Capstone believes the European Commission’s proposal requiring biosolutions manufacturers to classify goods by actual function will increase authorisation costs for smaller players such as algae- and clay-based producers. Smaller players unable to absorb these costs face valuation declines and market exit once amendments take effect in late 2026. This presents M&A opportunities for well-capitalised players.
- EU manufacturers of products such as algae- and clay-based formulations and disease-control goods currently market these as “feed materials” and “biostimulants” to avoid higher authorisation costs and regulatory burdens. The Commission’s December 2025 Omnibus proposal requires classification by actual function, obligating manufacturers of misclassified products to seek proper authorisation.
- The new classification rules pose risks to small biosolutions manufacturers that will struggle to absorb the increased costs and regulatory burden.
- We expect smaller players to face valuation pressure as markets price in authorisation costs, creating M&A opportunities for well-capitalised players to consolidate the biosolutions market.
EU Biosolutions Regulation
The European biosolutions market sits at the intersection of two countervailing regulatory trends – accelerating restrictions on synthetic chemicals creating substitution demand, and slow, expensive authorisation processes for bio-alternatives limiting supply response. This divergence creates market opportunities for biosolutions companies with robust regulatory compliance, while concentrating risk among operators who exploit grey zones to avoid registration costs.
Definitions
In the EU, “biosolutions” is a commercial umbrella term rather than a legal category; it groups together biocontrol, biostimulants, and feed additives or materials, as defined below.
- Biocontrol refers to biological or nature-based means to control harmful organisms (microorganisms, botanicals, etc.). They replace pesticides by preventing, destroying, repelling, or controlling pests and pathogens. Biocontrol products need to undergo approval under the Plant Protection Products Regulation (PPPR) (Reg. EC 1107/2009), the same regulation that governs conventional pesticide authorisation.
- Biostimulants are defined under the EU Fertilising Products Regulation (Reg. EU 2019/1009) as products stimulating plant nutrition processes independently of nutrient content. Input-material eligibility is governed through Component Material Categories (CMCs). A key practical constraint is that biostimulants cannot claim pest or disease control (or they are reclassified as plant protection products).
- Feed additives are substances, microorganisms, or preparations intentionally added to animal feed or water to perform specific functions, such as improving feed quality, animal performance, digestibility, gut flora, or reducing environmental impacts. They are regulated under Regulation (EC) No 1831/2003.
- Feed materials are products of biological origin used to meet animals’ nutritional needs, either as direct feed or as ingredients in compound feed. They are governed mainly by the EU feed marketing framework, i.e., Regulation (EC) No 767/2009 and Regulation (EU) No 68/2013.
Exhibit 1: Authorisation Frameworks Comparative Analysis
| Aspect | Plant Protection Products Regulation (PPPR) | Fertilising Product Regulation (FPR) | Feed Additives | Feed Materials |
| Authorisation Process | Two-step process led by EFSA (EU-level, Member State) | Conformity assessment with CE marking | EU centralised pre-approval led by EFSA | Self-declaration |
| Typical Authorisation Timeline | 2-4 years | Immediate | 2-3 years | Immediate |
| Market Access | Only after authorisation | Immediately upon compliance | Only after authorisation | Immediate |
| Cost | €2M-10M | €5K-€30K | €200K-€3M | None |
| Approval Length | 10-15 years | No expiration | Unlimited (post-omnibus) | No expiration |
| Data Requirements | Toxicology, ecotoxicology, efficacy, resistance, residues, safety | Nutrient tests, contaminants, safety | Safety, efficacy, proposed uses | No predefined rules |
| Grey Zone Prevalence | Moderate (biostimulant loophole) | Moderate | High (feed materials loophole) | N/A |
| Enforcement Trajectory | Already strict | Tightening | Tightening | Tightening |
Source: Capstone analysis
Omnibus X Changes
Classification Grey Zone
The EU introduced the first formal definition of biostimulants in 2019 under the Fertilising Products Regulation (FPR), thereby supporting market development by providing clearer definitions and labelling for products.
In practice, however, a range of products has avoided formal classification as biostimulants to sidestep the registration requirements and costs associated with FPR approval, thereby benefiting from a regulatory grey zone. These include seaweed extract–based products, silicon-based products, and certain microorganisms. Approval pathways have historically varied across Member States, depending on national authorities’ willingness to accept products and their marketing claims. Products with strong efficacy claims were classified under PPPR or FPR, while those making limited claims often remain regulated – or unregulated – at the national level.
Omnibus X Changes and Impact on the Grey Zone
Two developments under Omnibus X are expected to materially narrow this grey zone.
- Expanded Definition of Biostimulants. As part of the Omnibus X published on 16 December 2025, the Commission expanded the definition of biostimulants to include products ‘stimulating life processes of crops to improve their tolerance to abiotic stress’. The addition of products ‘stimulating life processes’ beyond the previous nutritional-only approach represents a deliberate broadening to capture borderline products previously in regulatory grey zones. Products that could now be captured by the FPR approval process include hormone-like bioactive compounds (seaweed extracts, brassinosteroids, salicylic acid), silicon-based stress tolerance products (silicic acid), and osmoprotectants (glycine betaine, proline). The refinement of the definition also helps address products that were historically marketed as biostimulants – e.g., phenolates- to avoid pesticide registration under the PPPR.
- “Mechanics of action” Enforcement Test. Second, the Commission has provided new guidelines to Member States and authorities to assess products. Instead of product claim-based classification, the regulators will need to look at the ‘mechanisms of action’ – i.e., whether the product improves crops or controls pests – to determine whether the product falls under FPR or PPPR. In cases of uncertainty, authorities are instructed to classify products under the most stringent applicable regulatory framework.
The Commission proposed these amendments on 16 December 2025. The proposal will undergo the normal legislative process, which includes reviews by the European Parliament and Council, and on average takes 12-18 months. However, this process has been accelerated for Omnibus-related legislation, and as such, we expect the proposal to come into effect by late 2026 or early 2027 at the latest.
Feed Product Read Across
Regulation (EC) No 1831/2003 governs all feed additives in the EU and requires pre-market authorisation following a scientific assessment by the European Food Safety Authority (EFSA) prior to commercial sale. Approval timelines typically include 18–36 months for EFSA’s assessment, followed by 3–6 months for the Commission’s adoption.
Authorisation costs range from €200,000 to €3,000,000 per application, covering:
- Toxicological studies
- Efficacy trials demonstrating functional benefit
- Residue studies for animal-derived products
- Environmental impact assessments
- Manufacturing and quality control documentation
Authorisations were originally valid for 10 years and required renewal applications to be submitted 18 months before expiry. However, the Omnibus X now allows for unlimited approvals, with risk-triggered reviews.
Grey Zone: Feed Additives vs. Feed Materials
The Feed Additives Regulation distinguishes between:
- Feed additives, which provide functional benefits beyond basic nutrition (e.g., performance enhancement, health support, preservation) and require authorisation; and
- Feed materials, which provide nutritional value only (e.g., protein, energy, fibre) and do not require authorisation.
A regulatory grey zone exists when natural products are marketed based on their composition—such as being a “natural source of beneficial compounds”—without making explicit functional claims that would trigger additive authorisation. Companies often exploit this grey zone for economic reasons, as the feed material pathway avoids both authorisation costs and lengthy approval timelines.
Several product categories marketed as feed materials may be at risk of reclassification as feed additives, including:
- Algae products are positioned as “natural protein sources” but contain bioactive compounds that improve gut barrier function, implying a zootechnical effect
- Clay products are marketed as “mineral supplements” but function as mycotoxin binders through adsorption, implying a preservative function
- Seaweed extracts are marketed as feed materials but modulate immune responses via polysaccharides, implying a zootechnical additive function
These cases illustrate the increasing regulatory risk for products that rely on ambiguous positioning rather than formal authorisation. We note that some Member States, including Germany, the Netherlands, and Denmark, already take a stricter approach and require additive authorisation where any functional positioning is identified.
Implications for M&A opportunities
We believe current regulatory developments in the EU feed additives space are creating two distinct valuation profiles in biosolutions M&A.
On the one hand, assets with EFSA-authorised feed additive portfolios spanning multiple functional categories are likely to command premium valuations, reflecting durable competitive advantage. The Commission’s Omnibus X confirms that biosolutions will not receive expedited approval pathways and will undergo the same core assessment as synthetic products, underscoring the principle that natural origin does not exempt products from safety verification. This reinforces the scarcity value of authorised portfolios.
Conversely, under-registered assets are likely to trade at discounts to fair value, particularly where products are marketed as feed materials but function as additives, creating immediate enforcement risk at the Member State level. Valuation discounts are driven by €200K–€1M+ authorisation capex, 18–36 months of potential revenue disruption, uncertain approval outcomes, and customer attrition during compliance. As a result, regulatory status has become a primary determinant of value in EU biosolutions transactions.
What’s Next
The proposed amendments are part of the Commission’s December 2025 Omnibus X package. While the ordinary legislative process typically takes 12–18 months, Omnibus files have historically moved faster—often within one year. We anticipate the legislation will take effect by year-end 2026. Although enforcement by Member States may lag , we expect regulatory risk to rise materially from 2027 onward, with potential consequences for asset valuations.
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