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 licensed out and integrated it into other formulas and products.
A trademarked ingredient cannot be replicated, redistributed or remade by anyone else other than the IP owner (manufacturer). Trademarked ingredients are used in various products to boost those products’ effectiveness. Branded ingredients also include parts used inside many products. In some cases, ingredient brands are 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 stamp 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”, educated consumers 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 outer wear 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. Products can sell at higher prices, and a better product gives you a bigger competitive advantage.
Licensing a branded ingredient can differentiate your product and add distinctiveness. If your product is a commodity, the ingredient brand can add value and quality. A well-known ingredient brand can build your brand very quickly. Using it on your packaging, in advertising or on your product attracts consumers towards your product. You can take advantage of ingredient brand marketing and use their research and development to add credibility to your products.