DSM’s acquisition of Ocean Nutrition Canada (ONC) for €420 million serves as perfect timing for the company in its efforts to penetrate emerging markets which offer the strongest growth.
ONC is one of the world’s largest suppliers of omega-3 EPA/DHA solutions to food manufacturing and dietary supplement markets. It produces a flavourless, odourless and high-quality EPA and DHA mix from fish oil, branded MEG-3, which is currently used by brand owners including Unilever, Tropicana and Danone.
While North America dominates the omega-3-6-9 supplements category with value sales of US$400 million, Euromonitor International statistics show that Asia Pacific and Australasia offer the strongest growth prospects for long-chain omega-3 fatty acids as ingredients in food and beverage products.
Growth of Long Chain Omega-3 Fatty Acids in Packaged Food by Country
Source: Euromonitor International
Despite a lower growth rate, Western Europe continues to be the largest market for omega-3 fatty acid ingredients in volume terms, with the main packaged food categories utilising omega-3 fatty acids being packaged/industrial bread, drinking milk products, spreadable oils and fats and infant formula. The European Food Safety Authority has recently published several approved health claims that manufacturers can use for products containing significant amounts of docosahexaenoic acid (DHA), as well as setting a recommended daily intake of 250mg/day for EPA/DHA. This takeover is perfect timing for DSM and ONC to benefit from increased consumer awareness in Europe, whilst simultaneously capitalising on emerging markets in Asia Pacific and Latin America.
The perspective from Ocean Nutrition Canada
Martin Jamieson, CEO of Ocean Nutrition Canada, has told Euromonitor International that ONC will benefit from DSM’s infrastructure, size and relationships, which will help it penetrate food manufacturing markets globally. Ingredient technology within the omega-3 market has progressed in recent years and within ONC is the largest privately-held marine research group in North America. However, being a small to medium-sized player with around 400 employees, the company’s sales capacity is limited. That said, ONC’s annual growth has been steady for the last five years at around 20%, and it is expected to net around €145 million in 2012.
Strategic move from DSM
For DSM, this is the latest move from a chemical to a life sciences company, and ONC will sit well within its expanding nutritional lipids growth platform. The deal complements its previous takeover of Martek Biosciences, a producer of a vegetarian-friendly source of DHA from algae, which made DSM the largest single supplier of omega-3 and omega-6 fatty acids globally. DSM will be able to capitalise on ONC’s strength in the North American supplements market whilst boosting sales in markets that ONC has yet to reach on its own.
This is also a forward thinking takeover by DSM. The price of algal-sourced omega-3 is declining and is expected to compete with marine-sourced omega-3 in the next few years, meaning by acquiring ONC it has just bought out one of its potential competitors.
With ONC’s technical expertise and DSM’s strong global infrastructure, this unison has the potential to boost growth of long-chain omega-3 fatty acids in packaged food. Their biggest challenge may be convincing manufacturers that there is consumer demand for fish-derived oil in everyday food products.