Speirs prepares to ramp up fish oil output

NZ fish-oil encapsulation technology set to ramp up from Speirs Group’s Marton base

By Peter Kerr

Feb. 9 (BusinessWire) – A calculated risk by Manawatu food company Speirs Group to scale up a laboratory process to a factory-production level looks set to pay off in a global distribution partnership for its patent-protected Omega-3 product.

In commercialising a new encapsulated product, Speirs Foods has created a new majority owned subsidiary, Speirs Nutritionals, from which it expects its 60% shareholding to provide an increasingly large future revenue stream.

“The market is colossal,” said Speirs Group chairman Nelson Speirs. “Neilsen Worldwide recently reported that the market for Omega-3 increased 49% in 2009 alone.”

The company’s repositioning to separate food and nutritionals divisions is a long way from 15 months ago when Speirs Group sold its financing arm to Allied Finance. The Speirs Foods division has between 60%- and 70% of the fresh cut salad market in New Zealand, which would’ve been extremely difficult to increase said Speirs.

The development of a relationship with Massey University’s Riddet Institute, the only one of New Zealand’s ‘centres of research excellence’ that specialises in food and human nutrition, led to the development of a stable Omega-3 fish-oil product whose smell and taste is masked within other food products.

For more than a year, Speirs Foods internally financed the upscaling of a laboratory proof-of-concept into a factory production capability and capacity beside its Marton fresh-food preparation facility.

“At the same time we were looking to form a partnership with a worldwide distribution player,” said Speirs. “Croda is one of the biggest global suppliers of Omega-3, and we saw them several times at food shows around the world. They examined five other suppliers, and us, and recognised we were far superior as our intellectual property was way ahead of the pack.”

Since signing an agreement with Croda last March, both Speirs and the UK-based supplier of natural-based specialty chemicals have had a number of milestones to meet. Full scale production of the encapsulated Omega-3 product is now underway as the first of the product heads to Europe, with Croda supplying the purified raw fish oil from Peru and Japan.

“Now that we are confident there is every chance of success, it is time to refinance our operation and replace the cash we’re used,” Speirs said. “We’ve met all Croda’s technical requirements, and we hope and are confident they will succeed. We could not distribute this product on our own.”

Croda will package and supply the Omega-3 to its own clients’ requirements. Speirs’ stock last traded at 25 cents on Feb. 1.

Speirs said it will be a year or two before the encapsulated Omega-3 shows strong profitability. The current general manager of Speirs Foods is to shift to Speirs Nutritionals Partners LP, and a new head found for the foods division – strongly indicating where major growth is expected.

He said functional foods are a huge potential market and that the development of a strong relationship with the Riddet Institute, recognised worldwide for its expertise, has been an enormous part of Speirs’ development of the globally patented Omega-3 product. Any new Riddet-developed Omega-3 products over the next few years will also be available to Speirs.

(BusinessWire)