Branded ingredients need equity, says analyst

By Jess Halliday

- Last updated on GMT

Related tags: Market share, Sucralose

The success of branded food ingredients should be measured by their ‘brand equity’, not just their market share, according to a new market insight from Frost & Sullivan.

Branding of ingredients has become a relatively common practice amongst ingredients firms, especially for value-added ingredients that offer benefits beyond run-of-the-mill commodities and can therefore command higher prices. Branded speciality ingredients are also seen as a safeguard for a company’s income from commodity price fluctuations.

Frost & Sullivan’s Nathalie Watt says often only the market share of a brand is looked at as a means of determining how successful the brand is.

“However, one needs to leverage both brand equity and market share to their full potential,” ​she says in a new paper. “In doing so, a brand will be successful and sustainable in the long term.”

Watt defines brand equity as “a way to describe a brand and measure its total value”. ​A brand is much more than just a logo on a product but is “the sum of all that is known, thought, felt and perceived about a particular company, service or product”.

For the food ingredients sector the brand is usually intended to speak to other businesses – that is, manufacturers. (Although in some cases brands are included on finished product packaging to create resonance with the consumer, too).

Watt cites a number of factors affecting brand equity for ingredients: perceived quality; R&D expertise and innovation; competitor activity; price strategy; regulatory understanding; company credibility; and customer relationship (contract or long-term).

Measurable results of brand equity in the sector are given as loyalty, high market share, and high profits.

Interestingly, the Frost & Sullivan insight asserts that an increasing market share does not necessarily correspond to high brand equity, since it still remains vulnerable to competitor or other activity in the market place.

On the other hand, high brand equity is said to create an opportunity for growth and invariably leads to higher market share.

“One needs to leverage both brand equity and market share to their full potential,”​ writes Watt. “In doing so, a brand will be successful and sustainable in the long term.”

The branding bandwagon

Food ingredient firms tend to attach their new product launches to brand families. Amongst the recent new launches seen in the market, UK flavour firm Treatt launched new flavours distilled from fresh fruit, under its Treattarome brand.

German company Wild also shored up its Fresh-Up brand with a new range of natural flavours said to bring a refreshing effect to confectionery products.

The creation of new brands can also set apart a newcomer in the marketplace as presenting an alternative to well-established brands.

For instance, Fusion Nutraceuticals recently launched its sucralose sweetener and called it SucraPlus. This ingredient is chemically the same as Tate & Lyle’s leading Splenda sucralose.

Fusion is not intending to compete with Tate & Lyle on a cost-basis, as industrial sales & marketing director told FoodNavigator.com in July that it is not in its interests to commoditise the ingredient. Rather, it is looking to diversify the supplier base for industrial users.

Tate & Lyle, on the other hand, has stepped out with new brands in the last few years, especially for its healthy ingredient and reformulation offerings. For instance, it calls its programme to reduce the levels of unhelpful nutrients, like fat, sugar and salt, ‘Rebalance’.

Its programme for the addition of added-benefit ingredients is called ‘Enrich’. And its range of fibre ingredients is names Promitor, after one of the twelve minor Roman gods said to have assisted the goddess Ceres with different aspects of farming. His responsibility was bringing the harvest in from the fields.

Related topics: Market Trends

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