The story of Intel is nothing new, but ingredient branding has yet to achieve widespread usage in the food and beverage industry, where it holds massive potential for manufacturers and their customers. Dr Antje Baumgarten explains
For consumer marketers, brands are part of everyday life and the core focus of all marketing strategies. But in business-to-business (B2B), branding is far less common, and is still seen by many to be significantly less important. Relatively few B2B products are branded, and where they are, those brands are normally 'lost' as soon as the ingredient is used in the end product.
Don't know, don't care?
The reason for this is that, traditionally, consumers were neither aware of, nor particularly concerned with, what made the product function. In all markets, from cars and paint to furniture and food, as long as it fulfilled its expected role, the technologies that facilitated its performance were unimportant. It is not surprising, therefore, that it was the ingredients manufacturers themselves who instigated the concept of ingredient branding.
For early adopters in the early 1990s, the motives were simple and the solution highly effective. Increased global competition (often from lower-cost competitors), commoditisation, homogenisation, and growing price sensitivity among consumers meant product differentiation became more a necessity than a luxury. In an attempt to add value and build brand loyalty and demand, manufacturers sought to communicate to end users the specific benefits of their ingredients. Intel was one of the first to do this, and did so extremely successfully. Intel Inside remains one of the most quoted examples of ingredient branding. Sales of the microprocessor rose 63 per cent in the campaign's first year.
B2B brands to consumers
The first B2B brands were created early in the last century in the chemical industry. Dupont pioneered the development of polyamide fibres in western Europe, helping to lead the company's business in man-made fibres and establishing 'nylon' as a famous brand. However, it was nearly several decades later before the importance of ingredient branding was recognised or seen by consumers. A growing number of organisations has now initiated ingredient branding programmes. Why is this and what can food manufacturers and retailers gain from these strategies?
Getting the right mix
While ingredient branding might still be at an early stage, the benefits and potential rewards for all parties in the food and drink sector — from ingredient supplier to retailer — are convincing. For the food/beverage manufacturer, these include:
- Benefits from the strength of the ingredient brand (and/or the supplier's corporate brand) when already established in other successful end products, even if they are unrelated
- Profiting from the investment made by the ingredient supplier in the creation of the brand, the definition of (and sometimes direct communication with) the target audience, and, in the case of healthy/nutritional ingredients, the scientific evidence behind them
- The ability to tap into new trends via existing products
- The establishment of genuine product differentiation and perhaps unique functionality
- Simple, targeted explanation and communication of the ingredient's benefits providing a credible reason to believe
- Consumer perceptions of added value reduce price pressure and/or enable premium pricing
- The creation of barriers to market entry, which help repel competition, particularly imitation/low-cost products
- Increased influence over end users and the creation of brand loyalty among them, which helps drive sales for both the food/beverage producer and its supplier
- The provision of a strong argument to the trade for stocking the product
- Potential cost savings in future product development and marketing (eg, range extensions).
Retailers, on the other hand, can enhance the value of their own brands and add value to the category as a whole. Ingredient branding gives their customers something to recognise and look for, and can even help them navigate the fixture.
Some good examples
There are several well-known examples of successful ingredient branding in the food/beverage industry — Nutrasweet being the first. This sweetener is now used in more than 3,000 products worldwide. Since then other examples, such as Wrigley's Airwaves / Isomalt (from Palatinit) and Bauer / Biogarde (from Degussa Biosystems), have enjoyed the gains of well-planned collaborations.
However, success does not come without detailed preparation, the careful selection of partners and ongoing effort. Both parties must be sure their brand fits well with, and derives added value from, the other. After all, any downturn in the fortunes of one brand could have repercussions for the owner of the other.
The fundamental requirements for a successful ingredient branding project are:
- The ingredient brand must be recognised and valued by consumers.
- Where the ingredient provides health benefits, these must be independently and thoroughly researched and proven so consumers can trust them.
- The benefits of the ingredient brand must be communicated effectively — on packaging, through marketing programmes, etc.
- Where premium pricing is in place, the consumer must be convinced the higher price is justified.
- Both parties must be equally committed to the project and provide the necessary resources to ensure its success for all the companies involved.
- Similarly, the two parties must present a united image in terms of product quality, marketing message, etc.
Branding in practice
Hi-maize from National Starch Food Innovation is a recent example of ingredient branding. The wealth of published nutritional studies that supports the multiple benefits of Hi-maize and consumer research that shows they value these nutritional advantages, has led to an identity being created to encapsulate and communicate the message of the supplier's resistant starch.
Consumer demands for the benefits of Hi-maize, coupled with suitable end products that possess the desired nutritional profile, have translated into a range of co-branded foods that carry the Hi-maize logo.
The market conditions that led to the creation of ingredient branding are as prevalent today as they were 15 years ago — if not more so. Consumers are bombarded with so much information that they select specific aspects to believe in and value, and this drives their purchasing decisions. Competition is even more intense and globalisation continues relentlessly. As a result, we can expect a further rise in B2B branding throughout the food and beverage industry as suppliers seek to differentiate their offerings and communicate their benefits.
More notable still will be increasing numbers of ingredient-branding collaborations. It has been proven that these projects can have a powerful impact on the business performance of both brand owners. Suppliers to the industry today offer an unprecedented number of ingredients that manufacturers can use to achieve genuine differentiation and added value. By selecting the ideal partner and adopting the right strategy, food and beverage manufacturers are poised for the sweet taste of success.
Dr Antje Baumgarten is marketing manager, Nutrition, National Starch Food Innovation, a leading global supplier of nature-based functional and nutritional ingredient solutions to the food and beverage industries.