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Creating a competitive advantage

In today's nutritional segment, the basic 'four Ps' of marketing still apply—making sure you have the correct product, price, place (distribution and positioning) and promotions (communications). Pro-viding differentiated products and services for your customers to make them extraordinarily successful is still what makes for successful marketing. But in today's hypercompetitive, $57-billion-dollar global functional foods business, marketers must be aware of changing trends and opportunities to be a winner.

For the nutritional ingredients marketer, three areas are worthy of additional attention. These are where changes to the traditional ingredient marketing approaches are increasingly being required. The first is adding focus on consumer insight. The next is developing new approaches to ingredient branding. And third is in developing new ways of using and managing the advent of new and potentially disruptive technologies.

Focus on the consumer
Consumers cast the deciding vote for the success of nutritional ingredients. Without end-user purchases, there is no 'new money' in the channel to provide acceptable profitability to any of the players in the product distribution chain. Consumers have an especially large impact on nutraceutical ingredients, since these nutrients are added to products solely to provide consumers with a relevant health benefit. These benefits are inevitably highlighted on the package label. They are added to support the brand's promise to consumers. So, which benefits do customers want? What promises should the brand owners make to consumers? These were previously the questions that only consumer product companies asked. Not any more.

Active ingredient suppliers must understand intimately what drives consumers to make choices if they want to create a differentiated 'healthy product solution.' For example, when attempting to market heart-healthy ingredients, should the focus be on programs related to 'cholesterol-related diseases,' or on understanding food choices consumers are making to ensure a longer, healthier life so they can enjoy their grandchildren? Using validated consumer data to support the answer, interpreting the consequences on consumer behaviour, and ultimately developing an entire food prototype concept is becoming the new standard for ingredients marketers.

As consumer packaged goods companies (CPGs) scour the nutritional ranks of ingredients for ways to drive sales, branded-product developers have a choice of which active ingredients they will use to deliver the targeted benefits in the final product. A well thought-out concept, developed and delivered by a knowledgeable and respected ingredients supplier, makes the choice of ingredients easier and increases the likelihood that your ingredient will be the one chosen to support the brand. Often these products are only one in a line of new healthy ingredients. It's critical that CPGs receive detailed consumer insight specific to each ingredient.

Health benefit claims can be a powerful driver of consumer interest in functional foods. Approved health claims are hard to get and require expensive, time-consuming scientific research designed to substantiate benefits. The time and expense needed to create a strong base of scientific evidence for safety and efficacy means that companies need to know which claims will create a positive consumer response and which will not. An in-depth understanding of consumer purchasing psychology can be applied to the development of wording which conveys a health message that is understandable, but not intimidating.

New branding perspectives
Cost and quality are more important than ever, but what else can be done to drive success for CPGs with consumers? As both functional food producers and CPGs look for ways to differentiate their offering, ingredient brands appear to be gaining increased acceptance. Brands such as Kemin's FloraGLO, NutraSweet, Cargill's AdvantaSoy and InterCal's Ester-C come to mind, though the approach for each is unique.

Under the right collaborative agreement between supplier and functional food marketer, ingredient branding can be an effective tool for capturing and communicating value-based messages.

Successful new active ingredients require an investment of time and money in scientific and clinical work to understand both safety and efficacy. Without an ingredient brand, these benefits flow freely among competitors in any given ingredient family. Regulatory approvals are not often exclusive or proprietary to a specific company's ingredient. In addition, since the ability to gain patent protection similar to newly discovered pharmaceuticals is not often available, ingredient companies may be discouraged from making such important investments in science and consumer insight.

The answer lies in creating new business equations for ingredient brands between the CPGs and ingredients suppliers that take into realistic consideration their value to the consumer. Spending millions of dollars on national advertising (as in the case of NutraSweet) is not often practical given the profitability of even the most successful ingredients.

The benefit may be as simple as a different name to describe an otherwise technical reference. Scientific or chemical-sounding terms may be partially mitigated by using brands, creating a more consumer-friendly ingredient positioning. For example, Cargill Health & Food Technologies worked with consumers to develop the CoroWise brand of phytosterols to provide CPGs a simpler name for use with functional foods containing heart-healthy plant sterols. Creative agreements could vary along a number of factors such as positioning of the brand logo on the package, scope of co-promotional efforts or magnitude of scientific support programs.

Brands do not thrive without support. Suppliers must create value in the brand. One example is spending on programmes to reach influential healthcare providers who can in turn recommend ingredient branded functional food products to their patients. Scientific support is another key element. Sound clinical studies conducted on a branded ingredient can provide a valuable trail for consumers or product developers who want to ensure they are getting the ingredient used in the original study. News articles and other mentions springing from publication of the study enhances recognition.

Educating the consumer is an expensive and daunting task, even for consumer product companies. Positive editorial coverage is often the best method for creating product pull-through. Sharing the cost of even limited efforts with consumers can help both the supplier and end-product producer to differentiate their product and drive new sales. The use of an ingredient brand helps leverage this cost for the ingredients supplier.

Finally, collaboration to effectively use an ingredient brand to co-promote a consumer product establishes a strong partnership between supplier and consumer marketer, allowing for information sharing, long-term planning and aligned incentives benefiting both parties.

Advanced technologies
"Is your product GMO?" A question increasingly asked in the industry, is only one of the outcomes stemming from technology-driven changes that should be factored into marketing plans. Nutrigenomics, information technology (IT) tools, nano-technology approaches and the like are among the advanced technologies that are making an impact on the industry.

How should ingredients and functional foods be positioned in the face of such complicated technologies? Which products will be most affected? While new technology improves quality of life, consumers do not appear to want 'technology' in their food.

There are ways of using technology to drive business. For example, new diagnostic devices that detect and measure important biomarkers of disease may help correlate the actual health benefits of certain ingredients. When consumer awareness of a given condition is heightened by safe, quick and inexpensive diagnostic methods, then sales of functional products should increase. Good marketing ultimately means understanding whether advanced technologies provide a benefit or a concern to the consumer and then adapting the marketing mix to leverage the positive implications of your product.

Traditional ingredient marketing has been mostly concentrated on technical performance, taste and 'cost-in-use' evaluations, along with various aspects of quality and service. These continue to be necessary starting points in a competitive market. Likewise, adhering to the basics of marketing is still important. To be successful in healthy products today, marketing professionals will benefit by paying increased attention to consumer understanding, branding and technology advances. These are by no means the only points to be emphasised, but equally, they should not be overlooked.

Steve Snyder is Director of Sales & Marketing Nutraceuticals at Cargill Health and Food Technologies.
Email: [email protected]

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