A look at the corporate brand sector

Posted by Marty Brochstein on October 14, 2011

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The corporate licensing sector has long been one of the key components of the global licensing business, nowhere more so than in the U.S. According to the most recent edition of LIMA’s Annual Licensing Survey, corporate brand licensing accounted for $19.7 billion in retail sales in the U.S. in 2010 – 18.9% of the total U.S. licensed retail sales of $104 billion — generating $845 million in royalty income to brand owners.

The $19.7 billion in retail sales generated by corporate brands is 4% less than the $20.5 billion generated in 2009 as retailers tightened their buying in the face of consumers pulling back on spending in the face of the ongoing soft economy.

Corporate licensing takes many forms. It can be something as obvious as creating a Pepsi- or Coca-Cola-logoed drinkware collection, Ford or Harley Davidson keychains or a t-shirt collection festooned with classic Kellogg’s or General Mills advertising icons. Those kinds of corporate licensing programs have long been a staple of the business.

But the most notable rise over the past several years has been seen in more subtle applications of strategic brand development and brand extension that is often invisible to the consumer. Think of such examples as:
• Stanley work gloves (a well-known tool brand licensed to glove manufacturer Magla),
• Mr. Clean mops (licensed by Procter & Gamble to Butler Home Products),
• Le Tour de France bicycles (applying the brand of the famed race to bicycles manufactured by Cycle Force)
• Dole Fruit bars (licensing the well-known fresh fruit brand to frozen novelty manufacturer Target Foods)
• Arm & Hammer Stay Fresh pet products (licensed to Petmate)

Though the corporate licensing sector includes brands from a wide range of categories, one of the most active growth categories in 2011 is in food, beverage and restaurant brand licensing. While restaurant brand licensing is far from new, there has been a notable increase in the number of restaurants active in the field. Names such as TGI Fridays, IHOP, Jamba Juice, Cinnabon and Burger King are appearing on a broader range of store shelves.

Other corporate brand categories that have seen increasing business in recent years are cable networks, magazines, and some relatively dormant brands (Polaroid, The Sharper Image, Linens & Things) that are seeing new life via brand licensing.

Over the past several years, according to licensing executives active in this sector, owners of corporate brands have become increasingly aware of and open to the benefits that licensing can bring to the strength of the core brand. “More and more, licensing is being embraced as a form of business development,” says one corporate licensing agent. “It’s been elevated within the organization” from a relative afterthought to attaining high visibility within corporate management as part of strategic brand development.

For the brand owner, the decision to license is part of a larger evaluation of the brand’s core equities, the possible categories into which it could be extended, finding the right licensee, and developing the right product. “The more [the licensed product] can walk like the core, talk like the core, taste like the core, feel like the core, the better it is for everyone,” says one executive.

In the vast majority of corporate brand licensing efforts, brand enhancement supersedes the relative financial return. “Licensors have become more sophisticated about what licensing can achieve,” says one agent. “They’re beginning to understand that it’s not all about the money. Revenue is nice, but it’s maybe third or fourth on the list” of goals.

After all, the amount a brand owner gets in royalty payments from a licensee is usually relatively small compared to what it generates from its core business.” For example, General Motors values the brand exposure and the chance to build brand loyalty, that it gets from licensing its cars to manufacturers of die cast vehicles. The licensing royalties it generates are miniscule compared to what it gets from selling cars. Says another licensing executive: “Revenue generated is a third consideration, certainly compared to the amount generated through the core ….but it has to be enough to be significant.”

Corporate brand licensing is only one of nine property classifications broken out in the LIMA Annual Business Survey, which is available free to members, and can be purchased for $295 by non members. Click here for more information and to download the report.