4.1 Microalgae: The Solution for Sustainable Ingredients in Animal

FeedsMonday July 24, 2017

8:30 – 10:00 am

Introduction

Harmon Consulting, Inc.

Why Microalgae?• Microalgae are an incredibly diverse set of one celled plants

• Fast reproductive rates providing fast crop turn around time with harvests occurring from production systems frequently, a crop harvest at least every week

• As primary producers, microalgae synthesize valuable compounds such as essential nutrients that animals – including humans – can not synthesize internally. Nutrients that must be ingested• Fatty acids• Polysaccharides• Pigments• Proteins• Etc.

• Tiny, efficient, and natural manufacturing plants with optimization possible via genetic modification and synthetic biology techniques

Harmon Consulting, Inc.

Sustainability• Due to ever increasing world populations, our ecosystems are pushed to the limits in an

attempt to feed ourselves.

Harmon Consulting, Inc.

Sustainability• Microalgae offer one solution for production of essential nutrients and high quality

proteins, as well as many other compounds.

• Avoid competition for agricultural land and water

• Carbon dioxide mitigation

• Extremely productive per acre compared to traditional crops

Harmon Consulting, Inc.

Chlorella, a FW microalgae was produced at Cambridge pilot plant. From the data generated it was estimated that algae can produce 17,000 – 40,000 pounds of protein per acre, while soybeans only produce 250 - 800 pounds of protein per acre (50x more productive)-The Technological Fix: How People Use Technology to Create and Solve Problemsedited by Lisa Rosner

Production Platforms• Outdoor vs Indoor

• Open (ponds) vs Closed (Photobioreactors)

• Phototrophic vs Heterotrophic

Harmon Consulting, Inc.

My Experience Selling Microalgae for Animal Feeds

Harmon Consulting, Inc.

My experience: Cyanotech Corporation

Harmon Consulting, Inc.

• V. Harmon hired as Technical Sales and Animal Feed Sales Manager

• Summer of 2004 from the Cultivation Department

• Responsibilities included:

• grow sales of NatuRose™ product

• maintain sales of animal grade (low grade) spirulina product

• Provide technical sales support to human grade product customers and animal feed grade product customers

Initial Strategy

• Identify markets that fit the size of available production quantities and quality specificatioins

• Regulatory approval had to be in place or customer had to have the resources to do the regulatory work

• 120 MT annual production

• 1.5% astaxanthin (10% overage)

• One year shelf life

• Regulatory approval as a color additive for salmonids

Markets• Existing markets:

• Sled dogs – 0.5 ton annually

• Chickens – 1 ton annually

• Ornamental fish – 2 tons annually

• Prawns - 1 ton annually

• Potential new markets:

• Pets: big markets, very hard to get in the door but had interest from Nutro, Hills and Purina• Potential for customer to handle regulatory approval

• Horses, particularly race horse market interesting• Potnetial for customer to handle regulatory approval

• Salmon: market is huge and price sensitive – Chile, Norway, Canada, Scotland and Ireland• regulatory approval in place

• We positioned for niche market, organic salmon farmers, as it fit size of production and interest was high

Strategy and the End of our Story

• Organic Salmon markets

• Sales trips and meetings with interest from feed manufacturers in Ireland and Scotland

• After significant effort and supplying product for trials in manufacturing and feeding fish, an exclusive contract for all of production to one supplier offered (120 MT annually)

• Value Proposition: NatuRose Natural Astaxanthin from algae, one feed manufacturer, one group of organic salmon farmers, and a grocery chain with exclusive rights to the organic, naturally pigmented salmon

• Demand for product in human markets began to increase with a significantly higher price point, so the exclusive contract was not negotiated

• In 2008 Cyanotech exited Animal Feed markets

Harmon Consulting, Inc.

Microalgae Industry Challenges

Harmon Consulting, Inc.

Regulatory Challenges• Feed ingredients vs feed additives

• Careful attention to terminology in marketing to determine if product is an additive or an ingredient

• Feed additives are added for nutritional value or pigmentation

• Data is required to show what the value of the additive is, expensive

• Petitions for feed additives can take a long time unless equivalency can be claimed

• Equivalency with existing feed additive petitions can be a route to approval

• Pet feeds are highly regulated, and the regulatory hurdles are not insignificant

• Require safety studies that are very expensive $200,000

• Can get GRAS approval for animals in US, but your GRAS application needs to state what you want to sell for specifically – GRAS status for humans does not apply to pets/animals

Industry Challenges

• Markets require steady supply

• Capital necessary to achieve economies of scale

• Product must be consistent so that blend formulas are easy and straightforward

• Extrusion stability matters – think about a preservative

• Shelf life and stability studies important

• Safety data of product should be available, this is expensive

• Most big markets are out of reach for algae producers, due to volumes needed and commodity market pricing

• However this is changing!

Our panelists today are ready to supply animal feed markets!

They are overcoming Industry ChallengesThank you very much for your time and attention!

Harmon Consulting, Inc.