Depending on the game plan, licensed products can mean big gains or big losses.
Whether from the movies, television or sports, licensed products can be a lucrative sales opportunity for supermarkets requiring close attention to trends and timing, according to retailers, wholesalers and other experts interviewed by SN.
“If you are going to sell a good licensed product, it all depends on timing,” said Anthea Jones, vice president, non-foods and pharmacy, Bi-Lo, Greenville, S.C. Mainstream characters like Spider-Man and those from Nickelodeon can be relatively safe, he said.
“If you can do some effective tie-ins or promotions with those types of licenses, you can win, but just because you have a licensed character, that doesn't mean success,” he said.
While entertainment characters remain at the core of most stores' licensed product offerings, sports items also are a productive area. These can include local teams, whether high school, collegiate or regional, along with professional team franchises, and the still-growing popularity of NASCAR in the heart of the country.
The licensing business is about $180 billion in total, according to numbers released at the beginning of the Licensing International Expo last month in New York. NASCAR in particular represents some $2.1 billion in sales, the show's organizers reported.
Hot entertainment franchises this year include Spider-Man, SpongeBob SquarePants, “Pirates of the Caribbean,” Dora the Explorer and Diego, Hannah Montana, the Cheetah Girls, “Star Wars,” the Fantastic Four and Superman, according to a presentation at the show.
These are relatively easy for executives at retail headquarters to identify and plan around,
particularly the television characters, who tend to have a longer and more predictable shelf life than their movie counterparts.
Sports licenses — especially local teams — represent more of a challenge, retailers and wholesalers said. This comes into focus when a supermarket in a certain town or market suddenly finds itself with a local team in a playoff tournament, with strong demand for product that dies absolutely when the team loses. If the team wins, sales of championship T-shirts can be tapped, but only for a short period of time, and they must be in stores immediately — that is, the next morning — after the team wins.
With manufacturing increasingly moving to China, sourcing this product becomes even more difficult, the retailers said, but there are still companies that specialize in making such licensed items overnight.
MOVING FAST
“You've got to be very nimble,” said Al Jones, senior vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass. “It's a good process, but you've got to be able to react very, very quickly.” Jones spoke with SN during a recent conference of the Global Market Development Center, Colorado Springs, widely known as GMDC, where most of the interviews for this story were conducted.
Some companies will start manufacturing right after the game, or even before it is over if it is apparent who the winner is going to be, he said. They may even send out partial shipments as soon as they can, and follow up later with the rest.
“It's worthwhile because people will go in the next day looking for it. If they know you had it for the last event, they are going to come back to you to buy it for the next one,” Jones said.
This is more difficult to manage at the headquarters level of a large, national company, said Lanny Hoffmeyer, corporate director of hardlines, photo and lobby, Supervalu, Eden Prairie, Minn. “We have partnerships in many of our major markets where we have big presences, like Boston, Minneapolis and Chicago. They coordinate that locally and they are doing a very nice job,” he said.
Even with the challenges, sports licenses do better for Supervalu than movie licenses, he said. “Whether it be the Chicago Bears or the Minnesota Timberwolves — preseason and in season — or college teams, there's always a lot of enthusiasm for them. Our people in the market sense this enthusiasm — they're enthused themselves — and so they manage that locally,” Hoffmeyer said.
With more manufacturing being done in China, sourcing this kind of time-sensitive licensed product is becoming more difficult because of the time needed to order, produce and ship it, said Bill Mansfield, president and chief executive officer, VIP International, Garland, Texas. Mansfield is a former supermarket nonfood executive who now a consultant.
“I remember in Dallas, Texas, after the Cowboys won the Superbowl, I had the locker room shirt at 7 a.m. the next morning after the game. I'm not sure that same speed-to-market exists today,” he said.
SELL-THROUGH CLEANUP
Sports licensed products clean up better than movies or other entertainment-related items, said Mike Bevel, category manager at Minyard Food Stores, Coppell, Texas. “We've done some NCAA basketball, and it cleaned up real well. We had some [Dallas] Mavericks products when they were in the playoffs last year and they cleaned up pretty well too,” he said.
Beyond domestic sports, Bevel sees potential for Mexican soccer teams at Minyards, which has been very successful with its Hispanic Carnival format. “In smaller Hispanic grocery stores, you'll see a lot of soccer jerseys from the Mexican soccer league. We haven't done a lot in that area yet, but I'd like to do more,” he said.
Overall, Hispanics are not big consumers of licensed items, he said. “Licensing increases the cost, which increases the retail, and some of our customers are not willing to pay for that license,” Bevel said.
For movie-related licenses, Ingles Markets, Asheville, N.C., coordinates with the big titles, such as Spider-Man and Shrek for their theatrical run and DVD release, said Dan Spears, director of nonfoods. “With sports, we try to target local colleges where our stores are located, or some NASCAR,” he said. The sports licenses tend to clean up better than the movie product, he added.
“NASCAR is big and it seems to be building,” said Jones. It's not that popular in the Northeast where Imperial is based, but “it's just superhot in the rest of the country.”
In terms of entertainment licenses, “it's a moving target and you've got to make sure you have an exit strategy because they can get very cold as fast as they got very hot,” he said.
Others said the same things about sports products. “I have never had a lot of success with sports licenses so I try to stay away from them,” said a nonfood executive with a Northeast retailer. “Sports licenses run hot and cold, and you never know when your team is going on a winning streak or a losing streak. If you get into the playoffs, your team could be on top of the world, but if they lose one game, your stuff is dead,” he said.
PLAYING THE END GAME
“You have to be careful once you get in to get out quick, because if you don't sell it, you are going to be stuck with it,” said Nick Barainca, director of nonfoods at Scolari's Food & Drug Co., Sparks, Nev. Without sales guarantees, and uncertainty about which licenses — and even which products of successful licenses — are going to sell, “you have to be careful about what you buy on licensed products,” he said.
With movie licenses, a retailer has to be ready, the Northeast nonfood executive said. “When the movie is released you have to have the product on the sales floor because the window of opportunity is very short. It could be two or three weeks and then you start to see a real tail-off in sales of products from most movies,” he said.
Lisa Matthews, GM category manager, the Penn Traffic Co., Syracuse, N.Y., also urged caution in buying licensed products. “You are basically placing a bet on a movie that it is going to do well. But I see an upward trend in what we've done with licensing, especially with Dora and Diego, or tied into hot movies from Disney,” she said.
“Sports is a fickle thing. If the team does well, you do well. If it doesn't do well, a lot of times your customers will walk away,” Matthews said.
“The key with licenses is staying up with whatever's new and hot: the latest movie or the latest TV show,” said Larry Ishii, general manager of GM/HBC, Unified Western Grocers, Commerce, Calif. “Marketing to the licenses that are out there is very dynamic and it's constantly changing. But there is no question: Whether it be bandages, children's furniture, or cups and bowls, licensed product will continue to be a key part of our business,” he said.
“In general merchandise, licensed products are driving the business. From toys to kitchenware, to cups and bowls, we're selling a lot more licensed products now than we ever have,” said Sammy Snell, director of GM/HBC, W. Lee Flowers & Co., Lake City, S.C.
Zak Designs, Airway Heights, Wash., a supplier of licensed children's tabletop products, was credited by several retailers for sales success. “Disney is still a big driver, as well as Scooby-Doo, and Zak Designs sure has it nailed,” said a nonfood executive with a Midwest retailer. “We're still doing well with licenses. If it's in the theaters, we are doing all right with it.”
“We added Zak products to our lineup,” said Doug Barnett, director of GM/HBC, Brookshire Brothers, Lufkin, Texas. For instance, there are bowls and tumblers that sell for $4.99. “We're seeing that product fly off the shelf, and it's because of licensing. You wouldn't sell a $4.99 tumbler without Dora or SpongeBob on it, so I think licensed products are here and they are going to continue to move,” he said.