Ingredients don’t drive value, yet some firms are stuck on selling generics and ingredients. Trusted brand names drive value. There may be 50-100 brands of Vitamin C with rosehips. And without a strong brand image, the consumer will buy only the cheapest. In the nutrition business, very few marketers have built really strong brand names.
Thus far, there are few nutraceutical or functional food brands that can be recognised for their strong brand- ing and their image. One standout is Yakult. The care of a brand plays an extremely important role for a firm. Differentiating ingredients How to differentiate a commoditised product like ingredients in the globe? As an individual ingredient manufacturer from India how can one create a differentiation factor, especially when the market situations, with respect to economy or regulations, are drastically changing? The differentiation factors can be attached to the entire organisation or a product or a group of products and also to a group of markets where it is to be operated. In fact, ingredient is not just a product/not just a part of product. It is a well-blended combination of prod- uct, service and value.
Let us consider various differentiation factors in the case of Indian ingredients.
Any one of the factors in product col- umn from the below representation can act as a differentiator. Many ingredient manufacturers have the capability to bring new products quickly but they drop the products once margins start eroding. Customers would prefer this company for development and early launch phase of their formulations. But at the same time the customer starts looking for alternate supplier. So the ingredient manufacturer has created a differentiation for itself as a ‘quick to launch new products company’. As long as the manufacturer maintains this differentiation factor, the benefits keep flowing in.
|Overall quality of the product
|Decent Representation in the Markets operating
|Continuous R&D and Process Development
|Availability of Marketing Person
|Studying the safety and efficacy of the data
|Customization of Specifications
|Regular Customer Visits
|Compliance with law
|Quick launch of New Products
|Prompt Supply of Material
|No Child workers
|Sustaining Old Products
|Decent phone, email, fax and SMS communication
Compliance with Packaging & Labelling
|Good host as well as a guest
|Contaminants, Toxins and residues
|Compliance, Licensing & Registration
regulations & certifications
|Feedback and Improvements
|Provide a clarity to all
stakeholders including enforcement agencies
|Scale of production
Through differentiation manufactur- ers like Omniactive (with their ingredient product Lutein) and Parry (with its product Spirulina) have already made their mark in the nutraceutical ingredients market.
Secondly, ingredient manufacturers are remembered by customers based on various exhibited and inherent attributes of product, service and value in the above representation. The question of what attributes to choose and what is right and what is sustainable depends on the long term vision of the ingredient manufacturer who would like to create a differentiation factor.
Nutraceutical ingredients market is an emerging sector with various stake holders such as raw material suppliers, processors, product manufacturers and end-use consumers. The product includes functional food, beverages, dietary supplements, animal nutrition and personal care.
The nutraceutical product and ingredients market are inter-dependent on each other. Shift in any one will have a direct impact on the other. Increasing awareness and reliability on the nutraceutical products offers a strong consumer base for the market. Nutraceutical ingredients are essential for various health purposes and prevent chronic diseases that may occur due to lack of required nutrients in the body.
Dietary supplements form the major application of nutraceutical ingredints as the nutraceutical are served in pharmaceutical formats. The majority of ingredients are served in the form of tablets, capsules, etc. Nutraceutical ingredients account for nearly 60- 80% of the ex-factory cost for dietary supplements whereas in functional foods, nutraceutical ingredients usually account for 10-25% of the ex-factory cost.
Consumer’s desirability of nutraceutical ingredients is as follows: Vitamins and minerals (highest) followed by proteins, antioxidants, omega-3, probiotics and dietary fibres.
These ingredients score high on health claims, positioning, research and application profile, consumer awareness and current market size and growth areas.
World-wide demand for nutraceuti- cal ingredients is forecast to rise by around 7.2% annually to $30 billion in 2017, serving end product markets totalling $369 billion. The best growth prospects will exist in substances with clinically supported health benefits and broad applications in foods, beverages, dietary supplements and adult and pediatric nutritional preparations. Comprised in this group are soy proteins; oat bran, psyllium and soy fibres; probiotics – Bifidobacterium and Lactobacillus; omega fatty acids, cranberry and garlic extracts, calcium, magnesium and zinc minerals and Vitamins A and C.
The personal care ingredient market in India is growing at almost double the pace of developed markets of US and Europe. With the personal care industry witnessing a cumulative annual growth rate of around 14%, the demand for personal care ingredients too has risen at an almost equal pace.
The key challenges faced by the ingredients industry are:
Absence of product validation and credibility
Lack of product differentiation
Expensive pricing catering to premium segments
The way forward in the ingredients market includes product diversification, product identity and market penetration.
Product diversification includes establishment of line variants e.g: Omega-3 oils into vegetable oils to provide penetration into the commodity sector.
Product identity includes creating brand and product equity. Market penetration includes customer retention especially in low volume markets such as probiotics. This also includes focus on efficient logistics systems, distribution channels and after-sales service. Moreover it includes targeted marketing, advertising and sales promotion campaigns that address specific needs of target consumers.
As a result, a best-fit strategy to differentiate is based on the factors mentioned in the above and weaving them in the competitive advantage. Most Chinese ingredient manufacturers at the beginning became high volume cost effective, competitive and quick producers. As time progressed, the differentiation factors increased and we now find focus on the efficacy data of the product and/ or its ingredients as well as handling of different chemistries.
Gradually make it visible to the customer about your differentiation factors either through subtle communication or through your professional activity and ensure that the customer is aware of the changes.