Next Phase of Supplement Industry “Flavor Licensing”
More than 260 different licensed SKUs are currently commercialized throughout the functional food, functional beverage, and nutritional supplement categories…with more popping up every week! Did that number surprise you? Maybe it will after you view the comprehensive list!
Regardless, this article will hopefully clear up the following questions (and more):
How did the supplement industry get here?
Why has flavor licensing become so popular?
How many are too many licensed flavors?
Where does the flavor licensing strategy go next?
Flavor Becomes King
Up until the very last part of the 2000s, functionality was prioritized over taste (and flavor originality). When you walked into a GNC or The Vitamin Shoppe store location, the pre-workout powders would have grape, watermelon, and fruit punch variants and the protein powder flavors resembled a carton of Neapolitan ice cream. So, if you think we’re living in a “sea of sameness” today, just imagine how beige that era was in the supplement industry.
Things began to change drastically in the late-2000s when sports nutrition brands began utilizing flavor as a differentiation point. That was made possible by a huge leap in flavor science (artistry) within powdered supplement products. This supply side component likely doesn’t get the credit it deserves for making the user experience more pleasant, thus kicking off the mainstreaming effect within the sports nutrition industry.
In 2014, MAN Sports did something that created the foundation for today’s licensed flavor strategy. This is when MAN Sports launched ISO-AMINO in “candy flavors” that mimicked the nostalgic candy that we all loved to eat as kids. Since this was a radical leap at the time, MAN Sports used creative name variants of the mimicked candy flavors to help consumers connect the dots more easily. So, you had Dorks instead of Nerds, Sour Batch instead of Sour Patch Kids, Starblaze to imply Starburst, Sweet Delish for Swedish Fish, and many others. For better or worse, you can still see that flavor naming tactic being used a lot throughout the sports nutrition industry.
B.G. (Before GHOST) “Flavor Licensing”
That paradigm shift of “who cares about flavor” to “flavor is king” led the supplement industry to explore brand licensing deals. Here’s a bit of useless trivia knowledge…
Who was the first sports nutrition brand to add branded inclusions into a protein powder?
While we officially have little way of knowing that because companies would add unauthorized branded inclusions for many years, Muscletech did officially partner with both Hershey’s and Oreo in 2009.
Who was the first sports nutrition brand to sign a flavor licensing deal?
In August 2015, Gear Nutrition announced they had secured an industry-first licensing agreement with Cold Stone Creamery. They posted renders on their website, but it ended up being a false start…it never happened, and the brand quickly crumbled.
GHOST Lifestyle Takeover
It took a little over a year later, but GHOST Lifestyle become the first sports nutrition brand to launch an officially licensed flavor with Warheads Watermelon Legend pre-workout in November 2016. Over the next two years, it was basically a GHOST Lifestyle takeover with the brand adding to their roster of licensed products:
more Legend Warheads flavors
Warheads flavors being used in other GHOST products
Sour Patch Kids BCAA launched
Swedish Fish BCAA launched
”why didn’t I think of that?” - every sports nutrition brand owner
It’s a valid thought because it wasn’t exactly inventive thinking…it was purely a remixed product innovation strategy that benefited from a bit of good timing.
Remix = If you walk down the aisles of your local grocery store, you would see food and beverage licensing being used across most CPG categories.
Timing = the internet democratizing the entire CPG landscape and “better-for-you” alternatives disrupting categories, thus causing legacy food and beverage brand manufactures to seek ways to build equity and expand a product’s relevancy in the mind of today’s health and wellness consumers.
By leveraging the recognizable brand name (and flavor IP) of the licensor, it helps the licensee increase trial rates, especially with new customers.
Follow the Leader
Imitation is the sincerest form of flattery, right? The successful use of brand licensing by GHOST Lifestyle provided two major effects:
it made the supplement industry more attractive to IP licensors
it allowed competitors to play a game of “follow the leader”
With the floodgates opened, it took only a handful of years for the global supplement industry to launch more than 260 licensed SKUs…a number that will undoubtedly grow in the coming years. But that brings us to wondering “how many are too many licensed SKUs in the active nutrition CPG categories?”
I don’t have an answer for that, but I can say with complete confidence that we haven’t hit the “too many” point yet. If you look across the entire sales channel landscape, you’d be hard-pressed to say we’ve hit the point of substantial diminishing marginal returns, especially in most large retail partners. That being said, the supplement industry will sooner or later hit a dense saturation point where licensed flavors provide almost no product differentiation value. Surprisingly, those same large retail partners laggards will be where you see the pushback first, as fixed merchandising sets will eventually cause the typical gatekeeper application. Alternatively, you will see continue to see an infinite amount of licensed flavors hit DTC websites and online marketplaces because of the endless shelf.
What Could Be Next?
Supplement brands should be thinking about licensing opportunities more strategically. Common sense, right? Yet, many recent brand licensing deals felt more defensive than offensive business strategies. Innovation to parity isn’t going to cut it in this next phase…
Localized, Impactful, & Meaningful
As large national retailer shelves and coolers continue to get saturated with licensed products, it will require brands to be strategically aligned between licensed IP, authentic storytelling, and channel partner.
Here’s an hypothetical example for “Josh’s Supplements”:
Brand License = Good Humor Ice Cream
Channel Partner = Giant Eagle
Authentic Storytelling = (1) I’m obsessed with ice cream. (2) Good Humor was founded in my hometown of Youngstown, OH. (3) I ate a metric ton of Good Humor ice cream products growing up.
That success in a localized market would create momentum that I could leverage across other markets (or online) because Good Humor also invented the ice cream truck…which I’m going to guess touched the lives of almost all American children.
This strategy can be applied to local creators, charities, or anything else. Size doesn’t matter in this case. Authentic stories matter. It’s about being different…not better than incumbents in this next phase. To win, it will need to be done through depth of authentic storytelling that’s aligned with your sales channel strategy.
Format Extensions
Yes, energy drinks are crushing it and there’s a few protein drinks/foods, but most of the current licensed products have been in the ready-to-mix powder format. This lack of “functional foods” with licensed flavors is a major opportunity that I think will be hammered hard in the next few years.
Entertainment & Beyond
Do you want to be a sports nutrition brand or do you want to be a lifestyle brand? Lifestyle brands transcend their original category and think psychographically to position themselves at cultural intersections that are relevant to their customer base. A great way to do that (if done correctly) is to leverage entertainment IP. That being said, outside of GHOST’s Space Jam and Teenage Mutant Turtles, and maybe a few G Fuel efforts, these entertainment licensing endeavors have been subpar at best.
“IP Hoarding”
As large CPG conglomerates evolve their portfolios into being more functional and healthier through M&A activity, it will inevitably lead to less (or at least more costly) licensing opportunities in the future. While the current examples are minimal, we’ve seen it play out with…
Post Holdings = a crosspollination between Dymatize and Pebbles cereal
Mondelez International = combining Grenade and Oreo in the UK market