Special Report: Licensed Properties Get in Shape

Licensed properties and celebrities used on displays, packaging and marketing materials have an impact -- if they didn't, U.S. manufacturers wouldn't have paid more than $6 billion in licensing royalties in 2006, according to a study commissioned by the International Licensing Industry Merchandisers' Association.At the forefront of this industry is an issue that should squarely impact future royalties, not to mention where, how and if a CPG should use a licensed property: "Childhood obesity is a huge issue," says Tony Lisanti, global editorial director, License! Global Magazine, New York. "You're already seeing, and will see, a lot of change in terms of food companies." Some food brands and retailers are limiting the use of licensed names and characters to only those products that satisfy U.S. dietary guidelines. Will this call for fewer Shrek partnerships with candy brands or kids meals? Maybe the cookie monster will shelve cookies for fruit?In September, Miami-based Burger King became the twelfth major food marketer to join the Children's Food and Beverage Advertising Initiative (launched in November 2006 by the Council of Better Business Bureaus), pledging they will not advertise food and beverages that fail to meet certain nutritional criteria to children under 12 years of age. Lisanti predicts that licensing and endorsements will help healthy foods and organic products at Wal-Mart and large supermarket chains, which are tapping into consumers wants for those items.Largely though, it's too early to tell what kind of impact will be had in-store. Many companies have a year or more to implement the limitations and restrictions they've agreed to in their pledges, and almost all of the 12 companies involved in the initiative declined to comment for this story.Healthy StandardsKris Charles, vice president, global communications for the Kellogg Co. in Battle Creek, MI, says the initiative the company signed in June does impact licensed characters but will not affect the use of equity characters, "such as Tony the Tiger, as they are part of our brand recognition, and we intend to continue to use them appropriately and responsibly." The company is developing an internal "global nutrient criteria standard" that will set upper limits per serving on calories, trans fat, saturated fat, sodium and sugar. Those items not meeting the criteria by the end of 2008 will not be advertised to children under 12. Says Charles, "Kellogg will use its newly developed Kellogg Global Nutrient Criteria to determine which products will be marketed to children in mass media (TV, print, radio and third-party Internet advertising), on our own websites, including games and other interactive content, licensed-character use in ads and on packaging, as well as other forms of marketing such as product placement, endorsements, viral marketing, branded toys and games, brand sponsorship and cell phone marketing. We will not use licensed characters on in-store displays for brands that don't meet the Kellogg Global Nutrient Criteria."In addition to limiting which items are allowed to use a licensed character, Disney Consumer Products, Glendale, CA, has also worked to brand healthier food options with the company's images."Disney has taken steps to ensure our nutritional guidelines are consistent with the USDA dietary guidelines. Our holistic approach to this is to first ensure the quality and safety of our products. Second, have nutritional guidelines in place to ensure we have products that promote healthy eating choices for kids. Third, to drive innovation within the food portfolio. We do not license anything that we would call 'junk food,'" says Andrew Georgiou, director, retail marketing for Disney Consumer Products. "Overall, displays are following the trends of healthier food offerings; more options for every age group."Disney began working with Kroger grocery stores in 2006 on Disney-branded food items such as apples and other fruit, low-fat cheeses and more, all based on the nutritional guidelines. "Kroger has been very enthusiastic about the Disney food line, and we have worked with their marketing group on promotional campaigns and in-store displays to help launch and communicate many of the nutritional advantages of each product line," Georgiou adds.Hormel Kid's Kitchen product manager Tim Garry didn't comment on the impact from nutritional guidelines but did say the Austin, Minn.-based company uses images of the Berenstain Bears on its Kid's Kitchen microwave cups. Hormel has worked with the license for two years."Kid's Kitchen has a long history of promoting literacy," Garry says. "The Berenstain Bears offered us recognizable kids' figures rooted in books that offer life lessons such as good manners, sharing, cleaning up after yourself and playing fair."Berenstain Bears cartoons have been used on shippers, which Garry says are ideally on the floor for about two weeks. A Berenstain Bears sticker or game is attached directly to the top of the microwave cups, and consumers can redeem UPCs for books.Finding a FitWhether it's healthy food, snacks or any other product, Lisanti of License! Global Magazine says it comes down to selecting the right marriage of retailer, supplier and licensor. Sensitivity of consumers can't be overlooked, particularly when it comes to cause-marketing initiatives. Lisanti says cause marketing will not go away but adds that each cause needs to be evaluated separately. Susan G. Komen for the Cure is one organization that many brands and retailers choose to partner with, including Chi-Chi's salsa, manufactured and marketed by Hormel Foods, which has partnered with the group for the last two years."We've established health and wellness as important pillars for the men and women we're trying to reach," says Dana Southard, Chi-Chi's product manager. "Our strategy has been to flag our partnership on special pink labels and caps. These products can be found in grocery stores between April and June and September and October. We've selected these time frames based on our partnership with the local Komen Race for the Cure events and Breast Health Awareness Month." Display shippers carry the pink jar and SGK logo, and the partnership is highlighted in two freestanding inserts, print advertising and online.Hormel-owned Valley Fresh Chicken began partnering with Susan G. Komen for the Cure this year. Product manager Allison Cobb says it's a good fit because it embodies values, such as healthy living, important to the Valley Fresh Chicken brand. From May to October, two sizes of Valley Fresh white chicken feature special SGK labels, while shippers also highlight the sponsorship. Cobb adds that at-shelf P-O-P was used in May, and May and September FSIs were used to communicate the tie-in. For every coupon redeemed, a donation is given to the charity. As with charitable causes, not every celebrity is a fit for every product. IMG Worldwide Licensing and Consumer Products' Michael Gottsegen agrees that finding a mutually beneficial partnership is key, particularly when it comes to creating celebrity endorsements and brands. He notes that many celebrities and athletes say "no" more times than "yes" as they become more selective in their own brand creation."The trend with celebrities is away from endorsement deals to having the celebrity becoming vested in the development of their own line of merchandise," says Gottsegen, vice president, licensing and retail development for Los Angeles-based IMG. Think Vera Wang's Simply Vera line at Kohl's or Martha Stewart's new collection being offered exclusively at Macy's. Both retailers declined to be interviewed."Not only will it provide a legacy for the celebrity, but it ultimately becomes more lucrative in the long run for the celebrity," he says, adding that retailers and suppliers benefit from the match by being able to drive traffic. "Providing a retailer an exclusive relationship with a celebrity and their branded merchandise is a significant incentive and point of differentiation that the retailer expects from partnering with celebrities."Cleveland-based American Greetings created a successful partnership when it teamed with Ellen DeGeneres for a 32-piece line of greeting cards dubbed "the ellen collection." Cards and P-O-P featured illustrations of the comedian while copy conveyed her sense of humor. The ellen collection is just one of several lines American Greetings unveiled after conducting in-depth research to find out what consumers find funny. Wanting to make a significant impact with the company's humor initiatives, Michael Brown, vice president, licensing, says American Greetings knew they wanted to work with Ellen. AG staff developed a business plan including developing all P-O-P and marketing materials to present to Ellen's agency. "With Ellen, it was great. We truly understood each other's objectives. For us, having her image helps capture consumers. Funny cards and Ellen go hand in hand. For her, it helps build and maintain her image."The comedian's collection ran from June to September, and Brown says while they are hoping to do more with Ellen they are "still working on what that will be."Happy TogetherWhen it comes to sharing space on packaging and displays, it's up to the two entities to determine what works best. For OnTrack Sports, Lenexa, KS, president and founder Richard Rutter says the company's name and 800-number are included on its Spider-Man junior golf clubs and accessories, underneath the Marvel graphics and logos. Burger King also wants to leverage its properties to the fullest extent, says Heather Krasnow, vice president of consumer brands for Edelman Public Relations, New York and Chicago. Burger King is her client. "On an in-store display, more space will be given to the property over the brand because customers are already in the restaurant. We are not using that piece of merchandise to drive traffic to the store but rather to increase awareness about the featured product," she says. "When it comes to packaging, BK and the partner share this precious space because consumers may leave the restaurant with the packaging, and it's important to have our brand presence on whatever the customer takes with them."As with any partnership, there's a lot of back and forth, and all interviewed agreed that building in extra time when working with a licensed property is key. American Greetings' Brown recommends beginning a year out from the time you want it to appear at retail. Detailed contracts and approvals throughout the design process are also vital to licensing success. Powerhouse Disney is not the only one to have the final say on all in-store branding. As IMG's Gottsegen says, "it becomes a collaborative effort, but the final control, in our case, is with the celebrity or athlete." For Chi-Chi's Southard, while both parties need to approve the work, Chi-Chi's has the final say in the creative process, she says. Whether that process culminates in a temporary or permanent display depends on multiple factors. "We implement both permanent and temporary display and presentation formats," says Disney's Georgiou. "Often, it depends on the retailer, the product and the duration of the program being launched. "For many of our film properties, we may use more temporary set-up displays, especially in mass market. For our year-round business, we devise programs for permanent space allocation and presence. Certainly our business at mid-tier and department stores is planned with permanent signage and presence."For OnTrack Sports, Rutter says temporary P-O-P works as the products will be in and out of big retailers in a few months. Burger King's promotional windows typically last four to five weeks, so Krasnow is also in favor of temporary displays. She says occasionally a display piece is created that uses hardware that can be repurposed for future use.Whether the display is for four weeks or four months, the goals are the same -- utilizing a licensed property or character to cut through retail clutter and stand out against the competition. As Gottsegen says, "We create that emotional attachment to our celebrities and products so that consumers want to take it home. Our role with P-O-P and in-store displays is to bring fun, Hollywood and sizzle to the retail environment."MoneymakersAmerican Greetings, which has numerous outbound licensing arrangements of its own properties such as the Care Bears and Strawberry Shortcake, has more than 100 inbound licensing programs. Brown says those are not determined based on if it's a celebrity or a movie but whether the character or property fits the business needs. Movie licenses, such as one American Greetings held for Transformers, pay off handsomely, particularly when the movie becomes a box-office hit. Characters can then move beyond the film and develop into their own brands."Our theatrical release properties are only a portion of our overall business," Disney's Georgiou's says. "The Disney Pixar movie Cars is a good example. The lead character, Lightning McQueen, was the key messaging character for The Walt Disney Studios. Consequently, we followed that through at retail for consistent messaging. Generally, we follow that type of trajectory with a property. "Now, Cars is a known property and has become evergreen, meaning the business for this property is sustained with growth plans each year even after the movie and DVD have been released. Building on that familiarity, we can expand our retail messaging to encompass a greater assortment of the 'cast' to appeal to different retail programs and consumer demographics."License! Global Magazine's Lisanti says that's exactly the type of license retailers are interested in -- something more than a passing fad. A property with staying power, like Star Wars, is a huge global licensing entity and brand that offers everyone something to expand upon. OnTrack Sports' Rutter says the key to making the license successful is marketing it immediately. "We are committed to pay minimum royalties, regardless of sales, so you need to attack the marketing and development the second that you get a contract signed," he says. "The clock is ticking on the contract and the window of opportunity surrounding a movie launch. Next year we plan on launching more Marvel characters. Our license covers most Marvel characters, but you only have 12 months to develop a line and sell it, or you lose the rights."When it comes to rights for movie sequels, most retailers and CPG brands negotiate for first right of refusal for any sequel. Such is the case for Burger King, where the movie properties the company works with are determined by multiple criteria. The company looks for "brand fit, relevance to target market, type of marketing support the partnership will bring, and particularly for the youth and family segment, if the licensor allows us to develop an appropriate collection of premiums to distribute at our restaurants," says Krasnow.They strive to bring the thematic vision of the movie to life at the restaurants by leveraging the key assets of the property, Krasnow adds. A top-to-bottom merchandising plan is implemented that includes adult and youth in-store P-O-P and packaging such as cups, bags and tray liners.