Posted: Oct. 15, 2012, 3:55 p.m. EDT
Successfully licensing pet products can depend on a variety of factors, from pop culture trends to market saturation and brand recognition.
By Hilary Daninhirsch
Products that tie in to familiar pop culture brands and sports team logos are winners with consumers across numerous market segments. But is it a business advantage to procure a license to sell such pet products?
The high-recognition factor, coupled with benefiting from trends in the marketplace to increase sales and possibly drawing upon new markets, as well as helping the company with its branding or message, are advantages from many licensees’ perspectives.
JLA Pets in Roswell, Ga., which produces pet bedding, throws and pillows, currently owns five licenses, including Simmons and Halo and formerly, Cesar Millan, and has one license pending, reported Scott White, company president. With Simmons, the company built a pet bed similar to a consumer mattress.
“This had the advantage of tying into their marketing and consumer advertising,” White said. “Similarly, with Halo, we build off brand loyalty and awareness.”
It’s definitely beneficial in that a manufacturer is working with a known brand already, reported Sandi Kaneko, president of Walnut, Calif.-based 26 Bars and a Band, which manufacturers eco-friendly beds, collars, leashes, plush toys and engraveable charms under the licensed Paul Frank brand.
26 Bars and a Band manufacturers pet beds and other accessories under the licensed Paul Frank brand.
“Paul Frank was not in the pet industry until us, and there are plenty of Paul Frank fans that are dog owners, so it was a good crossover,” Kaneko said. “Since they are also a global brand, we have been discovered by stores in other countries that find us through Paul Frank.”
There is also a lot business to be found in licensed sports products, reported Anita Chandan, company spokesperson for Hunter Canada in Montreal. The company has all the major professional sports licenses, including NHL, NFL, CFL and Hockey Canada, and its U.S. counterpart owns many college licenses, according to Chandan.
“Team logoed products enable passionate fans to extend their love of their team to their pets,” she said. “A passion for sports combined with the dollars that consumers spend on their pets and the potential untapped market makes this one of our fastest growing product lines in Canada. With licensing, we are also able to offer pet items that no one else can due to our league agreements.”
Licensed and logoed goods present the consumer with a product that they are connected with in a unique way, noted Adam Zucker, CEO of Fort Lauderdale, Fla.-based Dog-E-Glow, a manufacturer of LED dog collars, leashes and harnesses.
“The products are easy to market because most brands are recognizable and popular to the masses,” Zucker said. “These goods generally sell at a higher rate; there is less consumer uncertainty.”
However, expense and stringent requirements are some of the licensing disadvantages noted by some manufacturers.
“Since we have our own brand as well, it does take some of our time and attention away from it, but it’s just a balancing act,” 26 Bars and a Band’s Kaneko said.
What happens if a favorite team is having a losing streak?
“One of the drawbacks is that sales are determined on how your team is playing—if a team is performing poorly, a fan will not wear a jersey, let alone put his dog in one,” Chandan said.
However, the benefits outweigh the drawbacks, particularly with the vast amount of licenses Hunter owns.
“With a variety of licenses, we are able to capture the market year round,” she added.
Knowing when to cut ties before the popularity of the product peaks is part of the risk.
“You have to know the longevity of a license (normally three years) and get out before it is post-peak,” JLA’s White said. “That is what we did with Cesar Millan. The licensor rarely provides any substance so you are left to development on your own.”
Not all licensors are the same, though. Joel Barnett, president of Brentwood Licensing LLC in Irvine, Calif., said his agency does like to stay involved with product development, brainstorming for new retailers and new products.
“We help the manufacturer get product approvals and add other products to their contract as opportunities arise,” he said.
One of the agreements Barnett helped negotiate was PetEdge’s manufacturing of the Dog is Good brand, which recently announced a co-branded licensing deal with Victoria Stilwell of “It’s Me or the Dog” fame.
“A licensee expects a more pro-active partnership between agency and manufacturer,” said Scott Todd, senior vice president of development at Moda Licensing in New York.
Moda recently finalized an agreement with licensor America’s VetDogs-The Veteran’s K-9 Corps and licensees Ethical Products and Pet King, according to Todd.
Whether they own multiple or few licenses, most companies agreed that the benefits of owning a license outweigh any drawbacks.
“The licensed goods consistently generate profits that cover any upfront costs,” said Dog-E-Glow’s Zucker. “Overall, the brands resonate with consumers on such a very large scale, making most drawbacks obsolete.”
Still, obtaining a license isn’t as easy as 1-2-3. Based on the size or popularity of the license, several challenges can arise in obtaining or maintaining the license, but some of that is dependent upon a good marriage between a licensee and the licensor.
“I would just try to find a license that is a good fit with your company and try to offer them something that another manufacturer can’t,” Kaneko of 26 Bars and a Band said. “We had the resources to produce a full range for them as well as put their designs on a truly unique product that we are known for, which is our Avant Garde retractable leash.”
It is not an easy process, Hunter Canada’s Chandan agreed.
“One must contact the leagues with a unique product, an ability to manufacture the product, a strong retail business plan and solid reference of company integrity in manufacturing, sales and marketing,” she said.
It can also be very challenging if a company is attempting to obtain a major studio license, especially if the company is unable to offer the licensor something different from the competition, reported Brentwood’s Barnett.
“If the license and terms meet each parties’ objectives then it can be easy to obtain,” Todd of Moda Licensing said. “It is more difficult for small startups to get a top license because of lack of history or financial backing.”
Most licenses last two to three years, with some agreements containing renewal clauses based on performance criteria, he added.
Royalty rates range between 5 to 14 percent, Brentwood’s Barnett reported. And both cost and profit potential varies, Todd added.
“There are hidden values as well,” Barnett said. “First, the turn should be faster with licensed products, allowing for the possibility of additional orders during the year. Second, if a retailer is cutting back on vendors and you have a must-have or valuable license, they will usually not only keep you but give you more dollars for licensed and nonlicensed products and cut out another vendor.”
Also, while some producers of licensed products prefer to hold multiple licenses, others are content with a smaller number, or even just one.
“It’s nice that we can dedicate the time and energy into the brand that it deserves,” Kaneko said, regarding 26 Bars and a Band’s decision to hold only the Paul Frank license.
However, holding a variety of licenses is beneficial to Dog-E-Glow as, “It allows us to reach a wider audience,” Zucker said, adding that licenses for NFL, NBA and NHL are “in the system.”
White of JLA reported he is in talks with 3M and would like to have the Nutro license. And though Hunter Canada owns many licenses, Chandan said they are always looking for new opportunities and could even expand into the entertainment and recreation side.
Ultimately, though, a company’s decision to seek a license is based on several factors. Manufacturers should ask and answer several questions before diving in, Moda Licensing’s Todd advised, including: Does the license bring value and differentiation to its portfolio? Will the license open retail doors? Is it relevant to its product? Is the licensing process clear? and Will the deal help grow the bottom line?<HOME>
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