10 Jun The Intel-Inside dream

The expression, “We want to create a NutraSweet” or an “Intel Inside” concept has in recent years been one of the most-often expressed ambitions of companies commercialising new health ingredients. But, as Solae has found, it’s also one of the most difficult strategies to execute. The failure rate for business-to-consumer ingredient brand programmes is now running at 95%, according to our own analysis. So what did Intel and NutraSweet do that made them succeed? And what can we learn from these successes and the recent multiple failures?

First published in New Nutrition Business April 2010 Newsletter

Creating business-to-consumer (B2C) ingredients brands on the model of NutraSweet or Intel is often seen as a way of differentiating ingredients and the products they contain and of emphasizing the benefits of a particular active ingredient. The strategy, it is hoped, will lead to growing consumer recognition, which will in turn result in consumers choosing a product with a branded ingredient over a rival one which does not have the ingredient. Ingredient companies also hope that it will help them escape from the price-sensitive commoditisation that characterises many ingredient markets and support sales growth.

It wasn’t so long ago that it seemed like every company wanted their own branded ingredient, and at one point in 2002, when this strategy was most in vogue there were perhaps 30 or more branded ingredient programmes in operation. Almost all of them have now fizzled out.

So it’s worth looking briefly at the two inspirations for many of these Intel and NutraSweet. What made them work and what made their emulators fail?

NutraSweet

The non-calorific sweetener also known as aspartame was discovered in 1965. It proved to be 180 times as sweet as sugar. Aspartame received FDA approval in 1981. It was marketed as a table-top sweetener, packaged in individual serving packets, under the Equal brand name. It was also marketed as an ingredient in low-calorie drinks, cereals and desserts, where its taste advantage compared to other sweeteners then available helped sales grow rapidly. In the fiercely competitive beverage market, companies began to use NutraSweet aspartame in large quantities. The entire diet foods sector grew dramatically. Protected by patents, it had no comparable competition in the sweetener market. Sales of aspartame reached $74 million in 1982.

With aspartame becoming a crucial ingredient in the products of other manufacturers, Searle, the makers of aspartame, began a campaign to build public recognition for it. These were some of the steps in that strategy:

• 1983: created the name NutraSweet with a logo a red and white swirl.
• 1984: $40 million spent on advertising NutraSweet and the company got food manufacturers to display the NutraSweet logo on products that used it. The initial ad campaign focused on the number and variety of products that used NutraSweet and the fact that they displayed the red swirl. The move was partly designed to put pressure on beverage manufacturers to adopt NutraSweet. The firm also wanted to lock up the artificial sweetener market for NutraSweet before its aspartame patent expired in 1992.
• 1985: Searle was bought by Monsanto. NutraSweet sales amounted to over $700 million in 1985.
• 1986: NutraSweet began a $30 million advertising campaign to push the fact that it was made from natural ingredients, not artificial ones like saccharin and cyclamates. The television ads, which featured views of fruits and vegetables, used the theme, “Nature doesn’t make NutraSweet, but NutraSweet couldn’t be made without it.” The print ads, which appeared in major national magazines, focused on the fact that NutraSweet was digested in the same way that fruit or milk are digested.
• 1987: NutraSweet’s European patents expired in 1987 and the firm took strong competitive measures, allegedly cutting prices by over 60%. As a result it continued to hold onto most of its 65% market share. Its years of advertising its red swirl trademark had paid off in high consumer recognition.
• 1991: NutraSweet announced a $20 million ad campaign, targeted to support the products of customers using NutraSweet.

At one point the NutraSweet logo was a common sight on products in supermarkets around the world. Yet today it is seen on very few products. Once NutraSweet’s patents expired and manufacturers could source aspartame from other sources and as alternative sweeteners, such as sucralose, entered the market, brands began to drop the NutraSweet logo. The company is still a serious competitor in the ingredients arena, but the heady days of the 1980s brand era are gone.

Note that the total spend on advertising the presence of the NutraSweet logo was at least $100 million ($75 million) over 10 years from 1984 (adjusted to todays terms an investment equivalent to $150 million).

Intel Inside

The Intel Inside programme was started in 1992 to reinforce the difference between Intel’s processors and the competition and so achieve a price premium and maintain its high market share (90% in 1991, with its chip selling at a 40% premium). Throughout the 1990s, Intel’s claim to fame had been that its processors were the speediest and most powerful in the PC marketplace. It spent millions on the “Intel Inside” campaign, inventing the notion that consumers would order a computer based on the presence of its microchip which with its 90% market share was almost unavoidable anyway. Meanwhile, rival AMD lagged behind as the price-performance leader, unheard of by consumers and posing little or no threat to Intel.

Intel doesnt discuss numbers, but:

• TNS Media Intelligence reports the chip manufacturer spent $98.2 million on all its US advertising in 2006.
• The company reportedly spent $100 million on advertising in 2008 and $50 million on other channels, and on co-marketing programmes.

FINDING THE INGREDIENTS OF SUCCESS

Three things stand out from these examples:

1. If you want to create a successful branded ingredient programme, make sure you are already dominant in your market before you begin it: Intel was already dominant in its market (with a 90% share) when it initiated Intel Inside. The branded strategy has helped the company maintain the largest market share –- but it started out from a good place. NutraSweet was the first and for a while the only new intense non-calorific sweetener that food and drink makers could use. Protected by patents, it had a dominant position and was already seeing rapid sales growth even before it began the NutraSweet ingredient brand programme.

2. Cut your prices: Intel has remained dominant, but rival AMD has steadily eroded its share (now down to 80%) and Intel has maintained its share by a programme of aggressive price cuts (of 50% in one year). NutraSweet, too, used price-slashing (by up to 60%) to protect its share. It’’s easy to see that aggressive price-cutting was probably an even more significant part of these companies strategies than their ingredient branding programmes. So lowering your prices an ingredient brand, it seems, won’t save you from price competition.

3. Invest heavily behind your brand: A significant scale of expenditure is needed to sustain an ingredient brand at a level that actually gets the consumer’s attention. This is not a strategy that can be followed on the cheap.

There are some further elements that make for a successful branded ingredient strategy:

4. Uniqueness: It helps to have a significant point of difference. NutraSweet was certainly unique in its heyday; its uniqueness protected by patents. But when the patents expired and me-too producers entered the market, the NutraSweet ingredient brand was of little help in preventing the steady erosion of its market position. Rival sweetener Splenda has had its natural message to differentiate it in the sweetener market, a point of difference which may now be passing to stevia.

5. Understand the benefit: In the “Four Factors of Success” brand development checklist made famous by Swedish brand strategist, Peter Wennström, one of the most important of the Four Factors is that the consumer should understand the benefit. The advantage that a sweetener ingredient has is that its benefit low or zero calories is easy for any consumer to understand. Everyone wants to enjoy their favourite drink, almost everyone would like to enjoy it without worrying about sugar or calories. Hence the sweetener sucralose has also made headway as an ingredient brand and, in fact, beyond sweeteners there are almost no examples of really successful branded ingredients, perhaps because few other ingredient types have such an easy-to-understand benefit.

One exception is digestive health, which is the biggest trend. The benefit of improved digestive health is also easy for the consumer to understand and accept. So perhaps it isn’t surprising that the Beneo-Orafti ingredient brand of dietary fibres is making slow but steady headway in multiple countries. Note also that Beneo-Orafti, while not dominant in its market, was nevertheless already one of the world’s largest and best-known suppliers of dietary fibres when it began its Beneo ingredient branding programme (see point 1 above).

Solae slips up
The Solae soy protein ingredient brand can be seen to have fallen down on a number of these parameters:

1. No dominance in the market: Solae was using the NutraSweet and Intel models to create a leadership position.

2. Insufficient investment behind the brand: Solae’s marketing was underfunded compared to NutraSweet. In 2004, for example, Solae’s spending on TV advertising was just $6 million (4 million) just 10% of what Nutrasweet’s annual spend had been.

3. No uniqueness: Its soy protein, similar to what is available from many sources.

4. Understand the benefit? Soy’s benefits, as many soy companies have found have the strongest appeal to only a niche of consumers. Beyond that niche, few consumers understand the benefits. And confusingly for consumers, many different benefits are cited in the media, ranging from fighting the symptoms of the menopause to cholesterol-reduction. That’s very different from the simple, easy-to-understand no sugar, no calories message that sweeteners can use, a message that has mass appeal in its simplicity.

Conclusion: the way to build an ingredient brand?

Too often, it seems, innovative ingredient companies find that their customers NPD and R&D teams are enthusiastic about their new nutritional ingredients but that the enthusiasm runs out by the time the idea gets to the client’s marketing department. Too often, ingredient companies say, the marketing department becomes a graveyard for good ideas. If the marketers don’t know how to sell the benefits, or if it will require a new or unfamiliar approach to communication, then they don’t want to know.

In response, many ingredient companies have tried to bypass marketers conservatism by creating their own ingredient brands inspired by successes such as NutraSweet and Intel Inside in an attempt to create consumer pull for products containing their ingredients.

Such efforts have almost universally failed to get off the ground. The reasons for the failure of branded ingredients strategies are fairly straightforward: in large part it comes down to the difficulty of getting consumers to notice an ingredient brand on a package amidst the rest of the label clutter and the many other message with which they are bombarded and lack of investment.

But one of the often-overlooked lessons of Intel and NutraSweet is that if you want to start a branded ingredients programme, first be the established leader in your market. Outside niches such as sports nutrition, there’s no track record of business-to-consumer ingredient brands building new businesses, but there is a record of them helping to protect an existing market share. For companies that are trying to build a new market for a new ingredient, the two famous models of Intel and NutraSweet may be the least appropriate examples you can use.

About New Nutrition Business

New Nutrition Business is a London-based research, publishing and consulting company which specialises in researching, analysing and forecasting developments in the business of food, nutrition and health around the world.

The strategies and success factors it  has identified in the 1990s have become the benchmarks for strategy development and brand positioning in the worldwide nutrition business. It works with companies all around the world, from the United States to Australia and from Sweden to South Africa.

New Nutrition Business is headed by executive director Julian Mellentin, one of the world’’s very few global specialists in the business of food, nutrition and health.

He is the editor-in-chief of New Nutrition Business and Kids Nutrition Report, the only industry journal in the world on the rapidly developing kids’ nutritional marketplace.

Julian is co-author of both The Functional Foods Revolution: Healthy people, healthy profits?, the first-ever book on the business of functional foods, now translated into Japanese, and Commercialising Innovation: The Food & Health Marketing Handbook.
See www.new-nutrition.com