the established sectors, namely dietary supplements and functional foods

�Largely spurred by enormous scientific evidence and heightened media attention,

which has translated into rising consumer recognition and awareness regarding

functional benefits

�The market is also anticipated to witness growth in newly established health markets like

cognitive and immune health

� Highly competitive and relatively concentrated market

� Market participants include Ocean Nutrition Canada, EPAX, Croda, DSM, Cognis, Martek

Biosciences, Lonza, Pizzeys Milling, Bioriginal and Omega Nutrition

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Product Segmentation

Omega-3 Ingredients

Marine Oil Algal OilFlaxseed Oil

Product Types: Cod, 18:12 / 30%, Concentrates

Application: Feed, supplements,Functional foods, medical foods, pharma

Growth: +++

Competition: High

Application: Feed, supplements,Functional foods

Growth: +

Competition: Medium

Application: Infant formula, supplements,Functional foods, feed

Growth: ++

Competition: Dominated by Martek Biosciences

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Global Omega-3 Market Snapshot

About $500.0 MillionGrowth Rate – Strong

$287.0 MillionGrowth Rate – Robust

$419.0 MillionGrowth Rate – Moderate

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Challenges

U.S. – FDA’s Proposed RulemakingEU – Health claim legislation, Hygiene law

Rising Raw Material Cost

Technology notSupporting Application

Penetration

Growing Threat From Competing Ingredients Fluctuating Raw Material Quality

Very High

High

Medium

Low

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EconomicTrends Product

Trends

ApplicationTrends

ConsumerTrends

CompetitiveTrends

Key Trends

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Global Economic Upheaval

Economic Slow DownEconomic Slow Down

Consumer willingness tospend on premium products affected

Demand for cost-effective ingredients

Developed economies affected

Opportu

nitie

s

Increased Demand for value –Mass Market Health Products

Mass Market Ingredients Like 18:12 or flaxseed

Less affected markets like APAC, LATAM, BRIC

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Products and Sources

Intense internal Substitution

Growing Condition-specific market

Opportu

nitie

sWidening Fortification

Trends

EPA and DHA have robust scientific evidence

Products with approved scientific claim

- Total US Functional Foods market $27 billion (8-10%)- Ingredients with superior delivery technology

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Application Trends

Animal feed

Dietary Supplements

Functional Food

Medical Foods

Pharma

Higher Value

Opportunitie

s

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Consumer Trends

NutrigenomicsHealth

IngredientsCondition Specific

General Well-being

ONC, DSM, GC Reiber,LYSI, Merck, Bioriginal

EPAX, ONC, Croda,

Solutex, DSM, Martek,Cognis

ONC, DSM, GC Reiber,

LYSI, Cargill, Denomega, Martek,

Merck, Pizzeys

Opportunity

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Competitive Trends

Increased price competition

Pressure on Margins

Attractive growth rates and scope for penetration

Consolidation, manufacturers with better economies of scale at advantage

Vertical Integration (Increased need for integrated supply chain to have control over supplies and quality)

Growth prospects for new entrants, particularly in the vegetarian Omega-3 sector

Opportu

nitie

s

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Key Market Participants

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Last Word

Challenges

Opportunities

High level of consumer awareness

Mounting focus on preventive Healthcare

Widening Application Profile

Technological advances

Firm scientific platform

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On-Going Global Omega-3 & Omega-6 Research

Recent Studies

�Strategic Analysis of the European Omega-3 and Omega-6 PUFA Ingredients Market

� Omega-3 Nutrients: An Emerging Product Additive among U.S. General Consumers (Consumer Research Study)

� Flax-Based Omega-3 Alpha Linolenic Acid – Whitepaper

� Strategic Analysis of the Asia Pacific Omega-3 and Omega-6 PUFA Ingredients Market

Upcoming Studies

�Impact of the Economy on Key Functional Ingredients

� Strategic Analysis of the US Omega-3 and Omega-6 PUFA Ingredients Market

�European Heart Health Ingredients Market

� U.S. Heart Health Ingredients Market

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Next Steps

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