Our thousand cases of Trump Super Premium Vodka have already shipped to Russia this year. Four thousand more are backlogged, ready to ship. A distributor is lined up to purchase $7.5 million annually. China and India have put in their orders, as well.
How the heck do you sell vodka to Russia Apparently, Donald Trump is just that good.
Trump Vodka, manufactured by Drinks Americas which partnered with “The Donald” to license the brand, is enjoying worldwide popularity as well as a nod from the International Licensing Industry Merchandiser’s Association (LIMA), which has nominated it for the 2008 International Licensing Excellence Awards.
International demand and accolades aside, here’s how much weight a little license can pull: The Donald doesn’t even drink.
So how do you hook up your drink with a face or name that will garner global success? In other words, who can be your Donald Well, you license it, paying someone to allow you to use his or her name, image, and very aura for your product.
Depending on whom you ask, licensing can be a science, an art form, or a complete gamble. One thing is certain: it is alive and well in the beverage industry. In 2006, the U.S. saw $108 billion of licensing sales, with food and beverage tapped as the fastest growing sector.
Given the vast market of opportunity, both license owners (licensors) and license buyers (licensees) are looking to carve out their share of revenue and exposure, but not every licensing deal is created equal. In some cases the right character is tapped at just the right time and a brand explodes. In other cases, the parties proceed with caution, taking careful consideration of all legal implications. Recognition for the brand is built successfully over time.
Here we explore the ins and outs of licensing, from conception to conclusion, with a special focus on product development.
WHY LICENSING?
Beverage makers know a valuable license can both reinforce efforts to market an existing brand image, as well as expand its reach into other markets.
In the case of Socko Energy by Bliss Beverages, the drink was already on shelves in 2005 when wrestling icon Hulk Hogan tried the drink and “flipped over it,” according to Bliss president Mike Jannicelli. After some negotiations, Bliss decided to repackage the beverage as Hogan Energy Powered by Socko. Hogan was seen providing prime product placement for the drink on his show “Hogan Knows Best.”
“He’s the best promoter there is,” said Jannicelli, who said Hogan, he of the 24-inch pythons, is constantly seen drinking Socko and donning Socko shirts. “He’s just amazing,” he said.
Hogan Energy was picked up by Wal-Mart last year and is now distributed nationally.
A licensed image can also be used to launch a brand outright. R.W. Knudsen introduced its organic juicebox line this fall with the hope of a bear market. They have licensed The Berenstain Bears. The Bears, fond storybook characters for generations of children, have automatic recognition and can therefore save Knudsen the time and costs that other marketing efforts would require in order to reach their targeted consumer. The Bears can lend credibility to the juice, and possibly compel parents to pay more than the alternative (especially with the prospect of being #1 Parent just for bringing home the Bears).
Beverage companies have also been in the position of licensor. Starbucks, for example, is well-known for cross-marketing its company name to brand supermarket items such as ice creams and liqueurs. Its reputation as a purveyor of premier coffees in the café and RTD market triggers similar consumer associations of “luxury” in the supermarket aisles.
In every licensing deal, both parties should experience the benefits of licensing. The licensor gets exposure and cash. The licensee gets a quick marketing connection. This balance is the mark of a successful licensing program.
IMPORTANT CONSIDERATIONS
Woody Browne, president of Building Q licensing agency, said the first step in a licensing program is to consider what your company wants to achieve through licensing.
When Hansen’s was looking to connect its Monster Energy with a younger male consumer, it had only to look under its nose, according to Brand Manager Geoff Bremmer. “Monster had been working with …Lost Enterprises at their surf and skateboard contests and saw the opportunity to capture the consumership they sought.
“Lost brand’s loyal fan base and grassroots marketing program was already intact providing a great foundation to build an energy drink business on,” said Bremmer.
Sometimes, though, the connection is a bit superficial. Think: Rich man for a rich man’s vodka. Think: perfect.
Nevermind that Trump is a teetotaler, lending irony as well as image to his brand.
J. Patrick Kenny, CEO of Drinks Americas, noted that Trump brought more to the table. “The Trump Trademark means the most luxurious and best of class.
“I was recently in his new Chicago hotel checking on the vodka and in my opinion it is one of the most magnificent hotels I have ever been in. Mr. Trump didn’t personally pour the concrete or design the bar but he found the best person in the world to do so and the results are the same.
“My experience is Donald Trump demands, finds, gets the highest standards of quality and luxury. The point is not that he personally consumes it, the point is he manages to create it and his trademark represents it to consumers,” said Kenny.
In addition to Trump, Kenny has partnered with Paul Newman (Lightly Sparking Fruit Juice Drinks) and Dr. Dre (Cognac). He said Drinks Americas and the partners own the brands often 50/50.
The point is that, it’s not just the name, but the aura, according to Kenny. “We try to partner with icons – and I differentiate icons with celebrities,” he says, “An icon is someone who is global, transgenerational, and bears a premium image to go with the product,” he said.?
In order to hedge against risk, licensees may often consider an “evergreen character” such as Scooby-Doo or Barbie that they believe will instantaneously resonate with consumers.
However, certain characters can only carry so much weight, and they often cost more.
“There is a balance between evergreen and just somebody who’s been around a long time,” said Browne, “You see a lot of bad decisions with companies – they pick the safe thing, instead of being on target or on trend. In today’s tough economy, going safe is okay. But you’re not necessarily maximizing your opportunities,” said Browne.
Licensees must be circumspect about the opportunities they may see in retail. What was hot yesterday may not be hot today; what is hot today may not be hot tomorrow. Based on this information, licensees must make the best decision in light of their own marketing strategy.
PRODUCT DEVELOPMENT
While an important consideration for licensees is “Which license?” for licensors, the question of what will be done once the rights to the license are granted is of prime importance.
Angela Farrugia, CEO of The Licensing Company (TLC), said licensees should be aware that certain restrictions still apply even after rights to the license has been acquired.
“Every single step of the way, the brand owner has approval. Nothing goes to market without their knowing,” said Farrugia.?
This sentiment resonates with Monster’s Bremmer. “Each licensee has their own thoughts on where the brand’s priorities should lie and how the brand should progress,” he said.
If licensees are “logo licensing,” that is, attaching a logo or image to an existing product, the process may take much less time than if an entirely new product is being created around a license. Both parties should recognize that the process could be many months in development. Kenny of Drinks Americas said his licensing deals take two to three years from the first conversation to the first shipment to the shelf. Each licensing deal is dependent upon the unique factors at the negotiating table.
Farrugia works primarily with clients to develop new products inspired by licenses. If you ever wondered what a drink might taste like that is inspired by a jelly bean, Farrugia can speak to the experience of helping to create, build and brand it.
Farrugia is presently working with Jelly Belly Co. to produce beverages due out early in 2009 that not only bear the Jelly Belly logo and brand name, but also recreate the unique Jelly Belly flavor experience, as well.
Farrugia said the process of creating a licensed product from scratch may take as long as nine months, working with flavor technologists to replicate flavors, color and taste. But she said a detailed, time-consuming process is critical to success.
“The consumers won’t be fooled. They will buy a product once and if it doesn’t deliver on taste and flavor, they won’t buy that product again. The branding strategy must be right but also a taste and flavor strategy,” Farrugia said.
Browne also said the process should not be a hasty one.
“I liken licensing to the concept of just rushing in and snatching up a home run. If you’re going to be that random, you’re going to hit and miss. When you miss it looks really, really bad.
[Licensing is] mostly portfolio management and risk management. You have to be in it to win it. Usually, you win it slowly, with singles and doubles,” said Browne.