“Blank” Inside: Branding Ingredients

HARVARD BUSINESS SCHOOL—Why do we pay more for an orange with a Sunkist sticker? Because inspecting the outside of the orange doesn’t guarantee the quality of what’s inside. We need the assurance of the Sunkist brand. A variant on this theme is ingredient branding: putting the brand of an ingredient on the outside of a product to increase its appeal.

When is the provider of the final product or service willing to compromise its own brand-building to add the ingredient brand on the package as well as in advertising? There are 4 conditions:

1. The ingredient is highly differentiated, usually supported by patent protection, and so adds an aura of quality to the overall product. Think Gore-tex for water resistant rainwear.

2. The ingredient is central to the functional performance of the final product. Think Shimano gear systems on performance bicycles or Monsanto’s Nutrasweet, added to Equal sweetener.

3. The final products are not well-branded themselves, either because the category is relatively new, because customers buy infrequently or because there is low perceived differentiation among the options. Think about all of Dupont’s ingredient brands for clothing, from Rayon through Lycra.

4. The final products are complex, assembled from components supplied by multiple firms who may sell the “ingredients” separately in an aftermarket. Think cars with Michelin tires, Dolby stereo systems and Champion spark plugs. Read article.