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Cyanotech’s falling sales confirm reports that consumers are trading down
Hawaiian microalgae producer Cyanotech, which sells both finished dietary supplements as well as bulk ingredients, has reported falling sales and continued losses. This was attributed to changing consumer behavior and increased competition.
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Microalgae producer Cyanotech reported reduced sales and continued losses in a recent revenue report. The company’s results confirm reports circulating within the industry that consumers are seeking less expensive finished products and manufacturers are looking for cheaper ingredients on the international market.
Cyanotech, based in Kailua Kona, Hawaii, reported its third-quarter 2024 earnings on Friday, Feb. 9.
The company is one of the microalgae pioneers in the U.S. market. Cyanotech produces astaxanthin and spirulina in its open pond cultivation facility on the Kona Coast of Hawaii’s Big Island.
Cyanotech sells its ingredients under the BioAstin Hawaiian Astaxanthin and Hawaiian Spirulina brand names. It also markets a line of its own finished products under the Nutrex Hawaii brand.
Cyanotech reported third-quarter sales of $5.6 million for the three-month period that ended on Dec. 31, 2023. That represented a 5.2% decline from the same period a year earlier, when the company reported $5.9 million in sales.
For the first nine months of fiscal 2024, Cyanotech reported sales of $17.1 million compared to $17.8 million for the same period in fiscal 2023, a decrease of 3.9%.
Inflationary pressures affecting consumer behavior
Cyanotech’s president and CEO Matthew K. Custer said the company is reaping the same whirlwind that is affecting sales for many dietary supplement companies. Caught between rising rents and food prices and wage growth that struggles to keep pace, consumers are trading down to value brands.
The good news, if there is much, is American consumers are remaining loyal to supplements as a category, Custer said.
“The macroeconomic environment led to lower sales across the portfolio on a year-to-date basis, being driven particularly by Spirulina bulk sales. Industry data shows consumers are not pulling back from dietary supplements, but they have begun trading down to private label brands to save on costs,” he said.
Custer added the market for bulk ingredient sales has become increasingly competitive. Arguments about quality and ingredient integrity are no longer enough to carry the day for higher priced ingredients.
“The market for bulk material is increasingly price sensitive with many companies sourcing lower priced international ingredients,” Custer said.
Cyanotech reported a net loss (which includes interest expense) for the current fiscal quarter of $1 million, or $0.16 per diluted share, compared to a loss of $598,000, or $0.10 per diluted share, for the same period in the prior year.
The net loss for the full nine months of 2024 was $3.2 million, compared to $2 million for the same period a year previously.
To cope with the continued losses, Cyanotech said it is continuing to operate with a reduced headcount and has cut wages.
The company also raised additional capital via a private placement of 400,000 shares at $1 a share. That sale was completed in December 2023. Cyanotech’s shares are trading for 56 cents today, down from a 5-year high of $4.05 on March 1, 2019.
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