Case 10.1: Est-Agar - sustainable enhancement of the red algae Furcellaria lumbricalis – Estonia
Name of the company: Est-Agar AS
Country: Estonia
Size of the business: 25 employees
Website: http://estagar.ee/
Background
The enterprise is currently owned by three friends who were interested in engaging in the blue economy, namely the cultivation and processing of seaweed on the Baltic coast, on the island of Vormsi. The entrepreneurs studied the value enhancement opportunities offered by algae growing on the Estonian Baltic coast and their uses. They learned that it is possible to extract various useful substances from seaweed growing in Estonian coastal waters with the help of different technologies, which can be used mainly in the food and cosmetics industry. As a result of long research and considerations, it was decided to buy the Est-Agar plant on the largest island of Estonia, Saaremaa, which is the only producer of a unique texture-adding additive produced from the red algae Furcellaria lumbricalis – furcellaran. The deal was reached in 2016, when friends bought all the shares of the factory together. With this, they gained access to a working industrial plant, an opportunity to realize their ideas, access to an algae quota and raw materials, and existing market.
The history of Est-Agar dates back to the 1960s, when Estonian marine scientists established that the stabilizing, thickening and gelling agent furcellaran can be produced from the red algae Furcellaria lumbricalis found in the Väinameri Sea in Estonian western coast . This discovery was followed up by ‘Kalev’, Estonia’s largest candy factory, which developed the technology for furcellaran production and in 1966 built the furcellaran industry in the island of Saaremaa. The ‘Kalev’ candy factory used the industrial production primarily as an input for its production, but furcellaran was also supplied elsewhere – to Russia, Ukraine, Latvia and everywhere else. At the beginning of re-independent Estonia, in 1996, another company bought the furcellaran factory from the candy factory, and in 2016 the industry was bought by its current owners who proceed with working on new R&D.
Main activities
Est-Agar’s production is unique because it is the only producer in the world of the texturizing additive furcellaran produced from the red algae Furcellaria lumbricalis. It mainly produces fluffy furcellaran, the processing technology of which dates back to 1974. The company also has a pilot plant for the production of small quantities of furcellaran in powder form for the cosmetics industry. The plan is to proceed with design and development of production plant for producing furcellaran in powder form with larger equipment and in larger quantities. Furcellaran in powder form would allow the company to enter not only cosmetics industry, but also further expand in the food industry market and its customer base.
The raw materials used for the production are local and the enterprise trawls red seaweed from the Baltic Sea and processes it. Although the company has an alga catch quota, in addition to red algae, it is also purchased from local coastal residents, who collect algae drifting ashore from the shores of the Saaremaa island. The tradition of collecting algae is passed on in local coast areas.
Market
Most of the production is sold to the confectionery industry, the customer base of the cosmetics industry is growing and there are a few customers in the medical industry. The largest customer in Estonia is the confectionery industry ‘Kalev’ and 80% of the products are delivered worldwide. The production is sold directly to the customer, i.e. the company does not use intermediaries.
Although the company is the only producer of furcellaran in the world, it competes in the whole market of hardeners, thickeners and hydrocolloids. The company’s competitors are producers of gelatin, pectin, carrageenan, alginates, agar-agar and other products. The company consciously tries to make itself more visible and is constantly looking for new customers, including visiting exhibitions and fairs to create direct contacts and communication with potential customers and for direct marketing. The marketing includes the development of new website to be even more visible, searchable and easier to access than before. The company does not position itself in large markets, i.e. it does not seek large customers, because the company’s production volumes are marginal in terms of the world’s major producers, depending on the volume of raw materials and plant capacity. Position itself as exclusive, different and for different customers whose products have the same exclusive output.
Today, it is very difficult to find a customer in another industry, because it also requires a lot of recipe development ability by the company. Therefore, Est-Agar sees companies and laboratories that develop formulations for factories and manufacturers and a final mixture consisting of different substances (texturizing agents, emulsifiers, etc.) as their main customers.
Challenges and solutions
One of the biggest challenges is to find new customers, to increase sales and volume. Another challenge is technological developments in order to develop new products and market those. The company has several ongoing cooperation projects with research and development institutions. The Danish University of Technology is studying the technological possibilities of separating substances different from the second growing algae species in Estonia. In co-operation with Estonian universities and biotechnology companies, ways how to produce a dye from furcellaran and how to add extracted algae residues to fertilizer are being studied. The aim of cooperation projects is to make maximum use of available natural resources. As a side activity of the company, the cultivation of shellfish in the Baltic Sea is being tested. Shellfish farming and enhancement are studied in cooperation with research and development institutions.
Funding
Est-Agar has been funded by using creditors, investment loans and owners’ own capital. In addition, public sector opportunities (investment grants from the ERDF) have been used. It is planned to continue such a funding scheme in the near future.
What makes this case innovative?
Case represents a unique product from aquatic biomass. Est-Agar is the only producer in the world of a unique texture-adding additive produced from the red algae Furcellaria lumbricalis – furcellaran. In order to expand the use of furcellaran, in addition to production, technology and product development are actively pursued in cooperation with research and development institutions.
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