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March 22, 2012
  
Executive Talk: Delacon - 'Total Phytogenic Solutions' to maximise returns in changing times
 
An eFeedLink Exclusive
  
 
Delacon recently hit a new milestone in the feed additive industry after its flagship product FRESTA® F became the first phytogenic product to be approved by the EU as a zootechnical feed additive.
 
In the following interview, Delacon CEO Markus Dedl discusses the significance of this EU recognition to the company and the phytogenic feed additive group in particular; as well as global challenges facing the animal nutrition sector today.
 
 
The EU recently announced FRESTA® F as an approved zootechnical feed additive. What is a zootechnical feed additive? Why is the announcement a milestone for phytogenics in the feed additive industry?
 
There are several categories of feed additives in the EU, every category is restricted to certain use. Conventionally, all phytogenic products are registered or at least allowed for use under the category of sensory additive as flavour enhancers or sweeteners, which means you can claim the products improve the smell and the taste of the feed and nothing else.
 
By contrast, products under the category of zootechnical feed additive have the capability of affecting livestock performance in quantitative measures e.g. weight gain and feed conversion. Having FRESTA® F officially registered as a zootechnical additive allows us to claim that the product indeed improves livestock performance.
 
More importantly, FRESTA® F is the first and only phytogenic product in the EU that has passed the registration. This to us is a milestone because for the first time, phytogenics are recognised as something more than just a mixture of plants and herbs, but on a par with other traditional performance enhancers.
 
In the past, phytogenics have always been seen as some kind of 'wonder products' without strong scientific backing. There are new phytogenic products coming on the market every day with various health and performance claims that often confuse users. Of course, some of these products really work well, but many of them simply do not fulfill their claims. With the approval of FRESTA® F, phytogenics have been recognised as a performance enhancing product and thrust into the limelight in the feed additive industry for the first time.
 
Moreover, zootechnical additive products must meet an efficacy evaluation by an independent scientific committee along with exacting safety and quality evaluations by the European Food Safety Authority, the European Union Reference Laboratory, the EU Commission and 27-EU member states.
 
The certification is very hard to attain even for traditional chemical products as significant scientific data is required to prove those claims, what's more for phytogenic products which are essentially made up of natural substances.
 
This process is a high cost risk for most companies, since the cost of evaluation and registration is very high and success is not guaranteed. It took us almost two years and a significant financial investment to obtain approval. But we are highly confident in our company, people and products, so we never doubted that we would succeed. We are very proud that we have done it.
 
 
How will this recognition influence Delacon's business development, brand strategy and market positioning in the Europe, the US and Asia?
 
The approval of FRESTA® F as a zootechnical feed additive privileges us as the first company to sell such a phytogenic product in Europe. We are getting a lot of attention in Europe now, especially from bigger companies who prefer professional products with proven claims.
 
Globally, we receive the same overwhelming attention even in countries where the EU legislation is not valid to them. The US, for instance, does not have very strict feed additives regulations apart from basic safety requirement. But many US companies I've spoken to are really excited about seeing FRESTA® F being recognised as zootechnical, as this is synonymous with quality assurance by a high-standard authority such as the EU.
 
The recognition also puts Delacon ahead of competition especially in the Asian market. It will certainly help enhance the status of Delacon's phytogenic feed additives (PFAs) through a very clear distinction between companies which just want to have PFAs, from a company like Delacon which is serious and only focused on PFAs.
 
 
Can you tell us more about FRESTA® F?
 
FRESTA® F is a standardised combination of plant-derived substances developed to improve the performance of weaned piglets. It has been proven safe and effective by the highly-respected regulatory body in the EU.
 
 
Do you intend to submit other flagship products to the EU commission after your initial success with FRESTA® F?
 
BIOSTRONG® 510 is under the process of evaluation and we hope to get the positive and final approval within the year. Application of other Delacon products is being considered for submission.
 
 
Do you foresee the European Food Safety Authority (EFSA) approving more phytogenic feed additive products in the future?
 
The race is open on the submission of phytogenic products for zootechnical classification. Most of the phytogenic products available in the market will not be evaluated to fulfill the requirements for this classification. To get the first and second place in the race will be what differentiates us from the rest.
 
 
Compare market acceptance of phytogenics in Europe and Asia.
 
Market acceptance is higher in Europe than in Asia. Europe has a long history as all phytogenic companies originate from here, so the market saturation is quite high. European consumers have the emphasis on healthy products and ingredients, they are more inclined to use natural products especially phytogenics mainly because of the health benefits.
 
On other hand, we observe a growing interest in Asia. For some countries, phytogenics are still new because of the history of using other products and the lack of exposure. This entails consumer education, technical discussion and trials but once people see the results, they get convinced very fast, even though there might be some initial resistance simply because they do not know the product.
 
In addition, more companies in Asia are looking for alternatives for traditional feed additives such as antibiotics. They see phytogenics as a very valid replacement. China, for example, has always been inclined to use herbs or traditional Chinese medicine (TCM) in feed and therefore, they traditionally have higher trust in phytogenic products.
 
 
China is the world's largest pig producer who frequently faces swine disease outbreak and food safety scandals. As a proponent of phytogenic solutions for livestock, how do Delacon's products help overcome the problems mentioned?
 
In China, incidence of food scandals creates greater public awareness on the need to improve food safety. Our products offer very effective and safe replacement for other ingredients Chinese producers do not want in their feed.
 
Then again, we will never sell a product only because it is safe. Safety has to be part of the product package similar to quality management. Our products are primarily sold on the basis of contributing to profits of our customers in terms of cost saving, and at the same time, contributing to food security and safe production process.
 
 
Phytogenic products are relatively more expensive than other types of feed additives. How well do you think products like FRESTA® F will be received in cost-sensitive livestock production countries such as China and India?
      
If we look at the total return of investment (ROI), we actually help them because our products have a complimentary mode of action with many other feed additives. Economical calculations from scientific and field trials show average ROI for FRESTA® F to be 1:5 in sows and 1:11 in piglets.
 
In this time of high raw material prices, the best a producer can do is to invest in a relatively, seemingly more expensive feed additive which can help him save more costs in the long run.
 
Of course, we will inevitably face competition from cheaper local products. Some of these local products may seem very cheap, but when purchasers factor in questionable and unproven product performance, HACCP conformity and ingredients, the risk is high and the outcomes uncertain.
 
Large companies such as CP and Cargill usually do not like this kind of risk, they prefer proven solutions used on a worldwide basis. They are more likely to appreciate European products simply because they are reliable, safe and standardised, especially those approved by the EU authorities.
 
FRESTA® has already been used by large Chinese producers for years and with it now being recognised as a performance enhancer, we expect higher penetration in the Chinese market in years to come.
 
 
What are the unique challenges you face in Asia? How does your company address these challenges? 
 
First and foremost, antibiotics are still widely used in Asia. Many countries cannot afford to do away with antibiotics because they do not have the modern production environments that allow them to do so.
 
Second, it is difficult to position yourself in Asia if you have a foreign product because people are very used to local brands. Innovation is usually difficult to sell at the beginning. A lot of our work is about convincing the local industry regarding the concept of phtytogenics.
 
We help educate the Asian market by conducting seminars and running trials in the region to show the efficacy of phytogenics as an alternative to antibiotics, with actual performance in scientific studies.
 
Most importantly, with approval of FRESTA® F in the EU, we are able to raise awareness and recognition worldwide. This is something that will make it easier for us to promote phytogenic products in Asia.
 
 
How do you see the company's future prospects in Asia?
 
I see a very bright future for Delacon in Asia. The region is growing and getting more affluent. First of all, people are consuming more meat and at the same time, demanding safe meat. Take South Korea as an example, we see a very rapid market uptake of 'green' additives after the antibiotic growth promoter (AGP) ban last July.
 
Second, Asia has a penchant for natural products. We expect to see higher demand for products such as ours that are truly natural, standardised and cost-effective.
 
 
Competition-wise, do you see any changes for phytogenics in the feed additive market after the EU registration?
 
Due to the new registration we now play in a different league, competing with other zootechnical additives including probiotics, organic acid and enzymes, and in some regions still antibiotics.
 
To me, each of those feed additives has its place and functions. The truth is phytogenics work very well with some of those products, not necessarily to replace them. For example, when phytogenics are combined with certain enzymes such as phytase, you have a complimentary mode of action, which translates to more output and better feed conversion than when used individually.
 
Therefore, we do not necessarily compete with all those products, and surely we do not compete with antibiotics alone. In many markets, we are using phytogenics very effectively with antibiotics. We complement each other, creating an entirely different mode of action.
 
Some phytogenics in the market claim to be anti-bacterial, but we found it to be untrue as it is technically impossible for phytogenics to have the sole anti-microbial property. We never made such a claim because we know our products have a different focus in the areas of animal digestion, feed intake and gut microflora. Generally, our products have a synergistic effect with antibiotics - together they produce better results and have a greater impact on profitability. We do not recommend taking away the antibiotics where it makes sense.
 
 
Delacon opened a new research centre in Czech Republic last year. What are the key areas the company will be looking at in terms of R&D?
 
Delacon invests more than 10%-15% of its turnover into research every year. In October 2011 we opened our own research centre in Czech Republic - Performing Nature Research Centre (PNRC) - which is specifically designed to provide in-house testing and trial capacity for Delacon.
 
It will be used to test innovative phytogenic substances developed in our R&D programmes and to conduct trials of new feed application methodologies with live animals in typical production environments. PNRC will play a key role in identifying ways to improve overall animal performance and welfare, and to reducing undesirable environmental pollutants.
 
In Asia we will be launching a new product line for cattle this year. There will be a couple of products coming up next year, so the pipeline is full. We are well aware of the changing trends in consumer demand, nutrition, raw material prices etc. This is why we are constantly working on producing solutions that are up-to-date and meet customers' needs. One of our top priorities is to be the first company to address these new issues/challenges.
 
 
Do you think phytogenics and other 'natural-based' feed additives will be the future mainstream in the feed additive industry? Why and why not?
 
I think natural feed additives will definitely become one of the mainstream products in time to come. Consumers and regulatory authorities are pushing for the removal of synthetic and other non-natural products in the food chain. People want safe, clean, natural food as they get more and more informed.
 
As a result, companies are forced to respond. Even in non-EU countries where the regulatory pressure is relatively lower, more companies are producing antibiotic-free products to meet consumer demand. I would guess around 20% of the US poultry market is already antibiotic-free by deliberate decision of producers. More companies are willingness to innovate, to change and to prepare themselves for future challenges.
 
My firm belief is that phytogenic feed additives will eventually grow into a substantial portion of the EUR12-billion feed additive market in the near future.
 
 
What are the company's plans for this year and in the next few years?
 
We will continue to invest in R&D, production and talent. We have just expanded our R&D team and created a new innovation and research division that will deliver primary and applied research to our existing and new products. A director of communications was newly appointed to take care of our new consolidated global communications division that will drive our vision and value position in the market. 
 
In addition, we recently appointed a product manager, a customer technical specialist and a regulatory affairs specialist to strengthen our sales and marketing team globally. We are boosting our staff strength in all regions this year. Most of it will take place in Europe but we will add at least three people in Asia this year. Production capacity expansion is also part of our plan so we can better cope with growing demand for our products and services worldwide.
 
All in all, Delacon is geared towards the speed of change in the phytogenic feed additive industry by providing 'Total Phytogenic Solutions' - i.e. solutions for many of the challenges in the animal nutrition sector not just in improving feed efficiency, but also in addressing environmental problems, rising raw material prices, food chain safety and animal welfare. Phytogenics can be part of the solution to many of those problems.
 
To this end, we provide relevant information and technical advices on how to implement our products into customers' feeding strategies in order to help them get the best value. This precise and customised approach yields benefits beyond a single product, which is what the concept of 'Total Phytogenic Solutions' is all about.
 


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