Paths to Advantage no.3

Ingredient synonymy. Think of baking soda, and what name comes to mind? How about peanuts? Or more recently, pomegranate juice? Arm & Hammer, Planters, and POM Wonderful, respectively, have each carved out an enviable position by becoming virtual synonyms for their category. Such domination affords pricing power for products that are essentially commodities. It also builds a barrier to competitive entry and allows economies of scale and higher margins.
Perhaps more important, such synonymy with an active ingredient can provide a powerful platform for entry into adjacent categories. Planters successfully ventured into candy bars, and Arm & Hammer launched a line of baking soda toothpastes. In these examples, the ingredient itself provides the competitive protection. Crest and Colgate could — and did — develop baking soda toothpastes, but they did not “fit” as well in the consumer’s mind. And POM Wonderful has been able to leverage its dominance in juice into adjacent categories, including blends, teas, and POMx antioxidant supplements. The company’s sales grew almost 10-fold in the four years after its 2002 launch.