the omega-3 market and how high concentrates play a role

The Omega-3 Market and How High Concentrates Play a RoleAugust 24, 2016

GOED has conducted consumer surveys in 21 omega-3 markets

These countries account for 60% of the world population

Due to natural limitations of Internet surveys in many Asian countries, these surveys may not be nationally representative.

They are, however, representative of the urban middle class - the most likely consumers of omega-3s.

Remember, what consumers say is different from what they do, but is still a good metric of their aspirations.

Internet Surveys of Consumer in Asia (2016)

2016: 525 M people

2030: 3.24 B

Source: OECD

The APAC market for EPA and DHA products is reliant on infant formula, but there are some key opportunities

Source: GOED Analysis

US$ 10.99Billion

Infant Formula

Pet Foods

2014 Consumer Spending on Omega-3 Products

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%0%

Global

Asia Pacific

Functional Food Supplements

Pharmaceutical Clinical Nutrition

US$ 31.40Billion

69%

SE Asia has overcome the awareness hurdle.China and Japan are two of the largest omega-3 markets, despite lower awareness of these nutrients. The potential in the rest of Asia does not face an awareness barrier.

Source: GOED Proprietary Consumer Research

Vietnam

Indonesia

Malaysia

Australia

China

Japan

97%

96%

95%

80%

50% 75% 100%

South Korea

95%

95%

Source: GOED Proprietary Consumer Surveys 2016

Stated Usage of Various Types of Omega-3 Products

Consumers claim to use a high proportion of omega-3s, which may or may not be accurate in some countries

What is going on in Indonesia? These usage rates seem very high!

●When consumers identify themselves as user, they may not be taking omega-3 products every day

●Consumers claiming to eat omega-3 fortified foods and supplements may mean they are consuming ALA products, not EPA and DHA

Frequency of Usage of Omega-3 Functional Foods


Indonesia has the highest proportion of consumers using omega-3 foods the least frequently

Daily Usage of Omega-3 Supplements as a Proportion of All Users


In Japan, the users of omega-3 supplements are most likely to be compliant, while in China they are least likely

Age Distribution of Omega-3 Supplement Users


Except for Japan, most APAC omega-3 users are younger to middle-aged consumers in supplements...

China 25 45

Indonesia 26 42

Japan 35 58

Malaysia 26 46

Vietnam 23 36Mid

dle

50%

of U

sers

Age Distribution of Omega-3 Functional Food Users


China 27 40

Indonesia 25 39

Japan 35 59

Malaysia 28 45

Vietnam 23 35Mid

dle

50%

of U

sers

...and functional foods

Reasons Supplement Users Started Taking Omega-3s


Supplement users often have many reasons for starting an omega-3, but overall wellness tends to be a main driver

● Indonesia and Japan are the two markets where Wellness and Brain Health are top reasons

● Japan and Malaysia are the two countries with low emphasis on Heart Health, but are also the two lowest in Heart Disease rates

● In Asia-Pacific countries, Brain Health tends to outrank Heart Health, but in Western countries the opposite is true

% of Female Omega-3 Users That Started Taking Omega-3s Due to Pregnancy


There are some key times to start recruiting supplement users...during pregnancy for example

% of Supplement Users That Started Taking Omega-3s Due to Pregnancy


And actually what you see is that gatekeeper will influence the whole family’s decisions

Sources of Health Information Among Omega-3 Users


● Indonesian, Malaysian and Vietnamese omega-3 users rely primarily on a doctor or pharmacist’s advice for health information

● Japanese and Chinese consumers tend to do their own internet research

There are two distinct patterns among countries in how omega-3 users seek out information

Influencers of Brand and Product Choice Among Omega-3 Users


There are interesting clusters of influence that drive the specific products omega-3 users choose

% o

f Use

rs

Population Who Have Never Used an Omega-3 Supplement


One key target audience are the people who have never used omega-3s, but China is the largest opportunity

Non-Usage Rate Non-Usage Population


Reasons for Never Using an Omega-3

Education is still the single most valuable tool industry has in convincing consumers to take omega-3 products

Product Characteristics Education Economic

Population Who Have Used an Omega-3 Supplement But Stopped


Lapsed Users are another key population because they stopped using omega-3s and could come back

Lapsed Usage Rate Lapsed Usage Population

Lapsed Users Agreement That Omega-3s Are Beneficial


Lapsed Users generally believe omega-3s are important, so their reasons for stopping lie elsewhere

It is important to consider how omega-3s will be sold in the future.The biggest growth opportunities are still to come in Africa and Asia

Economic Development versus EPA+DHA Intakes in Asia and Africa, 2013

Much of Africa and Asia are developing quickly and are at levels where omega-3s can be attainable to the masses

WHO GOED

Source: World Bank, NUTRICoDE

There are still tremendous growth opportunities in Asia for high concentrates...the market is only now being established

Implications for Brand Marketers of Concentrates

As many APAC markets move from infancy, novel products like high concentrates will grow rapidly just by adding new competition to the market.

High concentrates are made in very sophisticated factories and should avoid some of the other quality issues that have plagued other markets like infant formula or cod liver oil

It is important to consider how omega-3s will be sold in the future.Refiners will add more value for their customers by addressing consumer issues

Innovation in communication is needed to target lapsed users and to stand out among other priorities


Reasons for Not Using an Omega-3 Amongst Lapsed Users

Ingredient manufacturers are being pressured to solve convenience and education issues, even though they affect the whole value chain

Convenience Education

● Building encapsulation into the refining value chain

● Equity partnerships with encapsulators

● Development of new forms like emulsions and tablets

● Moving down the value chain

● Industry-led marketing campaigns

● More health claim applications

● Building bridges to mainstream doctors

● Diagnostics and the quantified-self

Novel Solutions to Address:

Manufacturers of high concentrates have done extensive work on understanding how to market these products


Brand marketers should rely on their suppliers for consumer insights that will affect your marketing strategies

BASF has completed an extensive survey of how omega-3 products are marketed and have identified key opportunities for how to market high concentrates

It is important to consider how omega-3s will be sold in the future.The internet is going to become a bigger force in consumer purchases of omega-3s

21%Annual growth of Internet sales for

nutrition products in the US

Total E-commerce Sales in China

Compared to the US

1.7x

Source: Nutrition Business Journal, KPMG, Google

760Omega-3 Products

Advertising in Google Product Search

3xE-Commerce Sales in

China on 11/11 Compared to Cyber Monday in the US

Quality

Price

Convenience

● Buying products from quality rating sites

● Extreme traceability back to the fishery

● Competing against store brands for omega-3s

● Dynamically pricing products based on area

● Delivery to remote areas

● Quantified self movement linking to omega-3 index

● Auto-delivery & engagement

There are plenty of examples of how companies are tinkering with this today in omega-3s to compete against traditional retailers

Source: GOED Proprietary Consumer Survey, Dec 2015 / Jan 2016

The internet has also become the most trusted source of health information in Japan and China

Primary Sources of Health Information Among Omega-3 Users

The internet will provide new opportunities for high concentrates


The flexibility of the internet will allow for new business models like an omega-3 index test plus a tailored high concentrate supplement

It is important to consider how omega-3s will be sold in the future.There will be a continued trend towards convenience

US FDMx Market Share of Convenience Forms

Source: AC Nielsen XAOC data

13%

27%Small pillsEmulsionsLiquidsGummies

In the US, convenience forms are growing rapidly, doubling in size over a period of two-and-a-half years

The rise of more convenient forms of omega-3 products are ideal for high concentrates


High concentrates open up two new markets for omega-3 consumers: the super-premium high dose supplement market and the mini-softgel market

High concentrates can also be desirable for liquid, emulsion and powder forms of omega-3s where the EPA and DHA are diluted by other ingredients

BrainHealth

Source: Norwegian Scientific Committee for Food Safety

Proteins

Phospholipids

Fatty Acids

EPA and DHA have four known biological functions.They are incorporated as structural components of cell membranes, increasing fluidity and allowing for proper functioning of proteins

EPA and DHA Fatty Acids


Proteins

Phospholipids

Fatty Acids

EPA and DHA have four known biological functions.They are oxidized to generate bioactive metabolites called eicosanoids and docosanoids that help regulate inflammation in the body


Eicosanoids and Docosanoids

Mitochondria


Proteins

Phospholipids

Fatty Acids

EPA and DHA have four known biological functions.Modulate enzyme activity, including inhibiting protein kinases and preventing increases in calcium and potassium in cells



Mitochondria

Enzymes


Proteins

Phospholipids

Fatty Acids

EPA and DHA have four known biological functions.Regulate expression of genes involved in inflammation, cell proliferation, cell death, and oxidative stress



Mitochondria

DNA

Enzymes

Alzheimer’s and dementia is on the rise in Asia

Alzheimer and Dementia Death in Asia... ...and Disability Adjusted Life Years Lost

Source: Institute for Health Metrics Evaluation

Mill

ions o

f D

AL

Ys

De

ath

s

Self-Identified Health Priorities of APAC Consumers


Consumers care about maintaining their cognitive function

The evidence to support brain health as we age is mixed, but this may be due to study design

Anecdotal

Ideas, Expert Opinions, Editorials

Case Studies

Cross-sectional surveys

Case Control Studies

Cohort Studies

RCTs

Systematic Reviews & Meta Analyses of RCTs

Hierarchy of Evidence in Evidence-Based Medicine No systematic review or meta-analysis has

ever found that EPA/DHA can treat Alzheimer’s.

A recent comprehensive meta-analysis found that >1g of DHA improved episodic, semantic, and working memory in adults, regardless of cognitive status.

A few meta-analyses have seen benefits in brain function and memory in people with mild cognitive impairment without dementia. More evidence is needed.

1. Alzheimer’s Disease

2. Memory

3. Mild Cognitive Impairment

Source: NIH, GOED, Yurko-Mauro et al 2015, Mazereeuw et al 2012

500

1000

1500

Studies Showing Benefits Studies Showing No Benefits

DHA(mg/day)

Omega-3 Cognitive Function Studies and Their Outcomes Sorted by DHA DosageDosage is of critical importance in brain health studies!

Freund-Levy et al 2006

Sinn et al 2012

Lee et al 2013

de Waal et al 2014, Pardini et al 2015, Scheltens et al 2014Stonehouse et al 2013

Strike et al 2015

Yurko-Mauro et al 2010Külzow et al 2016, Witte et al 2014

Boespflug et al 2016, Fontani et al 2005, Johnson et al 2008

Chiu et al, 2008, Rondanelli et al 2012Tokuda et al 2015

Nilsson et al 2012

Hashimoto et al 2016

Rogers et al 2008, van de Rest et al 2008

Dangour et al 2010, Konagai et al 2013Karr et al 2012Jackson et al 2012

Benton et al 2012, Bauer et al 2011, Bauer et al 2014Cukierman-Yaffe et al 2014, Chew et al 2015

Jaremka et al 2014, Stough et al 2012Jackson et al 2014, Andreeva et al 2011

van de Rest et al 2008Geleijnse et al 2012, Sinn et al 2012Jaremka et al 2014, Kotani et al 2006

Quinn et al 2010, Jackson et al 2016, Köbe et al 2015

● Indonesia and other Asia-Pacific countries present an attractive opportunity for the omega-3 market

● Consumers in the Asia Pacific region spend about $2.7 billion on EPA and DHA fortified foods and supplements, or less than $1 per capita annually

● The best estimates of EPA and DHA intake in Indonesia indicate about half of the population is not consuming enough

● The Indonesian consumer is generally aware of omega-3s and believes they are effective, but needs education about EPA and DHA

● The typical Indonesian omega-3 consumer is in their mid-30s and brings their family along with them on their journey, but has low compliance

Summary

Questions?

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the omega-3 market and how high concentrates play a role

Health & Medicine