Making of feed ingredient stopped due to slow sales

Cyanotech Corp. is discontinuing its NatuRose animal feed ingredient after more than two years of slowing sales in Japan.

The Kona-based producer of nutritional products from microalgae will now exclusively focus on production of astaxanthin for the human market, where it has a cost advantage, said Gerald Cysewski, chairman, president and chief executive officer.

"Although many believe that natural astaxanthin provides far more benefits for aquaculture than synthetic astaxanthin made from petroleum, that product now dominates the market for fish coloring and our higher-quality, higher-priced natural product cannot compete effectively," Cysewski said.

Cyanotech announced last year that it would shift its marketing strategy toward human products after sales of NatuRose continued to slow in Japan.

The company is instead focusing on differentiating its BioAstin natural spirulina line as a premium antioxidant touted as enhancing skin, muscle and joint health. The company attributed an 8 percent increase in sales to $7,950,000 for the nine months ending Dec. 31 largely to higher sales of BioAstin products.

Cyanotech has sold Natu-Rose, a natural pigment source, internationally for 11 years, gaining U.S. Food and Drug Administration approval in August 2000 for sales in the United States.

NatuRose has faced sales pressure since 2005 when Japanese demand failed to recover after disruption caused by a severe typhoon season a year earlier and growers began to use less natural astaxanthin in their feed while also turning to less costly substitutes.

As late as its fiscal 2006 annual report released in May of that year, Cyanotech said it was looking to boost market share for NatuRose by expanding in additional markets, such as salmon feed producers seeking an 'all-natural' designation for their products, as the Japanese market continued to soften.

But for the third quarter ending Dec. 31, NatuRose sales decreased by 39 percent from the year earlier, inching up from a second-quarter sales decline of 35 percent. Cyanotech cut its net loss nearly in half to $594,000, or 11 cents a share, in the quarter on a 72 percent rise in total natural astaxanthin product sales.

The company also said yesterday that it will discontinue production and marketing of phycobiliproteins, or fluorescent pigments made from microalgae and used in medical diagnostic testing and research, citing "a small contribution to revenue in recent years."