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Branding Exclusivity

By Apr 01, 2003

The stagnant economy didn’t stop corporations from expanding brands into various segments of the licensing industry in 2002. Licensing rights fees rose approximately 3 percent to $6 billion in 2002 (vs. 1 percent in 2001), according to PROMO estimates based on industry sources. “Taking the whole economic situation into consideration, showing some growth and holding the line is very respectable; I look forward to steady growth in 2003,” says Charles Riotto, president of the Licensing Industry Merchandisers’ Association, New York City.

CPG execs understand the impact of having products that cross several categories at retail through brand-extension licensing (think Oreo ice cream). Eighty percent of successful new products are brand extensions, says Kirk Martensen, president and founder of Chicago-based licensing consultancy Goldmarks.

“It certainly is a more economical way to go when you are bringing out a new product with an existing brand,” Riotto says. “You already have consumer awareness and trust.”

Brand-extension licensing works well in the growing food and beverage category. Last year, licensee Dr Pepper/Seven Up’s Sunkist soda put together a cross promotion at 2,000 stores in 19 states. Participating retailers included Albertson’s, Hy-Vee and Rainbow Foods. When consumers bought an eight-pound bag of oranges, they got $1 off Sunkist soda. Hy-Vee reported a 310 percent increase in Sunkist soda sales during the promotion, says Kate Cox, brand manager for Sunkist at Plano, TX-based Dr Pepper/Seven Up. “This allows both to expand into different areas of the store,” Cox says. Sunkist is weighing a similar program at Rainbow Foods with General Mills’ Sunkist fruit snacks this summer.

Meanwhile, ongoing retail consolidation is having an effect on licensees and licensors. Licensors are seeking exclusive deals with fewer partnerships in key brands while licensees are keeping a tight leash on the number of programs and product on shelves. “For the past couple of years, this has been a tough process and it will continue this year and beyond,” Riotto says.

“Everybody is getting closer to the mass retail philosophy by carrying fewer brands and secondary products are difficult to get into the marketplace,” says Bob Brennan, director of licensing for FUNimation Productions, Ltd. in Fort Worth, TX.

Retail sales of licensed product rose 2 percent to $71.5 billion in the U.S. and Canada in 2002, per The Licensing Letter, New York City. “Licensed products don’t exist in a vacuum,” says Marty Brochstein, executive editor of Licensing Letter. “Retail was soft last year, so it’s surprising to many that sales were up 2 percent last year — until you spell it out to them.” Credit the jump partially to blockbuster movies like Spider-Man, Harry Potter, Star Wars, Scooby-Doo and Lord of the Rings, which raked in strong sales in the largest category, entertainment/character. Will the entertainment category sustain its growth with no Harry Potter or Star Wars movie in 2003? “There are a couple of big movies that some people are counting on, like The Hulk,” Brochstein says “Retailers are looking for things that customers can’t buy anywhere else.”

The only problem is the decreasing number of retailers out there. “The big keep getting bigger and it’s harder for the small guys,” says Leslye Schaefer, senior VP-marketing and consumer products at Scholastic Entertainment. Speaking of exclusives, Bounty and Scholastic have teamed for Bounty Activity Prints, a line of paper towels featuring Clifford, I SPY and The Magic School Bus. The line debuts in July.

LICENSING SNAPSHOT

total spent in 2002: $6 billion

Rights fees increased approximately 3 percent

Merchandise sales rose 2 percent

Brand-extension licensing continues to grow