Maxing equity via licensing

Licensing has become a staple enterprise for virtually every well known brand. It has also become a very competitive risk-averse business. Fortunately a spate of recent box office disappointments have left the door open for more permanent brands with a longer...

Licensing has become a staple enterprise for virtually every well known brand. It has also become a very competitive risk-averse business. Fortunately a spate of recent box office disappointments have left the door open for more permanent brands with a longer shelf life.

According to New York-based Licensing Industry Merchandisers’ Association, brand licensing is a $143-billion business worldwide. Internationally, manufacturers paid $5.6 billion in royalties in 1999.

What appears to be a common thread is licensing’s ability to open doors to markets that brands would otherwise find difficult to access.

The National Hockey League continues to carry considerable weight with men 18 to 34, but has begun shifting its focus to the younger 12 to 18 demographic in a strategy it deems essential for long-term prosperity.

Licensing has become a linchpin in this quest.

But the league is battling hard in the corners with the likes of professional basketball, baseball, lacrosse and football for this key demographic, not to mention the likes of Nike, Adidas and entertainment properties such as Sony Pictures’ Final Fantasy, based on the popular video game franchise.

‘That’s as big a struggle for us as it may be for our competitors, to get some share of mind for the brand within that [12 to 18] demographic,’ says Glenn Wakefield, vice-president consumer products marketing, NHL Enterprises Canada.

To that end, with the launch of the NHL Playoffs April 11, the league is rolling out its annual Cup Crazy promotion, a massive retail program used to leverage the Stanley Cup tournament and push licensed merchandise through more than 1,400 retailers nationwide.

For its part the NHL is providing POP materials to participating retailers who, in turn, develop their own promotions in partnership with the league’s head office.

Cup Crazy, says Wakefield, is intended to continue driving league merchandise even if local teams fail to advance in the tournament.

But offering branded merchandise to teenagers is not as simple as it once was for a sports property. Where it used to be common to see kids roaming the streets in the jerseys of their hometown teams, research indicates that this is no longer the case, Wakefield says. As a result, the NHL has had to revisit how it approaches its licensing programs.

As such, the league has begun licensing a line of casual wear with the NHL shield and is increasingly turning its attention to collectibles, such as signature hockey sticks, Stanley Cup replicas and team-emblazoned Timex watches.

Also with this youthful demographic in mind, the league has a deal with Puma Canada to design and distribute neon gear with team logos, such as a florescent orange cap with the Maple Leafs logo.

In its attempts to extend its reach the NHL is certainly not alone.

Cincinnati, Ohio-based Proctor & Gamble, for instance, recently signed a deal with Dana Undies to create a new line of Pampers branded infant wear. Since P&G has little in the way of expertise in clothing manufacturing, to launch a line on its own would be costly and outside its core competency.

Still, says Win Sakdinan, a spokesperson for P&G in Toronto, the company wishes Pampers to become more than a diaper brand and licensing is the most effective means to that end.

‘Pampers has always stood for a trusted company when it came to baby care with diapers. So we have a lot of valuable equity in the Pampers brand. It was the first disposable diaper, created in the 1940s,’ Sakdinan says.

‘So we’re taking this equity and asking, ‘how can we expand Pampers not just to be a diapering company but a baby-care company?”

While many such product manufacturers readily agree that licensing helps them become a brand bigger than their core, other brands pursue such agreements to simply drive sales of their core products.

Leigh Ann Schwarzkopf, manager of trademark licensing at General Mills in Minneapolis says the company has about 45 to 50 licensing agreements in place for the Betty Crocker brand, including a line of Betty Crocker cookware and serving utensils, plus a line of cookbooks published by Simon and Schuster.

‘Our primary mission is to enhance and extend the consumer relationships with our brands,’ she says. ‘So for Betty we focus on food prep and food presentation…it’s just a matter of focus.’

The company has also developed new SKUs for its Cheerios brand such as the recently launched Cheerios cell phone dispenser and a Cheerios Bingo Game. In addition, the company has a line of infant cups, clothes and teethers, plus a line of branded playbooks.

These products, Schwarzkopf says, are distributed to reinforce Cheerios’ core brand values by promoting child development such as fine motor skills, reading and counting.

But while such endeavours might indicate that Cheerios is inching toward becoming a kind of umbrella children’s brand, Schwarzkopf says General Mills has no such interest.

‘General Mills is a food company, first and foremost,’ she insists.

But Patrick Rodmell, vice-president global marketing at Watt International, a Toronto-based firm specializing in brand strategy and design, says such initiatives should have a broader goal to ensure long-term success.

‘The issue becomes, how does the licensed brand benefit in the long run. If it’s just a brand-borrowed concept, how does the licensed brand leverage the equity from the relationship to go beyond a short-term revenue generator?’ asks Rodmell, whose company does branding work for such clients as Wal-Mart, Safeway and General Electric.

‘If all you’re doing is licensing your brand, your equity is useless once the license expires unless you do something else with it.’

By way of illustration, Rodmell points out that the Martha Stewart line of clothing and linens sold through a exclusive license agreement with Zellers in Canada and Kmart in the U.S. has opened the door for Martha Stewart Living Omnimedia to launch its own branded retail outlets, should it choose – a move that may have been too far a stretch previously for the brand.

Conversely, selling a more upscale line could allow Zellers to launch its own line of higher-end products and maintain the equity brought by selling Martha Stewart.

‘Let’s say that when the Martha Stewart agreement runs out, why couldn’t [Zellers] just create another brand that would replace Martha Stewart’s name on the products that she would house? All of a sudden that brand starts to borrow the equity that was created through the licensing agreement with Martha Stewart,’ says Rodmell.

Indeed, David Strickland, Zellers’ senior vice-president of marketing, says the Martha Stewart line is drawing a more upscale consumer to Zellers stores, the type that was unlikely to shop there previously.

‘It broadens our appeal,’ he says. ‘It opens the door for us to offer customers a broader assortment, trading more into the better and best price points as opposed to opening price points.’

And allowing such movement is, after all, the great benefit of licensing.

Certainly, it’s a benefit the NHL is leveraging. With merchandise in Zellers, Sears, Wal-Mart and hundreds of independent sports stores nationwide, the league has hundreds of licensing agreements in place to make sure hockey remains Canada’s number-one game with the next generation of consumers.