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Evolution Strategy Advisors Marketing Consultant

TrendZ: Get the power of Brand Licensing for your Consumer products

Today licensing generates more than US$ 5+ Billion in royalties and contributes to US$ 100+ Billion in retail sales. The industry has healthy growth of 5%, as per data released by LIMA. What licensing covers is character related goods, followed by trademarks/ brands, fashion & sports, education, restaurants and even art.

  1. Character-related merchandise (covers: celebrities, entertainment, TV and movies). In India, like in the world, the best example of character lead license is Disney. Disney’s brand and characters, including movies, have been licensed to a number of consumer products. As per Forbes, 2012 Disney’s Princess made US$ 3Billion in retail sales. Disney has 7 of its properties amongst the top 10. At least 34 characters had a retail sale of US$ 100Million or above only in North America.  

A number of children’s brands have done wonderfully well in India too namely Princess, Barbie, Harry Potter, Doraemon, Mickey etc. One of India’s most successful kid’s brand has been Chota Bheem. Indian movies like Krrish and Hanuman have also been quite successful in licensing too.

 The kid’s brands are good business but they work only as long as the popularity of the character, movie or TV serial exists. The kid’s products that have been licensed are clothing, toys, home durables, first aid dressing, toothbrush, school accessories and many kid’s school accessories and educational products.

  1. Trademark and Brand licensing is the next biggest revenue earner internationally. We have P&G, General Mills, Coca-Cola, Harley-Davidson, Ford etc who have licensed their trademarks or brands to expand to different categories and geographies.

There are international durable brands too who have had success in the Indian markets namely Akai, Kelvinator, Electrolux, Westinghouse, Sanyo, Philips, Morphy Richards etc.  Many of these brands have relationship beyond licensing to include importing, distribution and local manufacturing. However there are fewer examples of FMCG products being licensed in India, one example being Nivea, till some years ago.

  1. Licensing through fashion products is another large segment. Some very popular fragrance licensors are Calvin Klein, Davidoff, Polo Ralph Lauren and in sports goods Fila, Converse etc just to name a few. Large fashion licensees in India are DLF Brands, Future Group, Reliance Brands and Arvind. They have license of international brands namely CK and Tommy and many more. In the clothing business deals are structured both as JV’s and licensing in India.  As demand for luxury fashion goes up in India this is expected to rise further. While today the market is mostly masstige (a prestige brand for the masses).
  1. Sports teams / clubs licensing like WWF, MotoGP, football clubs like Arsenal and ManU,. The biggest generator of licensee fees in India are all the IPL teams, this has been the best example of licensing in India. Other sports like football and hockey leagues are now creating their licensing to cash in on this trend.

Indian businesses have understood the power of the brand and have forged long term relations by licensing brands in sports, fashion, retail and characters. Companies have reaped rich dividends by associating with large brands and improving their image and business.

 

Licensing to FMCG and durables is still in nascent stage

With the slowdown in world economy, low product differentiation and localisation of international brands the opportunities for growth are limited. Local manufacturers would like to grow and improve their brand image, but are limited by their brand’s current image and by competition from international brands. Product differentiation is almost negligible while the brand is supreme.

The Indian market has always been a mass market (comprising bottom of the pyramid products and brands). However in the last 5 years this has been rapidly changing with the prestige brands contributing to about $5 billion in sales in India which includes watches, spirits, fashion, cars, jewellery etc.  The Indian brands have not been premium and global and can’t easily bridge their positioning gap between mass and masstige or prestige. Many brand would lose their existing customer base if they try to upgrade.

What are the advantages of brand licensing for consumer products?

  1. In a low margin business one can’t afford high investments in brand and image creation, a licensed brand helps in creating a business or a sub brand at a fraction of that cost
  2. A quick recognition and image enhancement for the new category or extension as it has the image rub off of a known international brand. A license helps overcome this positioning gap making them competitive to international brands.
  3. Lower cost of advertising and promotion, most licensed brands don’t need large investments due to their known strong image. A licensed brand is like signing up a celebrity who helps build your base brand or business.
  4. Easy acceptability by consumers and the trade helps generate trials and 1st orders
  5. When one wants to reach out to a new segment eg. Women, kids, or enter a premium category -something which your current brand is not capable of.
  6. To take advantage of a fad for a character to boost your product’s image. Retain your brand name and add the licensor as a sub brand or joint brand
  7. The parent licensor helps improve quality as they monitor the brand, product and environmental standards.

Understanding your current brand’s limitation

Mostly brands in India do not like to dilute their brand focus and would like to extend their brand names to different categories. But some brands can’t be easily extended as they have a legacy and perception which can only change with time and huge investments. Sometimes these investments can be expensive mistakes.

There are very few known cases of FMCG and consumer brands making a leap in image from being a mass market to premium brand.

Usually licensed brands do not want to make an entry into the market on their own as they are happier earning a royalty and not investing in a business which is not their core.

A number of international brands are willing to partner with Indian companies for the long term. When companies like Apple and Disney have made it work, it surely is an idea worth exploring.                                                           

Vineet Trakroo

      C.E.O.

www.theevolutionconsulting.com

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