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Branded ingredients: the path to growth in pressurised industry?

25-Feb-2005

The news this month that the world's number one drinks giant Coca Cola has linked up with Tate & Lyle's Splenda sweetener in a new branding venture could signal the beginning of a new wave of ingredient - manufacturer tie-ups.

Danisco's head of global marketing services Henrik Vesterborg Andersen speaks to Lindsey Partos about the challenges and benefits such a symbiotic venture can bring to both ingredients supplier and food maker.

The largest ingredients player on the market, with a product portfolio that hits 12,000, in the coming months Danisco will single out up to 2 per cent of these products for their branding value.

According to Vesterborg Andersen, the selection will depend on one key factor: "The market potential."

"In close collaboration with our customers, we will work on a case by case basis to identify how to bring more value to that product," he explains to FoodNavigator.com.

But plucking an ingredient from the range, or making the commitment to invest in the development of new ingredients, is just the beginning of a successful brand venture.

Danisco's marketing director believes two barriers need to be overcome before an ingredient can be put on the road.

"The ingredient plucked for promotion must be aligned with the brand strategy of the food manufacturer: and the end consumer must understand the value of the ingredient," he says.

While ingredients players can bring the scientific and technical know-how to an ingredient, the food manufacturers have the necessary clout to market the brand to the consumer.

Which means, clearly, that the food maker will only make the commitment if the ingredient slots into its broader aims.

"We cannot do the 'big bang' to the consumer that the manufacturer can offer," adds Vesterborg Andersen.

At least, not at the moment.

Although innovative ingredients companies can today meet the challenge of technical expertise, if the co-branding concept gains pace, they will have to learn new skills in the marketing area in order to gain a competitive advantage.

In Vesterborg Andersen's words: "New investment, but also new potential."

The marketing capabilities of the food maker will go some way to educating the consumer, but ingredients firms can also contribute here to the synergy.

In the 1990s Danisco identified the polyol sweetener xylitol for leverage in the Asian chewing gum market.

"As the biggest supplier of xylitol to this market, we saw there were good synergies to leverage the whole product category," says Andersen.

Danisco launched a 'value network' to bolster awareness of the ingredient.

"We talked to regulatory bodies, media, dentists, universities et al to promote the product to the professionals," comments Andersen.

Working in parallel, all chewing gum packaging bore the xylitol logo.

Today 80 to 90 per cent of chewing gum sold in Asia has xylitol in their formulations.

Gains are also to be made in the dynamic area of functional foods. Encouraged by consumer demand, ingredients firms are slicing away a chunk of their R&D spending into health, flagged up as one of the fastest growing, and potentially lucrative, areas in food today.

Surfing this wave, Danisco has kicked off a series of co-branding ventures for its Howaru probiotic range. Marketing rights for the ingredient have been sold, on a licence basis, to a series of retail customers in South Africa, Japan, Slovenia and Poland.

Not exclusive, the agreement works for both parties in a determined territory.

"In order for an ingredients company to make gains on branding issues, it has to be able to sell to more than one manufacturer," comments Andersen.

One exclusive player would simply not be worth the investment, he adds.

In addition to reliable information based on exhaustive scientific evidence, the ingredients suppliers can bring a further factor to encourage the supplier/maker co-branding equation. Knowledge.

Competition is fierce in the food industry; and with price pressures, squeezed margins and higher costs eating into their revenue stream, any additional leverage the ingredients player can supply the food maker is a clear competitive advantage.

In the last three years Danisco has set up a series of 'knowledge' teams, thirty in total, to capture the l'air du temps in food: once captured the firm aims to use the knowledge to inspire new customer concepts.

Spread across global operations, the small groups (around 10 people) of scientists and marketers assess how to build "knowledge" into Danisco's ingredients.

Andersen explains: "Teams at the different locations will define what they believe is occurring in food, from a new direction for yoghurt to a new angle for fine-food.

They will then design a product demo that can offer inspiration to our customers."

Essentially, innovation is the impetus to drive the food industry forward. But if the ingredients players can take their knowledge, founded on hard investment and a watertight understanding of the market, to the manufacturer, they could be on the way to a successful co-branding venture.

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