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Omega-3 market faces short-term challenges but has long-term potential

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Aldo Bernasconi of GOED provides an overview of the EPA and DHA omega-3 market in the U.S. and abroad.

The EPA (eicosapentaenoic acid) and DHA (docosahexaenoic acid) omega-3 industry is complex and diverse. The sources of its raw materials originate from almost every region of the world and its applications cover people’s entire lifespans, from before birth until well into old age.

Some regions of the world are home to a mature, stable market, while others continue to show strong growth potential. Not only people reap health benefits from consumer products containing omega-3s; our companion animals do as well. There is a thriving segment of pet foods and supplements containing EPA and DHA.

Finished products: Growth driven by emerging markets

EPA and DHA are used as the main ingredient or to provide fortification in a variety of applications, including dietary supplements, fortified foods and beverages, infant formula, pharmaceuticals, medical foods/clinical nutrition and pet foods. The amount of EPA and/or DHA in a particular finished product application varies greatly depending on the category. The proportion is much higher for applications like dietary supplements and pharmaceuticals, for which omega-3 oils are the main active ingredient. For other applications, like infant formula or fortified foods and beverages, many other ingredients surpass omega-3 oils in value, so this proportion is much smaller.

The global EPA/DHA consumer products market achieved annual sales of US$47 billion in 2021, growing globally at an estimated rate of 3.2% in 2021. The fastest growth was observed in the developing markets of Asia and Latin America. The rapid economic development of multiple countries in these regions has resulted in swift growth of the affluent middle class, and as incomes rise, so does the ability to purchase products containing EPA or DHA. Simultaneously, this economic development drives socio-economic changes that favor the use of these products. A larger participation of women in the workforce outside the home drives an increase in demand for infant formula, and the movement of people into larger cities and smaller homes creates a need for pet foods.

As an example, the Chinese market for finished products containing omega-3s, which accounts for 19% of the global market share, grew at 7.2% in 2021. While faster than in most other regions, this growth was somewhat slower in 2021 than in previous years due to Covid-related challenges. Additionally, a record decrease in the number of births contributed to a slowing in demand for infant formula, where China is the largest end-use market.

The U.S. and Europe (which, combined, account for 55% of the global value) are more mature, well-established markets, and their growth is typically slower. In 2021, the finished products market grew at 1% in the U.S. and 1.6% in Europe.

Ingredient market concentrated in three geographies

The total volume of omega-3 ingredients used globally in 2021 was 115,031 metric tons (mT), representing a 2.1% increase from the 112,627 mT used in 2020. The total market value of these ingredients was US$1.53 billion, up 5.5% from the value in 2020.

In terms of both volume and value, the largest markets are the U.S., Europe and China. Combined, these three markets represent 70.8% of the global volume and 71.1% of the value. The former two are well-established, mature markets, and in a normal year only small changes in volume and value are to be expected, while the market in China is less established and tends to be a market that evolves more rapidly.

In 2021, the U.S., which represents 34.9% of the global volume and 39.4% of the value, grew 4.5% in volume. This is not likely to be part of a long-term trend, however, but rather is due to a correction from the volume contraction observed the previous year. This contraction was largely due to Covid-related logistical problems. The U.S. market grew 10.1% in value, in part, because of those gains in volume, and partly because of gains in the valuable still-growing pharmaceutical sector.

The European market (26.1% of the volume and 19.6% of the value) contracted moderately in volume and grew in value, due to a long-term trend of replacing the refined oils used in dietary supplements with higher-value ingredients, including concentrates.

In normal years, the Chinese market experiences fast growth, driven by socioeconomic factors that include a rapid expansion of the affluent middle class, and an increased participation of women in the workforce. In 2021, this market represented 9.8% of the volume and 12.1% of the value and remained essentially flat in terms of both. This is not typical and is largely due to the economic uncertainty and logistic challenges caused by the Covid pandemic, as well as by the aforementioned large decline in birthrates.

Additionally, faster growth rates have been seen in Asia-Pacific and in the emerging economies of the Rest of Asia, Latin America and the Rest of World (ROW), while the omega-3 industry in Japan grew modestly and Australia remained flat.

Future of omega-3 industry remains strong

Looking forward, the supply shortages caused by the Covid-19 pandemic and its resulting barriers to normal trading, coupled with strong consumer demand, contributed to a worldwide increase in inflation rates. The price increases have likely been accelerated by the Russian invasion of Ukraine. The war created questions about the stability of the supply of oils needed for aquaculture feed and drove the prices of crude fish oil to historic highs, increasing the cost of production for several important omega-3 ingredient oils. Increases in the price of articles of first necessity may result in a reduction of discretionary spending, which may reduce the demand for omega-3 dietary supplements and other consumer products. Despite these short-term challenges, the overall potential of the omega-3 industry remains strong. Demand is up, new manufacturing capacity is being added and new omega-3 scientific papers are published daily, generating ongoing interest in EPA and DHA.

Aldo Bernasconi, Ph.D., is the vice president of data science for the Global Organization for EPA and DHA Omega-3s (GOED), an international member-driven organization with approximately 160 members from around the globe in all segments of the omega-3 supply chain. He helps GOED collect, analyze and interpret all the data relevant to the omega-3 markets, from raw materials to finished products. Bernasconi also manages GOED's Clinical Study Database, which consists of all the scientific literature published on human trials involving EPA and DHA.

Editor’s note: Data for this article comes from two market research reports published by GOED. The first, published biannually (the latest version was published in May 2022), covers the market at the point of sale of the many consumer products that include EPA and/or DHA. The second (published in September 2022) describes the volume and value of the ingredient oils used. Both cover the years 2020 and 2021 and provide detailed figures and describe the most relevant developments and trends. These reports rely on multiple sources of information (sales data, customs statistics, etc.) as well as business intelligence shared by GOED members and others to present the most comprehensive and accurate description available of the omega-3 market. Additional details on the reports can be found here.

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