If successful, ReSource-the companies' first joint project since Sandoz Ltd. acquired Gerber for $3.7 billion in 1994-is likely to lead to future product launches combining the strength of Sandoz's nutritional expertise with Gerber's national distribution and marketing savvy.
"If the company can make ReSource a success, they can apply that to other products," said Arvind Desai, an analyst with Mehta & Isaly, New York. "It's a bold experiment that can open up huge business opportunities."
ReSource was rolled out regionally in 13 western markets last October and will be in store nationally by the end of February.
Sandoz is running ads in regional markets and will expand to network TV and national print by April. The ads, via Noble & Associates, Chicago, carry the theme line "Improve your diet, improve your life," and will also be supported by in-store promotions, direct mail and free standing inserts. The campaign targets adults 55 and older.
The $325 million adult nutritional beverage category is growing at an estimated 30% to 35% a year, and that's likely to escalate with the leading edge of the baby boom hitting 50.
"The growth of this category...is what really drove the synergies between" Gerber and Sandoz, said Kim Hayes, general manager-new business for ReSource.
Abbott Laboratories' Ensure and Ensure Plus brands dominate the category with sales rising 57.8% to $303.4 million for the year ended Oct. 8, according to Information Resources Inc., Chicago.
ReSource won't reveal its ad budget but will have to spend big bucks to compete with Ensure, which increased ad spending via Gotham, New York, 55% to $26.9 million in the first nine months of the year, according to Competitive Media Reporting.
If it succeeds, ReSource could lead Sandoz to move more aggressively beyond its core pharmaceutical business to become a bigger player in the nutritional market with the help of Gerber. Ms. Hayes said future joint ventures are possible but there are no plans in place for the next product launch.
Michael Wilke contributed to this story.