Proprietary Ingredients for Functional Foods

October 24, 2008
Daniel Schatzman

Branded and proprietary ingredients offer at least four benefits, according to experts.

When Intel (Santa Clara, CA) launched its famous Intel Inside ads in the early 1990s, consumers readily embraced the idea of the branded microchip as a key computer component. Since then, manufacturers in a host of other industries have attempted to replicate Intel’s success. In the natural products industry, proprietary ingredients are helping transform raw materials from mere commodities to easily recognized symbols of quality.

Branded and proprietary ingredients offer at least four benefits, according to experts.

First, they ensure a regular and reliable supply of materials. When the source of an ingredient suddenly changes, the cost, flavor, texture, shelf life, and even the nutritional content of a product could change as well. Because consumers expect the products they buy to remain consistent over time, the fact that a product contains a branded ingredient that conforms to a standard set of specifications can be a huge plus.

Second, branded ingredient suppliers often develop and test their materials over a period of many years and at great expense. The R&D and technology that go into a branded ingredient can therefore provide added value as well as peace of mind to manufacturers and retailers.

"There is no need for trial and error," explains Lori Covert, vice president of marketing and communications at Ocean Nutrition Canada (Dartmouth, NS, Canada), which supplies the branded DHA/EPA ingredient MEG-3.

Covert adds that the R&D that has already gone into the ingredient usually means lower development costs and a shorter development time for the finished product. "Proprietary ingredients such as MEG-3 are proven ingredients," she says. "Major companies use them around the world to fortify their products, and using a proprietary ingredient is a way to capitalize on the previous success of other food manufacturers."

"Manufacturers are looking at ways to increase the brand equity of their products," adds Michael Bush, vice president of business development at Ganeden Biotech Inc. (Mayfield Heights, OH), which supplies the probiotic ingredient Ganeden BC30. "When they find a new ingredient, they want to know that their R&D investment is protected. Through Ganeden's deep IP portfolio and the use of ingredient branding, our clients are able to benefit through patent protection and the exclusivity of the brand."

Third, the marketing synergy that springs from consumer ad campaigns that promote the branded ingredient is hard to beat. Because many branded ingredient suppliers spend heavily to promote their products, consumers are already familiar with the ingredients and what they do.

"There's often a marketing advantage for functional food manufacturers that use proprietary branded ingredients," says Bob Green, president of Nutratech Inc. (West Caldwell, NJ), which supplies the well-known bitter orange ingredient Advantra Z. "We support manufacturers with a complete array of marketing and educational materials. In addition, we run ongoing advertising and public relations programs that publicize and profile consumer products that include Advantra Z in their formulas."

Fourth, and perhaps most importantly, using proprietary ingredients can help a manufacturer increase market share by distinguishing its product from the competition.

"Proprietary ingredients afford food manufacturers an opportunity to differentiate their products and command a premium in the value-added wellness foods category," says Joseph O'Neill, executive vice president of sales and marketing at Beneo-Orafti (Morris Plains, NJ).

With so much at stake, it's no wonder that many manufacturers are willing to rely on branded ingredients.

"Given that proprietary ingredients are more likely to be backed by an investment in long-term research and a reputation to uphold, manufacturers look to these companies to provide a solid ingredient," says John Alkire, president of AHD International (Atlanta).