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Meeting up with SeaDragon CEO Ross Keeley in Auckland recently, it quickly became obvious that I knew little, if nothing, about fish oils. There I was thinking they were all much the same, including their association with health giving Omega-3. 
 
Keeley soon puts me straight, explaining that some 83 percent of the world’s fish oils are sourced from vast anchovy schools off the coast of Peru. “Not many consumers are aware of this. I’d suggest that more than 90 percent of fish oils you see on New Zealand shelves are in fact anchovy oils,” he says.
SeaDragon is the only supplier of 100 percent New Zealand fish oil. Nelson-based and since October 2012 NZX-listed, SeaDragon began life almost 20 years ago as a small processor of shark liver oil. Keeley led the purchase of the business ten years ago to pursue the opportunity in the burgeoning Omega-3 fish oil market.
While shark liver oil is still the company’s core business, Keeley paints a remarkable picture for the future of Omega-3 fish oil. The Asia Pacific market alone is growing at around 7.6 percent per annum and until recently the overall world market was growing at a similar rate. SeaDragon’s market proposition is unique, and this is the message Keeley is hot on. It’s around sustainability (thanks to New Zealand’s world leading quota management system), traceability, transparency and purity, he explains. “There are very few man-made pollutants in New Zealand waters, which means only minimal processing of those fish oils is necessary, compared to say North Atlantic fish oils.”
 
He says SeaDragon’s Omega-3 fish oil production is focused on New Zealand’s sustainable hoki and salmon, and Fijian tuna fisheries – the latter species known for its high levels of DHA (an Omega-3 fatty acid).
SeaDragon has recently been in a strong growth phase. It raised around $8.5 million to fund its working capital needs, which includes purchasing raw material and funding the construction of a $6 million fish oil refinery in Nelson, due to open next year. “The plant will allow us to produce around 5,000 tons per annum – compared to our current capacity of 500 to 1,000 tons,” says Keeley.
 
He believes securing raw materials, and therefore export sales going forward (with 95 percent of production destined for export markets), is the primary reason why the company was judged the DHL Global Forwarding Exporter of the Year for the 2013 Natural Products New Zealand Awards. The judges were impressed by SeaDragon’s unique product proposition and ability to commercialise resources that would otherwise have been discarded. They were also impressed with SeaDragon’s growth. In one market, sales of squalene (natural moisturiser produced from shark liver for cosmetics) and related products grew 213 percent in the year to 31 December 2013, while group total revenue grew by 40 percent over the same period.
“Winning the award has certainly raised our profile both locally and internationally,” Keeley says. “It’s one thing to blow your trumpet, but it’s another thing to have someone else blow it for you. That peer endorsement is so important.”
 
Export strategy
Until now, SeaDragon, which exports to all continents except South America, has not been able to meet international market demand for its fish oils. Ramping up export quantities requires a carefully planned marketing strategy, and Keeley is grateful for the assistance they’ve received through NZTE’s International Growth Fund (IGF) and Better by Design advisory programme. A key part of the strategy, he says, is the testing of product locally. “Many export customers prefer that you and your product are proven in the domestic market first.”
 
Keeley says local customers are those who want to break out of the “price trap” and take advantage of SeaDragon’s 100 percent New Zealand fish oil. He also says the intention with the new refinery is to go beyond simple fish oil, which is a worldwide commodity, into high concentrates with Omega-3 content up to 90 percent. “Which is not the dietary supplement market, but moving into pharmaceutical applications. 
 
“Our challenge is not just to grow the total Omega-3 market, with Australasia and North Asia our primary target, but move consumers in this part of the world from a Peruvian sourced product that is processed and capsulated in other countries to one that is completely produced in New Zealand.”
Keeley also reminds me that, with the New Zealand-China FTA, Chinese customers do not pay the 12 percent duty on New Zealand-sourced fish oils. While the SeaDragon product will still command premium pricing, that’s a big market advantage, he says.
He also believes that their biggest strategic competitive advantage in China is the ability to get product across the border. Considering how SeaDragon stays on top of the regulatory requirements, “it’s a key component of our intellectual property”.
 
Looking ahead, arguably the biggest opportunity in the Omega-3 market for SeaDragon is through infant formula.
Today, infant formula fortified with DHA-rich Omega-3 makes up the vast majority of the multibillion-dollar infant formula market. “We’re keen to foster relationships with New Zealand’s infant formula manufacturers,” says Keeley. “Together we’ll be able to provide a 
100 percent New Zealand infant formula product – because all that DHA product is currently imported.
“We’re still a few years away from realising this – it’s our three to five year strategy, but that’s where we see ourselves. Dietary supplements are important to us now, but in the future we’ll be moving more into the functional and fortified foods market.” 
 
Keeley, not surprisingly a walking encyclopaedia on Omega-3 and its benefits to human health, sees Omega-3 fortified food becoming increasingly popular in years to come.
For now, SeaDragon has much on its plate: the new refinery; bringing pure, sustainable New Zealand fish oil to market; developing new products “beyond Omega-3” with Plant & Food Research; and rolling out its international marketing strategy. 
Says Keeley, “our message is simple: ‘watch this space’!”
 
 
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