Supply-Side Transparency: Why It’s the Key Differentiator

by Yadim Medore | November 5, 2018

This week, two important events are happening at Pure Branding — first, we are launching our newest market research study, The ROI of Transparency. Second, I am attending and speaking at SupplySide West.

This confluence of events provides me with a perfect platform to write about the importance of supply-side transparency. For supplier companies that produce ingredients, offer raw materials, or provide contract manufacturing for brands that sell to consumers and/or practitioners, transparency is worth considering. And it could be the single most important factor that determines the sale.

Let me explain.

Consumer Brands Being Pressured to Be More Transparent

Dietary supplement, functional food and personal care brands are selling and marketing to a consumer who is more aware of transparency and considers it valuable. Our study shows that 73% of consumers say that transparency is of value to them.

The study also confirms that a company’s level of transparency directly and positively affects sales. The study also goes into greater detail about the kinds of consumers who are demanding greater transparency.

So brands are paying attention to transparency and how to integrate it into their operations. The alternative is no longer an option, because in reality, we know that being perceived as non-transparent is actually damaging to a brand’s reputation, and a company’s bottom line. If a brand doesn’t have a transparency strategy, they’ll fall victim to competitors who do.

What Practices Should Be Most Transparent?

It takes a level of commitment and investment of resources for a company to become more transparent. Not only does this affect processes, but it also impacts corporate culture. It is not an easy “flip-the-switch” proposition.

Companies are often overwhelmed by the prospect of becoming transparent. Paralysis sets in. But all that is required is the first step. What should it be?

In our study, we determined which practices for a vitamin and supplement company, a personal care company, and a food and beverage company should be most transparent. We looked at:

  • Ingredient labeling
  • Factory conditions
  • Standards on safety and toxicity testing
  • Growing
  • Processing type
  • Sourcing/procurement
  • Distribution
  • Employment/labor
  • Science behind the product claims
  • Backing up information by third-party verification
  • Environment
  • Conditions
  • Livestock
  • Community
  • Management

More than half of all consumers insist on having ingredient labeling be as transparent as possible. In the study, ingredient labeling was defined as things like the labeling of GMOs, additives, or synthetic ingredients. This was followed by standards on safety and toxicity testing.

The most important transparency practices directly relate to ingredients and raw materials suppliers.

We also looked at growing, processing, and sourcing, which were most important to millennials and to those who most value transparency in general.

I point these practices out because they directly relate to ingredient and raw material suppliers. What we often find is that consumer brands want to make their supplements, functional food or skin care as transparent as possible, but are stymied by their suppliers.

Just imagine how much you would help a supplement company that wants to be more transparent if you made your own ingredients, safety testing, sourcing, growing and processing transparent.

Increase the Value of Your Ingredients

An ingredient that offers transparency is worth more than one that is not. This is not wishful thinking.

We asked our panel of more than a thousand consumers if they would be more likely to pay more for a vitamin and supplement company that has transparent practices than from one that does not. 78% either strongly agreed or agreed that they would be likely to pay more. This was across all generations, as well as both natural and mass sales channels.

By investing in making the raw materials transparent to the consumer, an ingredient supplier has increased the value of that material — not only in terms of emotional value, but also real dollars. 

Transparency Leads to Story

I bring up the idea of emotional value because we have also found in our other research that relying on science-focused features and benefits alone is simply cost of entry. Every ingredient supplier has the science, offers the best technology, and has the highest quality. You are the best. And so is everyone else.

Supplier companies that successfully brand and market their ingredients and manufacturing will need to tell human stories, fostering emotional connections that can then be leveraged by their finished goods customers. And embracing transparency provides the foundation for great storytelling.

So, as I walk past the myriad of booths at SupplySide West, I’ll be on the lookout for companies that promote the transparency of their ingredients. They will be the ones that have the more valuable ingredient or raw material, and able to support the business interests of consumer brands looking for ways to become more transparent.