Lots of ingredients suppliers are doing it, but is it effective? Pedro Vieira takes a critical look at the strategy
If you work in the nutraceuticals or functional-foods industry, you probably have a high awareness of the names and logos of FloraGLO, Teavigo, Ester C, Tonalin, Carnipure, Pinnothin and other branded ingredients.
As in other markets, the majority of ingredients manufacturers have chosen branded strategies to identify their products. This makes sense in today's growing market where new products are proliferating, and many ingredients are quickly becoming commodities, allowing for huge price pressure and profit erosion. One quick look at the recent evolution of the vitamin C and co-Q10 markets is enough to understand why branding in this industry has taken off. But why do manufacturers brand ingredients in a business-to-business industry that is still too focused on commodity-type ingredients? A simple reason: a brand, according to the American Marketing Association, is "a name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors." Branding manufacturers hope to stand out in the industry. A dietary-supplements manufacturer wanting to make a product containing omega-3s can select from among available brands the one that best delivers the attributes he is looking for. However, for this to happen the different omega-3 brand suppliers will have had to invest significantly in their brands to deliver a specific set of features, benefits and services to their potential buyers. This investment may need to be in the form of both category and brand awareness, and should include a combination of solid science, proprietary positioning, getting to the market first and using carefully planned communication strategies. If these criteria are met, the supplements manufacturer will be able to choose the best brand for his intended purpose and needs. If the supplier can clearly demonstrate that its brand offers unique advantages, he may convince the manufacturer to place the omega-3 brand logo on the final product's package.
Theoretically, when including a brand within a brand, the other brand will strengthen brand preference and increase purchase intention of both products. But is this the reality?
How many examples can we remember of brands within brands? How many have been successful? There are the classical examples of Intel Inside and NutraSweet. Do you recall more? During a series of consumer focus groups held in several European countries last year, the Natural Marketing Institute (NMI) tested various famous consumer brands that contained well-known branded ingredients. Surprisingly, the results showed that only with a great deal of help did consumers understand the concept of a brand within a brand.
Yet, another NMI study found that 36 per cent of consumers indicate that a specific branded ingredient prominently displayed on the front of the package increases likelihood to purchase.
Is this a reason to co-brand? Maybe yes, maybe no. If we search for brands within brands in the nutraceuticals and functional-foods market, we do not find many finished examples on the shelves. Why? In this industry, most ingredients manufacturers do not invest sufficiently in co-branded advertising and communication, and do little to foster the awareness of their own ingredients among final consumers. Financing a full advertising campaign to consumers is very expensive. PR campaigns are only marginally cheaper. How many ingredients suppliers are willing and have budgets to engage in such strategies when the business-to-consumer market is not their direct market?
The industry is obsessed with cutting prices, and unfortunately, no matter how strong the science, service and marketing support, at the end of the day suppliers face purchasing departments focused only on reduced cost. This gives no added value to the investments made in brand creation and differentiation.
Also, the confusion of messages on supplements and ingredients reaching consumers has not helped. A 2007 Frost & Sullivan survey shows that consumers hardly distinguish between Centrum or Sanatogen, two supplements brands, and glucosamine or omega-3s, two generic ingredients.
I fully support branding. It is the only way for manufacturers to differentiate their products in a market naturally inclined toward commoditization. However, ingredients suppliers need to fully understand the concept of branding and the investment it requires. Short cuts in strategies will not help. Suppliers should be honest with themselves and the market when discussing the benefits, reality and attractiveness of their own co-branding programmes.
Pedro Vieira is Managing Director Europe for Kemin Health. He has been responsible for marketing strategy of FloraGLO Lutein and its cobranding program in Europe. FloraGLO Lutein has more than 300 cobranding agreements worldwide, representing more than 600 products with its logo on pack.
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