Ingredients are often thought of as the different pieces that make up a formula. Many of them are patented, most are kept as trade secrets. What you may not realize is that many ingredient IPs are created for the purpose of licensing and integrating it into other formulas and products.
A trademarked ingredient cannot be replicated, redistributed or remade by anyone else other than the the IP owner (manufacturer). Trademarked ingredients are used in various products to boost those products’ effectiveness. Branded ingredients also include component parts used inside many products. In some cases, ingredient brands can be a symbol of quality that assures consumers of a products origin and values.
Ingredient brand licensing is increasing as consumers pay closer attention to what’s inside the products they buy. There are many examples of successful branded ingredient licensing programs. One of the most famous is Intel inside. They taught consumers to look for the Intel Inside logo as an assurance of quality. This “branded ingredient” is one of the world’s largest co-operative marketing programs, with hundreds of computer companies licensing the use of the Intel Inside® logos.
In the 1960s, Colombian Coffee was a pioneer in the use of an ingredient licensing strategy. At the time, coffee was a non differentiable commodity. Through the Juan Valdez character and the phrase “100% Colombian Coffee”, consumers were educated to look for the Colombian Coffee logo as a symbol of excellent quality in the brand they bought.
Many ingredient brands are well known and are synonymous with the products that license them. Some of these include:
- Diet soft drinks with NutraSweet
- Stereos with Dolby noise reduction
- Teflon in cookware
- Gore-Tex in outerwear and ski apparel
Increased revenues and lower production costs are often the biggest reasons for licensing ingredient IP. It helps reduce the amounts of other more costly (and less “effective”) ingredients. You can use their research and development to add credibility to your products, sell it at higher prices, and gain a bigger competitive advantage.
A branded ingredient also differentiates your product and add distinctiveness. If your product is a commodity, the ingredient brand adds value and quality. It can also help build your brand faster. Using it on your packaging and in advertising increases recognition an attracts consumers to your product.
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