Interlink Insight

Vol. 10 Issue-1, Vol. 10 Issue-1 Jan - Mar 2012

Branding and Marketing Practices for Successful Nutraceutical Business

Dilip Ghosh

With intensifying competition & increasing consumer sophistication, Brand Building is becoming inevitably essential to ensure consumer trust & loyalty. While providing insights, this article also articulates success factors for Branding & Marketing practices in nutraceutical business

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Interlink Insight

Vol. 10 Issue-1, Vol. 10 Issue-1 Jan - Mar 2012

hy brands matter? Over the past decade or so there have been sporadic attacks against the idea of brands and branding. However, the presence of a large number of strong brands across different categories, be it hospitals, dishwashing liquids, washing machines, or nutraceuticals, has clear advantages for society. Ingredients are the core of a nutraceutical product, yet it is not the ingredients but the brands themselves that drive value. For example, there may be 50100 brands of vitamin C in US supermarkets/ pharmacies, but Wal-Mart's 'Spring Valley' store brand enjoys nearly four times the market share. In addition to food manufacturers, the pharmaceutical industry has become interested in this fast-moving field; prominent examples include Novartis Consumer Health, Glaxo SmithKline, Johnson & Johnson, and Abbott Laboratories. One important motivation for these such companies to invest in functional food is the shorter development times and lower product development costs compared to pharmaceutical products. Also, owing to the brand image of the companies, acceptance of new products in the market should not be an issue. Choice Although too much choice can have its own disadvantages (e.g. selection paralysis), people fundamentally enjoy having the power to choose between comparable options. In the absence of brands with a strong image, the consumer will naturally prefer to buy the cheapest product. The current market is flooded with a large variety of products, but to survive in this competitive environment, brands must fulfill the promises made to the market, or consumers will no longer support them with future purchases. This is natural selection at work in a commercial sense. Innovation Given the competitive nature of brands competing for customers, there are two main options available for brands who want to improve their competitive position innovation in product and marketing. To pave the way to success, the following three key drivers need to be explored: ? Developing customer-focused products that address specific needs of different customer demographics (Product Development) ? Differentiating products by focusing on credibility building and/or lowering prices of products (Product Differentiation) ? Increasing awareness of a product among physicians and consumers through advertising and education (Product Promotion)

Over-the-counter (OTC) pharmacological foods and beverages companies are moving towards the extremes of the diethealth continuum, adopting both category creation and category substitution market entry strategies. The objective of this cross-category innovativeness is to deliver new brand and line extensions in lozenges, sprays, and capsules targeted at colds and influenza, and in analgesics; examples include GSK's Panadol Cold and Flu range, Wyeth's Anadin Max Strength and Tramil capsules, and, more recently, Reckitt Benckiser's Lemsip Max and Max Sinus capsules. This radical cross-category innovativeness also introduces a high element of risk for food and beverage companies. For example, while plant stanol esters and probiotic cultures have successfully made the transition from spreads and yoghurts to dairy drinks, probiotic juices such as Valio's Gefilus and Skane's ProViva Shots have been relatively less successful in select European markets. Another growth strategy is to reposition existing products to meet consumer needs. The most successful example is Calcium Sandoz, which was switched to the OTC route from the ethical pharmaceutical route by Novartis India in 2000. Also, in 2002, Ranbaxy has transitioned its adult health supplement 'Revital' from prescription to the OTC category. Consistent Quality When many brands compete in a category, there is simply no room for poor quality. Today's consumers will never choose a product or service quality that is below an acceptable level. And, it is very hard to lure back customers who have switched to another product. A recent AC Nielsen survey of consumers in 13 Asia Pacific countries including India showed that more than 30% of customers do not believe the product-related claims made by companies. Thus, brands must ensure that quality control is maintained at all times, which would lead to incrementally improved quality in the longterm. How to drive this to the next level Any given market contains a multitude of distinct consumer segments with different needs and desires and therefore a one-size-fitsall approach won't necessarily work. For successful branding and marketing of nutraceuticals, market segmentation based on sex, age, and physiological conditions; innovations in branded activity ingredients, format, and supply chain; and category

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Interlink Insight

Vol. 10 Issue-1, Vol. 10 Issue-1 Jan - Mar 2012

encroachment should be exercised. Reputation Reputations are earned, not given, and brands have to continually work to maintain the trust of consumers by continuously meeting or exceeding their promises. Consumers choose between brands based on a range of variables, including value for money, function, and, often, emotional connection. In terms of building consumer trust and brand recognition, joint ventures and co-branding strategies with pharmaceutical or consumer healthcare companies potentially represent viable strategic orientations for food and beverage companies entering the market with medicinal products such as OTC pharmacological foods and beverages. Investing in consumer education Increasing consumer sophistication is leading to more opportunities for shelf space in mainstream retailers. Thus, there is an eminent threat that a competitor will be hot on one's heels, releasing a similar product within weeks. Also, many countries use widely differing approaches to nutraceutical labelling regulation, making the creation of global marketing strategies difficult. In order to survive, it is imperative that manufacturers reevaluate their marketing strategies to take into account brand development, product authentication, and consumer education. Companies must be prepared to invest in educating consumers before they can expect to sell to them; further, companies must be innovative in changing the point-of-sale environment. Brand building is now essential to ensure consumer trust as well as interest Competition is intensifying with growing sales. However, with massive increases in media spend; marketing is an increasingly risky business. Brand building is now essential to ensure consumer trust as well as interest. Brand-building strategy development is more complicated than developing the products themselves as it requires an in-depth understanding of the complex motivations purchasing decisions. Identifying your specific consumer is the first and most important step. Commentary Thus far, there have been very few nutraceutical or functional food brands that can be recognised for their strong brand image. One standout example is Yakult. It has been suggested that, in

the case of functional foods and beverages, most consumer segments would be expected to make trade-offs between the functional benefit, price, and carrier attributes, given the complex and multi-faceted nature of consumer food choice. However, more recent consumer insights would suggest the importance of pursuing a strong technological orientation for new product success in the case of medicinal products such as OTC pharmacological beverages. Innovators who are first to market new products targeted at specific usage occasions or specific market segments need to maintain a balanced marketing and technological new product development (NPD) orientation in order to remain responsive to consumers' diverse and changing needs. Concept ideation and generation represent the earliest stages in the NPD process and entail the generation of new product ideas from various internal and external sources. Orthodox approaches to innovation are leading to incremental innovations, which result in the product being poorly differentiated from the other products in the market. However, while 'radically innovative' new products offer potentially greater rewards to both consumers and manufacturers, the level of risk increases along the product development continuum. In that sense, from both an operational and NPD management perspective, concept ideation and generation have also come to represent the most critical stages in the NPD process for new product success. Another major challenge is the incoming Health Claims Regulation in Europe which will both increase the cost of healthy product innovation and challenge current innovation practices. References Aarikka-Stenroos L and Sandberg B. 2011. From new-product development to commercialization through networks. Journal of Business Research. Bogue J. 2009.Cross category innovativeness as a source of new product ideas: consumers' perception of over the counter pharmacological beverages. Food Quality and Preferences 3% Peruzzelli A. 2011. In search of Capaldo A and 7% alliance-level relational capabilities: Balancing innovation value creation and appropriability in 19% R&D alliances. Scandinavian Journal of Management. Harman C. 2003. The global report on nutraceuticals. ABOUT Publishing Group, 71% London.

Mr. Dilip Ghosh, PhD, FACN, is director, Research and Development of Neptune Bio-Innovations Pty Ltd, and Nutriconnect, Sydney, Australia.

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