The Quebec-based company has been developing its ingredient for supplement clients, but the current deal represents a coup in the functional food industry. "Since the creation of Neptune the functional food market has been key to the company's strategy," said Henri Harland, Neptune president and CEO. "Neptune has been developing its product NKO to be well positioned and in compliance with new regulatory requirements, the first of which will be enforced in Europe by July 2007." As part of the agreement, Neptune and Yoplait will develop dairy products containing NKO, set to be clinically tested for their effect on chronic health conditions. Yoplait will then launch those products that secure approval in strategically chosen pilot markets to begin with. Neptune will receive an upfront fee for the supply of NKO, as well as milestone payments and distribution royalties to follow. NKO is a lipid derived from the planktonic family of crustacean and is rich in omega-3 as well as phospholipids and antioxidants. It was originally launched at the end of 2003 for the North American supplements market, where it has already established a strong presence. The company then began eyeing the functional foods market, and it is awaiting novel foods approval in Europe. Neptune's branded NKO is said to be different from other products marketed as krill oil. The company uses only a breed of Antarctic krill and a patented extraction process to manufacture the ingredient. Dairy represents more than 25 percent of the global functional food market, with approximately $16bn in sales.