The 3 Reasons Why Food Licensing Can Be Your Next Meal Ticket
posted in media on 8/18/16
Good marketers know a secret. They know that if you can license your brand, you can unearth new customers and mint money. They know that licensing is one of the surest, steadiest way to lift profits. Yet great marketers know a secret that’s even more lucrative. They know that of the myriad industries in the licensing space, food and beverage are the soundest.
Indeed, for any company in the business of making money, licensing a food or beverage presents a tantalizing arrangement: Done right, these deals are practically risk-free. You don’t have to splurge on R&D, nor do you need to shell out for manufacturing. Instead, while the creations of your competitors often fail or flounder, you get to invest in a proven product. So whether you’re a restaurateur or retailer, here are three essential reasons why you should consider licensing your brand.
With a few exceptions (think: ice cream and watermelon), food is marketable all year round. For example, visit any college campus, and you’ll quickly learn that human beings will devour pizza no matter the weather or time of day or even the state of the surrounding sanitary conditions. (Guilty.)
Indeed, food is as close to recession-proof a product as there is. Everyone needs to eat. Kids have gulped down my favorite childhood drink and one of the earliest licensed food products—Donald Duck orange juice—since 1940. By contrast, as enticing as those new Air Jordans are, they’re not a biological need.
This kind of steadiness and constancy is a rare prize in commerce, where many products are seasonal or subject to obsolescence. That’s why Welch’s Foods, which was founded in 1869, has been able to expand its juice, jam and jelly empire by licensing those now-ubiquitous (and delicious) fruit snacks. In a world of ever-changing trends and tastes, food is a licensing rock—which has the added virtue of tasting good.
When it comes to licensing, food and beverages provide a particularly compelling source of cash. According to License Global, eating and drinking are consistently one of licensing’s top-three largest categories (the other two are apparel and accessories).
In 1999, for example, California Pizza Kitchen teamed up with Kraft to sell frozen pizzas across the country. The partnership was so profitable—QSR Magazine called it a “licensing home run”—that by 2009, California Pizza Kitchen was raking in $7 million a year in royalties. In 2010, Kraft’s overall pizza freezer business was bought by Nestle for almost $4 billion.
Similarly, consider Baileys Irish Cream. Everyone knows that Baileys is one of world’s bestselling premium spirits—and yet, Baileys knew it could do better. For one, its products tended to be purchased on special occasions, like Christmas. For another, while many of us enjoy an Irish coffee, it’s not socially acceptable to drink alcohol every morning.
Then the company hit upon a solution: license the beloved Baileys brand for flavored coffee creamers, chocolate and ice cream. As License Global recently noted, “Baileys lends itself organically to a range of confectionery products, a category the company has invested in for more than 15 years and that is embraced in over 30 countries. The current Baileys sweet-treats line includes collaborations with partners such as Unilever for Baileys Magnum ice cream and General Mills for Baileys Häagen-Dazs ice cream.”
These incremental interactions with the greater Baileys brand remind people to purchase the cream liqueur even when it’s not a holiday. As a result, the seasonality of Baileys’ sales has been lessened and new customers have been created.
Here’s a significant statistic: Of the licensed products that Cinnabon introduced between 2003 and 2007, 17 of 20 were still alive and wellafter two years That’s a success rate of 85%.
Yet as remarkable as this foodie feat is, here’s something even more extraordinary. Of the $1 billion that consumers plunk down every year on branded cinnamon-roll deliciousness,75% is spent not at the chain’s brick-and-mortar spots, but at grocery stores, convenience stores and restaurants.
That adaptability—the ability to plug and play within another manufacturer’s ecosystem—is the holy grail of merchandising. And no category of products realizes it better than food and beverages.
So, the next time you’re in your local supermarket, take a minute to look around. No doubt, you’ll be surrounded by items like Dr Pepper freezer pops, Fatburger frozen patties and Ghirardelli cake mix. What you may not realize is that none of these products is made by the companies that own those brands.
That’s the power of food and beverage licensing.
Founder and CEO, Global Icons