Paths to Advantage no.2

Claims. In the world of consumer goods, claims are often related to the health efficacy of a product or ingredient. And claims add substantial value when they are tied exclusively to a product and can be held for a significant period of time. In 2006, Mars developed a new line of chocolate bars, CocoaVia, which it labeled “heart-healthy” because of the demonstrated cardiovascular benefits of flavanols, a natural antioxidant in cocoa beans. The claim provides a sustainable point of differentiation because Mars owns patents related to processing technologies that are designed to retain higher concentrations of flavanols than regular chocolate manufacturing processes. The company doesn’t release sales figures but says the product is “selling well,” and it is expanding the line.
Claims, however, can carry a downside risk, precisely because a competitive advantage that cannot be defended may quickly undermine any initial benefit. Competitors will often exploit a claim that is made for a widely available ingredient. Take the example of Quaker Oats, which spent a small fortune proving to the satisfaction of the U.S. Food and Drug Administration that, yes, oat bran can help lower cholesterol. Quaker (a unit of PepsiCo) may be the premier oatmeal brand, but oats are a commodity, and Quaker did not own any special technologies related to this claim. General Mills, which makes Cheerios, was free to conduct its own piggyback studies and broadcast the cholesterol-lowering benefit widely in its product marketing. The result: Sales of Cheerios climbed 11 percent, while Quaker’s sales actually fell 3.5 percent.