Whereas ingredient suppliers and product manufacturers may have traditionally had a simple, transactional relationship, according to Jeff Hilton, co-founder and chief marketing officer, BrandHive, Salt Lake City, UT, today companies are looking for more turnkey solutions that offer significant value—for example, through clinical science and marketing assistance. “Everyone needs to play a role,” Mr. Hilton said, and companies can help build consumer loyalty with proven ingredients that are backed by science.
This more collaborative relationship will be important for the future of the industry, he added. “It’s not only a trend, but the way the industry needs to go. It takes a village to build a brand, and ingredient companies play a big role by offering more turnkey solutions.”
According to Dan Murray, vice president of business development, Xsto Solutions, LLC, Morristown, NJ, branded ingredients signify value and benefit to consumers in terms of quality, scientific support and unique product attributes. Branded ingredients are “the foundation of product development,” he said, and they typically create “new opportunities with new products and new categories. The supplement market needs branded ingredients for innovation and attention.”
Branding an ingredient conveys that there is substance behind it, and that the company has invested in intellectual property for that ingredient, according to Suzanne Shelton, founder and managing partner of The Shelton Group, a PR and marketing firm that specializes in strategic communications within the dietary supplement and natural products industry. “The most successful ones are patented for either use or process, and sometimes both.” Research, safety data and clinical substantiation for health claims are all important components. “To safeguard that kind of investment, the company will protect its quality, which protects the companies using the ingredient in their finished products,” she added.
All of this provides substance for marketing and PR campaigns. “Given the questions raised about the nature of the global supply chain, this sort of demonstration of quality, safety and efficacy will remain important indefinitely,” said Ms. Shelton. “Looking at the pattern of negative media coverage on the industry over the past 20 years, this substantiation is essential. It helps manufacturers decide what ingredients to include in their products, and gives them information to convey to consumers supporting their own quality and efficacy claims.”
Foundations of Trust
When it comes to consumers, and business partners, trust is invaluable. As more suppliers disseminate information about their ingredients directly to consumers, the value proposition can be reinforced when they see a product online or on the store shelf, said Mr. Hilton. “Education is underrated, underutilized and under-delivered in our sector.” Building trust through education can build a strong foundation for brands.
Informed shoppers are more likely to seek out and purchase products with branded ingredients, according to Mr. Murray. “When consumers take the time to educate themselves, they know there is science and quality backing up a specific ingredient and they will look for that ingredient in their favorite brand or they will look for the brand itself on the packaging.”
Shaheen Majeed, marketing director, Sabinsa, East Windsor, NJ, said working with branded ingredients in finished formulations effectively raises the quality bar for the industry at large. With investments in clinical data, patents and intellectual property (IP) protection, sourcing/quality control measures, and traceability standards, branded ingredient suppliers offer best-in-class raw materials for the industry.
There’s also a value proposition to consider, he said. “Our customers tell us all the time that they spend a lot of time conducting required testing of ingredients. Surprises in the lab, which are common with commodities, become very expensive to resolve. Dollar-wise, for the amount of money they’re spending, they’ll see a better return on their investment selling a premium product.”
Finally, from a consumer standpoint, Mr. Majeed said it’s much easier for someone evaluating labels, online or in-store, to review products that contain branded ingredients, as all the research and relevant data is easily accessible and recognizable.
Branded ingredients signify quality, consistency, transparency and science, said Lynda Doyle, senior vice president of global marketing, OmniActive Health Technologies, Morristown, NJ. “Savvy consumers are doing their own research into what they are taking and can find confidence that the branded ingredients included in their favorite products have been rigorously tested and come from responsible suppliers.”
Mike Bush, president of Ganeden, Cleveland, OH, supplier of the branded probiotic BC30 (Bacillus coagulans GBI-30, 6086), agreed that branded ingredients help establish a community of consumers who are invested in their own health, and are looking for research and data to support their purchasing decisions. The key to expanding the brand is recognition, Mr. Bush said. “We want consumers to know that when they see our branded ingredient they can go look it up, review the research, and see the data to support what they’re looking for. Then they can go look through the store and see our ingredient and trust the data.”
In a 2015 consumer survey, Ganeden found that almost 25% of respondents who have one or more children were familiar with the probiotic brand GanedenBC30. The company also said one beverage partner saw a 28% increase in sales after adding GanedenBC30 to a product formulation. Additionally, according to IRI data, only about 15% of new product launches are successful past 24 months, but products with GanedenBC30 average over 75% success. This difference speaks to the recognition of the BC30 brand, Mr. Bush said.
Condition-specific products are among the fastest-growing sectors in the dietary supplement market, according to Mr. Hilton. That growth is driven in large part by baby boomers and seniors who have specific health issues, such as joint aches or vision problems, and are looking for targeted solutions.
Boomers who may be in their peak earning years, are most willing to pay a premium for products that contain branded ingredients with a convincing dossier of supporting research, Mr. Hilton said. A 10-20% premium is likely reasonable, he added, given the investments required on the supply end to bring a branded ingredient to market.
Mr. Murray agreed that there is a price to pay for premium, added-value ingredients. “As a marketer of branded ingredients, we want to recoup the investment we make in establishing a better ingredient. Often a branded ingredient starts out as ‘the one and only,’ but eventually competition develops and we hope we have set a high bar, or created a following that rewards time and resources invested.”
According to a survey commissioned by specialist PR agency Ingredient Communications, 73% of consumers across Europe, North America and Asia-Pacific said they would pay a higher retail price for a food or drink product made with ingredients they recognized and trusted. More than half of respondents (52%) said they would spend over 10% more on a food or drink product that contained ingredients they recognized and trusted, and nearly a fifth (18%) said they would pay 75% or more extra.
“Co-branding of ingredients in the food and beverage industry is still fairly unusual, and yet our survey suggests it would resonate with many consumers,” said Richard Clarke, director of Ingredient Communications. “We have seen the power of the ‘Intel Inside’ concept in the home computer market. If it works for selling laptops, then why not food and drink? Co-branding can develop consumer trust and provide a clear signpost for differentiation, which can be converted into higher spend, loyalty and repeat purchases.”
Ms. Doyle argued that consumers of varying demographics would be willing to pay a premium for branded ingredients as long as the product offers unique claims/benefits that set it apart from commodity formulas. “This may be more relevant with targeted nutrition formulas, as consumers are increasingly looking for supplements that address specific needs and where brands can have a greater impact on behavior because of unique claims and science.”
Although cost will always be a consideration, formulators need to answer bigger questions when considering which ingredients to incorporate into their products, she added. “How are they differentiating their product and meeting consumer expectations? In most cases, formulating with commodity ingredients is a race to the bottom, with generic formulas competing on price. Ingredient-specific research to support claims, efficacy and safety are going to carry a higher cost but offer a better long-term strategy for growth because of differentiation and continual investments into a brand that benefits formulators—and consumers—using those products.”
Consumers generally opt for a brand over a generic version with the hope that it provides higher quality, better nutritional value, is better absorbed, and/or provides specific benefits, Ms. Doyle said. “Social responsibility and or environmental initiatives undertaken by a company may also resonate with consumers and their sense of social responsibility. A combination of some or all of these, when communicated effectively, can be a strong incentive to justify a higher price tag that consumers will pay.”
History indicates branded ingredients are leaders—and winners, Mr. Murray said. “Great brands like Super CitriMax, 5-LOXIN and FloraGLO created huge markets for their finished products, he added. “Consumers will pay a premium for the new and novel ingredients. Innovation is rewarded but eventually the brand yields some market share to generics; that’s life.”
Companies need to make decisions about how best to market a finished product that contains branded ingredients, Mr. Murray noted. “The first question when using a branded ingredient is whether or not to use the brand as the foundation of the finished product. Will it be Doctor’s Best brand of PepZin GI or will the ingredient be a secondary part of the finished product? Many people use a branded ingredient as a supporting role to lend credibility, while others make it the primary focus. The risk with the latter is price comparison, but if your house brand has a loyal following, then it makes sense to offer the branded ingredient as a part of your line.”
Protecting a proprietary position is a major challenge for companies that invest resources in developing unique ingredients and products. “Commercial success is not guaranteed simply because the ingredient is new or has science,” said Mr. Murray. “You must have some way to protect and recoup your investment. IP helps but the courts leave it up to private lawyers to fight over the details.”
Lack of regulatory enforcement can be frustrating for responsible companies that abide by the rules, he added. “At the end of the day, a branded ingredient marketer needs to decide ‘how protective am I going to be?’ Is it fiscally wise to chase every infringer or just the big ones? These are tough questions with no clear answers.”
Mr. Bush said the catch-22 of investing in science and publishing research in order to educate consumers and build trust is that competing suppliers often attempt to leverage that information for their own brands.
This is why Ganeden, and other trusted probiotic suppliers, are adamant about stressing strain specificity, as not all probiotic strains function the same way in the body or survive different processing applications.
Mr. Bush said working closely with customers is rooted in Ganeden’s business. “Their success is our success. We’re a science-driven company focused on our customers and the end consumer. We intend to keep putting good science out there.” Ultimately, this will continue to separate branded, value-added ingredients from the rest of the market.
Ms. Doyle agreed that borrowed science will continue to be a challenge for suppliers that invest time and money into product development. Ultimately, though, in a competitive market, companies need to standout to entice consumers to buy their products. “Consumer loyalty is driven by perceptions around quality, efficacy and safety. The more product-specific these are the higher the likelihood consumers will seek them out and continue to buy. Branded ingredients bring a trove of attributes—including R&D, science, marketing, co-branding, claims, education and messaging—that differentiate them from generic products and build consumer trust.”