7 Companies You'd Never Imagine Investing In An Algae Future

by: Kevin Quon

Not many prophets would probably have considered algae to be such an essential part of our lives were you to ask them a few years ago. But if you've been hearing more and more about a green slimy future, you're not alone and it's no coincidence. As the original oil creator, microalgae is beginning to show its true potential as a lead energy source in the future. Even President Obama recently dedicated a $24 million investment into the odd fuel source. In his casual demeanor, Obama stated before a crowd at the University of Miami:

Believe it or not, we could replace up to 17% of the oil we import for transportation with this fuel that we can grow right here in the United States.

Yet as the President endured ridicule from the masses and political zingers from across the aisle, he surprisingly doesn't stand too far off from the pathway that corporate America is already following. For partners and investors in Algae-specialist Solazyme (SZYM), there is no denying the power of algae. The green goo is not just replacing a spent fuel resource, but it's literally opening up new markets and changing the manner in which industry operates.

The following are 7 such partnering companies of Solazyme. Listed are their interests in this algae-based technology company:

  1. Dow Chemicals (DOW). Interested in dielectric fluids, the company may buy up to 80 million gallons of Solazyme's tailored oils by 2015. Dow was impressed that Solazyme was able to create an oil that far exceeded the abilities of already enhanced sunflower oil. From a research standpoint, it was clear that Solazyme has an edge in the tailored oil market.
  2. Whole Foods (WFM). Currently selling the company's nutritional products under the brand of Golden Chlorella, the company will soon undoubtedly see products flowing in made from Solazyme Roquette Nutritional's imaginative flours. As a joint venture with Roquette Freres, the company produces algae flours that are able to replace eggs and butter. These algae flours retain taste and consistency while they reduce calories, fat, and cholesterol.
  3. Unilever (NYSE:UL). As one of the largest consumers of palm & palm kernel oil, the company began to seek alternatives that were more eco-friendly in light of their expected boost in demand in the years to come. Solazyme's tailored oils proved to be the solution. Once exploring the technology further, Unilever expanded their partnership with Solazyme to pursue additional tailored nutritional oils thereby opening an unexplored market in a way the world has yet to understand.
  4. Sephora, a division of Louis Vuitton S.A (OTCPK:LVMHF). The cosmetics company was interested in being the distribution arm of Algenist, Solazyme's in-house brand of cosmetics. Intrigued by the discovery of alguronic acid, Sephora partnered with Solazyme as they explored new valuable properties in the realm of high-margin cosmetics.
  5. Volkswagen (OTCPK:VLKAY). Recently partnering with Solazyme and Amyris (NASDAQ:AMRS), the car company wanted to test its latest models on these two fuel providers in efforts to optimize their products down the road. Largely seen as a vote of confidence, Volkswagen appears to be endorsing these two biofuel companies as having a significant impact on transportation fuels in the future.
  6. Bunge (NYSE:BG). As an investor in the company, Bunge brings to the table the needed sugar to make the algae process work. Already one of the leading sugar cane producers in the world, Bunge's influence in vegetable oils and hopes of further diversifying their product lines helps to make Solazyme a perfect partner to seek synergy.
  7. Chevron (NYSE:CVX). Also an investor in the company, Chevron serves as the Big Oil endorser who's keeping an eye on their own energy future. With agreements in place, Chevron pays for part of Solazyme's ongoing research. Undoubtedly the company is interested in the future biofuels Solazyme can produce. It would not be hasty to predict a future expanded relationship as the company continues to develop.

With Solazyme expressing a greater than $3.1 trillion market opportunity, one quick glance at their list of partners and the thought becomes less comedic. Here is a company that is developing oils in a way the world has never done before. Above all, it's commercializing into multiple industries and is able to pull the cream of the crop when it comes to partnerships. Perhaps President Obama's algae dream can become a reality faster than people realize. For this $903 million company (as of 3/26/12), at least, the possibility of a multi-billion dollar future appears to only be hindered by the speed of building production capacity.

Disclosure: I am long (SZYM), (AMRS).