Case study: nurture, Inc.

BUSINESS DESCRIPTION: Nurture, Inc., Devon, PA, is a developer, manufacturer and marketer of proprietary, high value ingredients derived from oats, which are marketed to the human health, personal care and industrial markets. Its main product is OatVantage[TM], a 54% oat fiber (beta-glucan) concentrate.

THEME: Critical to Nurture's success going forward will be to extend its technological advantage and pioneer additional finished product applications to increase its competitive insulation and continue to build a superior "value proposition" versus other cholesterol-lowering ingredients.

BACKGROUND: Nurture is a privately held company, with a leading U.S.-based cereal company among its investors. After six years of development, the company introduced the first and only highly concentrated, convenient dose form of oat beta-glucan for use in dietary supplements and food and beverage applications. To marketers, the value of this technology is that it enables their products to offer the FDA permitted "Helps Lower Cholesterol" claim versus a structure/function claim, and leverages the existing high awareness of the link between oats and heart health, which among other advantages, can substantially reduce the cost of educating consumers. The company has GMP manufacturing facilities in Missoula, MT, and has more than 20 patents for grainbased natural product applications. Oat beta-glucan is supported by a large number of published studies showing applications in cardiovascular health, diabetes and weight management. Nurture has had excellent growth with levels of 500% in 2003, and to date exceeding 200% in 2004, with the clear majority of that growth coming from the human nutrition market.

SITUATION ASSESSMENT: Nurture competes in the nutritional solutions segment of the $6+ billion therapeutic cardiovascular market. Nurture views its market differentiation across several dimensions: health benefit/claim; source of material (oat, phytosterols or soy, concentration); and fit with finished product application. Consumer research has shown that oat soluble fiber (beta-glucan) is the consumer preferred nutritional ingredient for cholesterol reduction. In an effort to maintain the edge the company's technology has afforded it, Nurture is focusing attention on three key strategic areas. (1) Validate and communicate that the FDA permitted health claim is meaningful to dietary supplement consumers. Many dietary supplement companies are leery of using FDA health claims on their products, but a recent study commissioned by Nurture demonstrated that 86% of consumers who are managing their cholesterol prefer to see a "cholesterol reduction" health claim rather than the permitted structure/function claim on the product label. (2) Continue to build the OatVantage[TM] brand, including going direct to consumers. (3) Fund trials that demonstrate cardiovascular benefits beyond cholesterol reduction.

OPPORTUNITIES: Nurture's market is attractive--high growth, technology-based, convincing science, substantial market demand and many applications. However, there exists substantial competition as larger and more financially robust competitors often market these products. Nurture recognizes that the competitive battle in this market will be won on technology and value, not price. Finished goods manufacturers have options available to them, but not all options are alike. Due to a variety of factors, it is highly critical that Nurture succinctly and efficiently communicates its value to customers and demonstrates its advantages versus the competition. An inherent challenge for all players is to build a unique value case with customers. Nurture believes it understands this and has recognized its strengths and weaknesses and has a built a marketing plan around them.

LESSONS LEARNED: The Nurture case demonstrates the challenges of being a highly differentiated player in a crowded market. Looking at its position can help bring to light some important factors in strategy. (1) It's important that customers understand the full value of Nurture's offering. Since the foundation of its business is a FDA health claim, Nurture needs to continually work to demonstrate the value to its customers to use the claim, understanding its importance to consumers. (2) A brand is a living being and must continually be grown. Brand building is a long-term process that needs to grow and adapt over time. Due to the large funding requirement of building a brand, Nurture needs to continue to look for creative ways to plow back into this effort, like trade allowances tied to use of the OatVantage trademark and other success-based brand building agreements with manufacturers. (3) Company success highly depends on translating superior ingredient technology into superior finished goods products. Although higher beta-glucan concentration appears to have value, it will be most valuable once customers understand its fit with a product offering. Key to Nurture's success will be proactively helping customers find solutions in its own products that allow it to be unique and address a customer need.

Information in this colunm was provided by Tom Clough, founder of Health Strategy Consulting, Providence, RI. He can be reached at 401-270-0760 or [e-mail].