For Eco-Friendly Santas: Algae Milk and Cookies

Algae isn’t just about fuel any more. Milk, cookies and Omega-3 oil are just a few of dozens of lucrative products, some of which are already raking in the green.


As much as we debate the prospects of an
algae-fuel future
, companies are already making big money out of the green stuff. While some keep their focus on
algae fuel, others are finding lucrative corners of the algae industry in a number of unlikely products: infant formulas,
nutritional supplements–even cookies and milk.

Oil at $100 a Gallon 

Greg Bafalis came
on as CEO of Aurora Algae in June. Aurora is building six acre-sized
ponds in Australia now, and hopes to begin construction on large scale
ponds, totaling 1,000 acres, in 2012. Aurora Biofuels, as it was once
known, was founded four years ago; it officially changed its name in
August to signify a  change in focus to the supplements market.


“It’s a funny thing: we discovered that there’s a lot of higher
value products than just biofuel. Our focus now, because it’s a very
valuable commodity, is Omega-3 EPA oil. Omega-3 oil in fish comes from the algae themselves.
The algae produces it, and the fish eats the algae. This cuts out the
middle man, and it doesn’t have a fishy taste or smell.

“Diesel fuel, on a wholesale basis, is probably selling around $2.50 a
gallon. In contrast, Omega-3 oil sells anywhere from 100 dollars to 300
dollars per gallon. If you go into a supplement store lately and try
to buy fish oil tablets, if you track that back on a per gallon basis,
you’re talking in the neighborhood of $1,000 dollars per gallon on a
retail basis. Why sell a $2.50-a-gallon product when you could sell a
$100-a-gallon product?

“The science and the costs are not there to justify focusing on
biofuels right now. But over time we’ll create efficiencies and produce
better yield. As a businessman I’m always going to take the highest value.
As I saturate that market, I’ll expand into other markets.”



An Algae Infant Formula 

Peter Nitze, COO
of Martek Biosciences Corporation, joined the company in 2005, having
previously worked in senior management positions at Honeywell and GE. Martek has been in the algae game longer than most other
companies, which helps explain its healthy balance sheet


“In the late ’80s we identified a strain of algae that we discovered
was a high producer of DHA, an Omega-3 fatty acid known at the time to
be present in fairly high concentrations in breast milk and to play a
role in infant development. Infant formula sold at the time did not have
DHA in it, and we saw an opportunity to produce infant formula that
more closely mimicked breast milk. Thereafter we discovered a process
for developing ARA, an Omega-6 fatty acid from fungus.

“Things took off after we received a GRAS–“generally recognized as
safe”–from the FDA. The year after that, in 2002, Mead Johnson launched
the first U.S.-based infant formula containing our DHA and ARA, and
that’s when things really took off. Other infant formula companies
jumped on the bandwagon, and we’ve been growing ever since. Now
virtually all of the major multinationals use our DHA and/or ARA in all
U.S.-based products and many international products. Over 95% of all
infant formula sold in the U.S. uses our DHA/ARA. We went from nothing
in 2001 to profits of $140 million in 2003; what we’ll do this year is
over $300 million.”

Algae Milk and Cookies


Jonathan Wolfson is
CEO of the California-based Solazyme, which has been around since 2003.
It produces oils and bioproducts. In November, Solazyme announced a partnership
with a French starch company that will help it produce and market its algae-based dietary products.

“We actually have a product we call ‘algal flour.’ We call it flour
because it’s a dried powder, but ultimately it has a very different
content than the normal flour you’re thinking of. What it actually
contains is a powdered, heart-healthy oil, that has a profile similar to
olive oil. It includes protein and a type of dietary fiber.

“Algal flour can be used to replace eggs, oil, and butter. We use it
to make bakery products: breads, pastas, cookies, cakes. It could end up
replacing eggs, oil, and butter even in things like ice cream or beverages. What you end up with has a far lower fat content and
lower calorie content, in some cases reducing fat by up to 75% and
essentially removing all cholesterol as well.”


Fly the Algae Skies 

Jason Pyle, CEO of
Sapphire Energy
, has degrees in engineering, physics, molecular and
cellular physiology, and medicine. Sapphire has its eyes on the algae fuel
prize, but says a detour through other products will
be helpful.

“Our belief is that the pursuit of liquid transport fuel is unique,
and there is no route through other products to get there. Once you’re
selling cosmetics products, then you’re a cosmetics business. So we made
a very deliberate decision at Sapphire to avoid getting distracted with
different kinds of algae products.


“We started with the idea that the only replacement for the three
major liquid transportation fuels–gasoline, diesel, and jet–would be
actually gasoline, diesel, and jet. There are dozens of alternative
energy schemes, but the U.S. possesses an $8 trillion
infrastructure to deliver liquid fuels to consumers. When we came at
this problem, we said the actual product that has to be the end state of
Sapphire’s work has to be the product everyone uses today. These are
not mimics; these are identical.

“By late 2008, we had created a version of Jet A, a specified product
by the Federal Aviation Administration. In January 2009, that
product was used in a demonstration with Boeing and Continental Airlines
to fly a 737 out of Houston. They took it over the ocean and formed a
series of test maneuvers on a 90-minute test flight. It was the first
time a renewable fuel was flown on a commercial two-engine plane.

“In December of 2009 we received a joint Department of Energy and
Department of Agriculture award for 104.5 million dollars in order to
construct the world’s first algae commercial demonstration facility;
we’ll be in full-blown construction at the beginning of 2011. Our goal
with the government is to demonstrate the full commercial viability for
algae fuel.”


Making “Nuisance” Algae Useful 

Robert Fulton III,
founder of Compact Contractors for America, LLC, also has grand schemes
to bring algae jet fuel to market. In the short term, he has an
intriguing idea for developing lower-grade fuel cheaply to power

“There’s quite a bit–probably about the size of Massachusetts–in
the form of nuisance algae. There’s a huge reservoir of potential fuel
there. The problem is so great, many people poison lakes and streams
trying to kill it off. Well, we’re able to use the harvested nuisance
algae, dry it, and use it for power applications. Even though it’s not
as energy dense as gasoline or aviation-quality fuel, you get it so
cheap that it makes sense to burn it.


“We’ve got people interested, but nobody’s cut us a check. [Laughs.]
It’s like the first time somebody discovered gunpowder. ‘What do you
mean, powders burn? No, they don’t.'”

[Images: Solazyme, Aurora Algae, Flickr user eutrophication&hypoxia]



About the author

David Zax is a contributing writer for Fast Company. His writing has appeared in many publications, including Smithsonian, Slate, Wired, and The Wall Street Journal


Call for Most Innovative Companies entries! Apply now.

500+ winners will be featured on Final deadline: 9/23.