January 1, 2006
Hot licenses can sell more candy — but retailers have become much more selective in their ‘picks.’
While licensed candy isn’t tracked per se, the overall licensing industry seems to be losing a bit of steam from decades past. Manufacturers paid $5.9 billion in licensing royalties in 2004, which was a mere 1 percent increase from 2003. In candy, it seems that more and more retailers are looking for only “the best of the best” from new and evergreen licenses.
Faced with reduced SKU counts in their programs, many are finding it most effective to take a stronger position on a handful of the most popular evergreen and TV licenses (and maybe one kids’/family movie license a season) rather than carry a broad assortment of major and minor licensed products all over the board.
That being said, candy is one of the first places a new license will “make” it, simply because both are high impulse buys.
Kids are the obvious target audience for licensed candy. But their fickle nature makes them less than ideal as the focus of any license with staying power. That’s why moms are emerging as the primary target of the up and coming “evergreens” of our time: licensed candy that has a positive nutrition value and/or candy that has a value-added connotation because of the licensed brand it carries — such as a juice license.
Thus licensed candy’s latest edge is similar to other consumable categories that appeal to the moms who buy them: they are in portion-control packaging, they highlight nutritional/added value and calorie count is very visible. It seems that when there’s value, moms don’t mind spending a little bit of extra money for the license.
Licensed candy is typically found promoted away from the mainstream candy set at slightly higher price points than its non-licensed counterparts. The economics of the licensing model are fairly straightforward in this and other consumables markets: manufacturers pay licensors an average of 10 percent of the wholesale price, betting that the increased and incremental sales from a licensed item will more than exceed that. Retailers pass some of that fee on to the end consumer, but not all of it — meaning everyone gambles on the success of the license. But a few cents more is to be expected by consumers and shouldn’t be viewed negatively by retailers.
Themed party goods are a natural adjacency for licensed candy. This appeals to moms and kids when shopping for birthday party supplies — and means that it will not be necessary for mom to make an additional shopping stop.
The opportunity for cross-promotion is huge in licensed candy. Therefore, it is imperative that candy buyers coordinate with each department buyer involved with that license. If there is a promotion going on in one department, it makes a lot of sense for candy buyers to do tie-ins, or at the very least, to cross-merchandise.
The in and out nature of seasonal candy is in perfect sync with the in and out nature of licensed candy that is tied to a particular movie, especially if it falls during a holiday. If a movie is being released in late winter, for instance, Valentine’s Day candy tie-ins/packaging make a lot of sense — or so it would seem. In reality, the amount of lead time between idea and rollout is a major risk for manufacturers and retailers — especially with seasonal licensed candy. There is no telling a year in advance when a movie will hit the market. For retailers planning a holiday promotion of a licensed product, even a slight delay could be devastating. The industry is going to have to come up with ways that allow for quicker seasonal opportunities with shorter lead times.
Seek and you shall find . . . the right licenses. Candy buyers need to establish more of a voice in the licensing community if they are to be truly successful with the sub-category. It has always been assumed that it is the responsibility of the various studios, etc. to go after retail buyers with the latest licenses and draw them in to the process. Now, forward-thinking retailers are expressing that they want to be brought into the licensing life cycle much earlier than they currently are. They are playing a much more active role at the onset of the license.
Water your evergreens. Cross-merchandising and promotion is the best way to develop higher-than-average sales with evergreen licenses. Regularly add “new life” to older favorites with endcap promotions that may or may not incorporate other departments. Licensed seasonal displays that are created in-store can capitalize on the consumers’ need for moderately priced gift items throughout the year.