Why did bioenergy sales decline through 2015, especially in the U.S. market?
We saw a pretty dramatic shift in the market when global oil prices fell. Ethanol producer margins went down by 30-50% from what they were in 2014, with many producers going from being nicely profitable to barely breaking even. That changed their thinking about whether they should focus on maximizing yield with Novozymes’ solutions or reducing costs. They became more cost-conscious, and some of our premium offerings became less desirable. This impacted our revenue and competitive positioning in the marketplace.
How will Novozymes regain market share in biofuels in the U.S.?
The shift in U.S. biofuels puts us in a tough position, and we lost some market share in 2015. To recover, we have to understand and anticipate change better, we have to engage with our customers around this new market reality, and we have to adjust our product offering.
Ethanol yield is still very important, but you have to be able to deliver it at a lower overall input cost. Novozymes is working on a broader product portfolio that still offers premium yield and the value that brings, but is also more competitive in the mid- and lower-tier segments where customers only want to pay for enzymes that provide basic performance benefits. We launched products that broaden our offering across these segments in 2015, and this broad-based approach will remain important to our success in 2016.
"Our online Bioenergy University provides market and technology insights for biofuel customers, as well as operator training across the biofuel production process."What bioenergy innovations does Novozymes expect to introduce in 2016?
Going forward, we’re targeting improvements in throughput, reductions in chemical inputs, higher yield, and using our service offering to create more value. For instance, our new innovation, Novozymes Avantec® Amp, enables producers to save costs by not having to add yeast nutrition and by reducing foam in fermentation, which means less use of antifoam control. We’re also looking to boost yields of coproducts such as corn oil and higher-value distillers’ grain, which is used in animal feed, as well as exploring how to break down the fiber component of the corn kernel into fuel.
At the same time, our innovations help customers better understand and use the data from their plants and thereby optimize their operations. Building on our track record of strong service offerings, our online Bioenergy University provides market and technology insights for biofuel customers, as well as operator training across the biofuel production process.
Commercialization of cellulosic ethanol appears some way off. What will it take to kick-start growth in the mid-term?
Novozymes is committed to cellulosic ethanol. With our partners in the industry, we continue to work hard to demonstrate that cellulosic ethanol is technically viable and to prove this is a feasible industry. Together with Beta Renewables, Raízen, GranBio and POET, we have already initiated the first commercial-scale cellulosic ethanol plants. We will now support our partners in getting these plants to operate reliably and pass the litmus test of showing the world that cellulosic biofuels are achievable. The low oil price and uncertainty around the political support for advanced biofuels create uncertainties as to the timing of commercialization, but we remain convinced that we'll see a day where the world uses residues and waste for biofuel production.