The Marketing Evolution of Ingredient Co-branding -- June 2007
If you have noticed an increase over the past decade in co-branding activity behind proprietary, patented, or in some cases, even commodity ingredients, it is no accident. A cutthroat marketplace is certainly a factor. Eroding consumer confidence has definitely created some urgency, and intellectual property violations have fueled the fire. The result is that manufacturers are increasingly looking for categories or segments they can own. That pressure is shared with their raw material suppliers and partners, who are trying to meet that demand with patented, proprietary or at least unique raw ingredients that have been branded to facilitate awareness and encourage differentiation. As a result, the market has been flooded with a wide range of branded ingredients incorporated into both supplements and foods, and the list is growing.
While it may be a popular strategy, is it also a smart one? The answer is a qualified “yes.” In other words, it certainly can be a wise marketing approach, if it is executed well. However, it involves more than merely slapping a name and logo on the ingredient. The most successful programs are integrated to provide a 360-degree approach to marketing communication.
The assumption here is that by partnering in the promotion of a branded ingredient, a manufacturer and supplier can share the cost of developing and introducing differentiated products into the marketplace and generate incremental sales. The supplier gains a committed customer that will continue to purchase raw material exclusively from them, as long as the branded ingredient or logo is in the product and on the label. The manufacturer gains a value-added product which can be sold at an above-parity price. Plus, the promotional dollars that each is willing to spend work together to build brand awareness and encourage trial.
There are numerous ways to attack this, but the key issues are the number of partners and the channels of distribution.