National Brands, Private Label and Licensing

IMC Licensing

April 15, 2010

During a panel discussion about product innovation at the 2009 Grocery Manufacturers Association’s Merchandising, Sales and Marketing Conference, one participant gave a glimpse into why retailers continue to propagate, then populate their shelves with new products under store and owned brands. When prompted by a question on how his company positions store brands against national brands, Dennis Mullahy, Group Vice President, Merchandising and Supply Chain Management of Meijer Inc. replied, “I don’t have private label to compete with national brands. I have store brands to compete with other retailers.”

Mullahy went on to say that in order to optimize shelf space, store footprints and deliver a selection their customer demands, Meijer has to strike the right balance between the number of offerings they have under their store brands and national brands.

It’s obvious then that retailers need store brands to have an identity among consumers and differentiate themselves from other stores. The presence and power of store brands has evolved so rapidly that their relationships to national brands now exist on several levels. Many store brands continue to quickly duplicate national brand introductions, offering similar innovation and enhancements that have CPG marketers believing the relationship is primarily parasitic. Some will call the relationship antagonistic. In many categories, private label has taken such a significant share that national brand category leaders have to battle them along with their long time rivals for shelf and cart space.

But as store brands continue to close the gap in packaging, merchandising, pricing and value, they collectively have presented themselves as an emerging national brand. Brands that have an identity partly taken from national brands, partly developed by private label manufacturers, then completed by retailers.

With the advances in packaging and innovation made by private labelers, these successes are now being mimicked by CPG manufacturers and marketers. National brand marketers are increasingly responding to store brand presence with pricing and positioning changes and adapting their brands’ identities and equities accordingly. The relationship is now not just competitive but symbiotic.

With the consolidation of retailers, the remaining retailers reducing SKUs, and the recent recession thrown into the mix, one might assume that the likelihood of launching a successful new product grows slimmer each day. But retailers and consumers alike point to needs and gaps in product lineups.

Licensing is a way that all the parties involved can work to fill those gaps and respond to consumer demands in a timely manner. National brand marketers need ways to extend and solidify their brand with retailers and consumers. Manufacturers need to fill capacity and broaden their offerings to retailers. Retailers want products that will resonate with consumers and allow them to get more from familiar suppliers.

From Generics to Great Value and Beyond

While a number of grocery stores in the U.S. have had items packaged under contract for decades, the 1970s and 1980s saw a proliferation of value products on store shelves sold under a variety of guises. However, the economic downturn of the early 1980s led many consumers to emphasize price and value over brand loyalty and the increased presence of generics and eventually store brands were here to stay.

Retailers began placing their own logo on many of these products, first in rather minimal fashions and eventually moving front and center. As their sourcing expertise and manufacturer’s capabilities grew, the ability to truly make national brand equivalents emerged. Retailers became increasingly confident in backing private label products in more and more categories, eventually developing tiers of to offer good, better and best owned brand items.

Kroger now has numerous offerings under their premium Private Selections brand and price driven Kroger Value. Today every major grocery retailer has at least one banner owned brand to offer consumers. Wal-mart Stores has Sam’s Choice and Great Value in Walmart and Member’s Mark in Sam’s Club. They have exclusive rights to national brands like White Cloud to produce products in adjacent categories. Licensing arrangements with Better Homes and Gardens and Mary Kate and Ashley (now out of Walmart) have allowed the chain to offer products exclusive to their stores.

Some manufacturers have been able to develop vital and long lasting relationships as contract suppliers to retailers for private label products. Many are run on the same assembly line as their national brand cousins. Companies looking to maximize operation have supplemented production of their own national brands with contract manufacturing.

Burgeoning relationships between manufacturers and retailers, born in the trenches, are just one thing that has led to the surge of private label in recent years.  Retailers’ use of customer loyalty data, the hiring of seasoned CPG talent to spearhead development at contract manufacturers, and the use of marketing dollars behind owned brands have all led to a new breed of store brands. Brandweek hailed 2009 as the Year of Private Label. Several other industry notables are saying that 2010 will bring more of the same with the economy remaining such a game changer.

Brands Bounce (and Bite) Back

One doesn’t even have to look at the steady growth of private label to recognize the impact it has had on national brands and the marketing giants behind them.  In response to a volatile economy and store brands chipping away at unit share, and more importantly dollar share, several leading CPG companies have adjusted their sales and marketing campaigns. In addition to launching Oscar Mayer, Capri Sun, and Chips Ahoy campaigns focusing on value, Kraft Foods also invited customers to “Save. Share. Smile.” with not only Kraft Macaroni and Cheese, but the premium Velveeta Shells line as well. Kool-Aid, battling not only private label in its mix category also took on soda and was easily found at 10/$1 pricing with year round advertising touting ”More smiles per gallon.” In 2009, Kraft conducted no fewer than a half a dozen campaigns focused on the affordability of Kraft Singles, which confronts considerable competition from private label cheese slices.

Perhaps an even more intriguing approach has been that of Proctor and Gamble. Instead of positioning its iconic brands as a strong value, P&G has developed brand extensions under the Basic label. Charmin Basic is “Soft. Strong. Sensible.” Bounty Basic  is “Practical. Not Pricey.”  And Tide Basic with “Big Value. Basic Clean.” have all entered the market with the basic proposition of less bang for less buck. Only time will tell if the initiative recaptures share lost to store brands or finds P&G consumers trading down from their premium siblings.

The prognosis for national brands is not all bad, however. There is no denying the power of brand. P&G, Kraft and Colgate all showed increased sales in late 2009 as the economy stabilized. Historically, national brands recover 30-40% of share lost during economic downturns.

Store Brands, Owned Brands and National Brands Now More Alike Than Different

There is a consensus among CPG marketers on how they will not only survive but thrive in the years to come. Common themes among announced initiatives and strategies include continued innovation, successful product management, and mining lots of consumer data for insight. A fourth, working on category management, involves the very retailers spearheading much of store brands growth. At the recent Private Label Manufacturers Associations (PLMA)’ Leadership Conference, no less than three speakers mentioned the very same four strategies on how store brands can continue their growth.

Returning to Dennis Mullahy’s comments on the role of store brands in Meijer’s merchandising efforts. He went on to say he believes that there is a threshold in shelf space, market share, and dollar share at which private label is optimized. While that metric will change over time and across categories, it somehow all balances out in the end.

Taking a closer look at data put forth by PLMA along with IRI and Nielsen, lends even more credibility to Mullahy’s approach. While private label has seen a significant gain of over 2 points (from 15% to 17%) of dollar share over the last five years, the gain in unit share has been less than 1 point, remaining between 20% and 21%. Both private label and national brands have shown increased sales over the same period, pointing to the fact that the available dollars and spending continue to rise.

The data also calls out the fact that store brands are mimicking national brands in more ways than just packaging and quality. Due to the investment in innovation, the rise in cost of raw materials, and marketing spend, pricing of store brands has crept closer and in some cases exceeded their national brand competitors. There are a few retailers who are taking on the role of CPG marketers and selling their owned brands outside their stores. For over two years now, Safeway has made available a number of products in the O Organics and Eating Right lines to retailers in other markets. The vehicle is being driven by an alliance of established Safeway private label suppliers like Ready Pac, Schreiber Foods and Overhill Farms and supported by marketing and merchandising firms EMAK and Crossmark.

Despite goals and strategies that align, store brands and national brands will remain competitors. But gone are the days of pure imitation and value only propositions. Store brands and their marketers are as aggressive and complex as national brands and have moved from parasite to peer. Peers that need one another to have their own unique identities and drive one another to bring more value and innovation to consumers.  But as they develop unique identities and equities of their own, store brands also become less nimble and adaptable across multiple categories. This creates more opportunities for challengers and new consumer-centric product offerings.

Linking Licensing to New Opportunities

Since both national brands and store brands point to overall demand for products as necessary for continued growth, they and retailers should look for more opportunities for collaboration. Much like promotions with other CPG companies and entertainment properties, mass marketers are looking for unique ways to feature their products. In an interview highlighting Kraft Foods’ efforts in working with retailers like Publix and Meijer on in-store sandwich displays, CEO Irene Rosenfeld said “They bring the bread. We bring the meat and cheese.”

Promotions, in-store marketing and merchandising solutions are just a few ways to attract and maintain new customers. Amidst acquisitions, consolidation and competition, licensing may often be ignored as the right way to fill in product gaps and bridge the divide that will continue to exist between national and store brands. National and store brands are not able to meet every consumer preference and product need, leaving several opportunities for licensed products to reach consumers minds and wallets. Licensing is a marketing tool for brand owners, a vehicle in which manufacturers can draft behind a powerful name with equity, and a way for retailers to grow categories overall. When envisioned and executed properly, licensing meets the needs of all in different ways.

Surrounding a brand with appropriate licensed products not only makes sense for the brand owner in extending its presence and mind share, but it means revenue for all involved in delivering that product to consumers.  Licensed products that are complimentary to a brand’s core offerings or even other successful licensed items allow to manufacturer’s tie into a brand’s success and can increase the total basket ring for the retailer. MilkBone was a veteran but still immature brand when dog owners began spending extraordinary amounts of money on pet toys and accessories. A full licensed program of leashes, bowls, and assorted toys not only extended the dog lover’s joy in the “MilkBone moment”, but also brought the biscuit in the box out onto end caps and in center aisle displays paired with its new partner.

Consumers are motivated to trade up or trade down in a category by brand affinities in addition to pricing or value considerations. A 2009 Licensing Letter Report claims that licensed products command a 33% premium over non-licensed items, with larger premiums existing in mass channels versus specialty and department stores. Premium brands have utilized licensing in order to deliver products at a lower price point while maintaining the integrity of their own brand. All-Clad developed a line of cookware with Emeril Lagasse to enter the mid-price market without compromising the integrity of its brand with professionals.

Being able to match a demand created by emerging trends like health & wellness or a market opening created by unexpected circumstances with an established equity could prove to be a boon for brands, manufacturers and retailers alike.  Can you imagine the opportunity that could have been realized if an appropriate brand had stepped in to fill the void left by the recalls of Peter Pan peanut butter or Pilgrim’s Pride chicken?

Licensing allows for retailer differentiation in a number of ways. The benefit is quite obvious when the license is an exclusive, but retailer exclusives are not the only way to accomplish this. Licensed products may be used to build retailer specific merchandising solutions, offer up exclusive packaging and assortments or deliver complimentary products in a marketing promotion. Retailers often co-brand store brands with a recognized mark to attract a demographic or build credibility in a category. Kohl’s utilizes exclusive access to marks like Candies, Fila Sport and Food Network to find its way into people’s closets, gym bags and kitchens. Costco has placed its Kirkland Signature mark on products next to the likes of Newman’s Own, Borghese and Starbucks.

Williams Foods used licensing to bring a branded balance to their product offerings. Etherington explains that their expertise landed them ingredient sales and contract manufacturing relationships and led them to licensing opportunities. Those relationships with brands like Betty Crocker and Jimmy Dean led to additional opportunities for the packing side of the business. Each new or expanded relationship led to more and more opportunities for Williams, eventually making them into a very attractive acquisition for C.H. Guenther.

Roman is quick to point out that his portfolio at Revman is not only laden with some of the licensing industry’s heavy hitters like Tommy Hilfiger and Laura Ashley, but with up and coming brands as well. But each of his more than dozen brands meets a very specific need for his retail partners.  He and his clients take into consideration demographics, styles, brand equities and emerging trends with each launch they undertake. Without manufacturing capabilities behind them, licensing rights to properties is are the assets that best complements Revman’s design ability and expertise in textiles.

The Balancing Game

As retailers seek the right mix of national brands and owned brands, manufacturers that can offer a balanced mix of product solutions will become more and more attractive to them. Even with private label continuing to grow by behaving more and more like true CPG brands, the opportunities for brands will continue to abound. As Jewel discovered in the eighties and Walmart realized very recently, consumers may waver in their brand loyalty, but will never completely abandon it. Bricks-and-mortar stores will continue to stock what sells best, but as a future with more and more unlimited virtual shelf space looms, consumers will still expect to be able to buy what they want to when they want to.  For years, non-competitive CPG marketers have collaborated with one another to deliver promotions, incentives and reasons for consumers to buy across multiple categories. Licensing is one way that brand owners, manufacturers and retailers can expand those types of relationships to bring more partners into that influential circle. Taking advantage of these kinds opportunities still allows for healthy competition and capitalism, but can help all involved by increasing category sales and consumer satisfaction instead of merely stealing share from one another.

IMC Licensing Logo Mark

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    If you want to develop great products that actually sell at retail, you are probably already thinking about how to…

    Stephen Reily

    January 2, 2014

  • Starbucks, Kraft and the $2.7 Billion Divorce

    Last week’s LIMA Bottom Line featured an article I wrote about the recent resolution of a long-running dispute between Starbucks…

    Stephen Reily

    December 23, 2013

  • 7 Most Inspiring Products for Old People are Great New Products for You, Too.

    IMC’s hometown hosted the Louisville Innovation Summit last week  Aging care is a growth industry for Louisville (headquarters for companies like Kindred,…

    Stephen Reily

    November 18, 2013

  • More than Just a Hill of Beans

    Kraft Foods recent announcement of its intent to test market McCafe packaged coffee adds a deep, new wrinkle to the already interesting…

    IMC Licensing

    November 15, 2013

  • Keeping Your Options Open in Licensing

    Licensors with iconic brands often have to make tough choices about extending their brands in new markets through licensing versus…

    IMC Licensing

    November 4, 2013

  • Licensing at Tiffany’s: Not a One-Way Street

    On vacation this summer I needed to get my sunglasses repaired.  While waiting, I was surprised to look in the…

    Stephen Reily

    September 16, 2013

  • What Licensing Agencies Can Do For You: A Tale of Chocolate Cereal

    One of IMC’s most deliciously licensed products is Kellogg’s Rocky Mountain Chocolate Factory cereal. The coco-brown box features the names…

    IMC Licensing

    September 4, 2013

  • What does the Local Food Movement mean for Food Licensing?

    In my hometown of Louisville – a city proud of its food culture in a state proud of its farming…

    Stephen Reily

    August 8, 2013

  • Licensing by Litigation: A Bad Business Plan

    Two large-scale lawsuits in the licensing world have recently been stopped by injunctions.  After spending millions of dollars on legal…

    Stephen Reily

    August 1, 2013

  • Paula Deen and Food Licensing: Why Didn’t She have More to Lose?

    Paula Deen, as a brand with great licensing potential, seems almost beyond repair.  While I can imagine strategies that would…

    Stephen Reily

    July 30, 2013

  • What’s Your Innovation Reality?

    What’s Your Innovation Reality? I was recently reviewing some notes from a talk I heard almost two years ago –…

    Stephen Reily

    July 24, 2013

  • Just Married

    Often times we describe a licensing partnership much like a marriage. The Licensee and Licensor meet, are engaged by signing…

    Emily Wickerham Randles

    June 27, 2013

  • Purina Tidy Cats® and Glade™ Tough Odor Solutions: A perfect match

    The partnership between Purina Tidy Cats and Glade Tough Odor Solutions has developed a scented cat litter which has customers…

    IMC Licensing

    June 20, 2013

  • Integrating New Products with Licensed Properties

    Integrating New Products with Licensed Properties Demands on new product development have greatly increased over the last decade with increased…

    IMC Licensing

    June 17, 2013

  • The Humanization Of Our Pets: Key Survey Findings

    The cliche is that pets look like their owners- but will they use the same products? The theory at IMC…

    IMC Licensing

    June 10, 2013

  • What Do Pet Owners Want Next?

    The pet industry is one of our favorites, and not just because most of us at IMC have pets of…

    Stephen Reily

    June 5, 2013

  • Sharing the Love of Brands with Your Pet!

    Pet owners are passionate about their furry little friends and they spend over $50 billion annually to prove it.  They…

    IMC Licensing

    April 4, 2013

  • What Makes Martha Stewart Such a Bad Partner?

    I’ve read lots of articles about Martha Stewart’s recent bout of litigation, but none of them addresses why someone would…

    Stephen Reily

    March 21, 2013

  • 2013 Housewares Show: Forging New Partnerships

    The 2013 International Home and Housewares Show in Chicago is the largest housewares-only fair in the world with 60,000 home goods professionals…

    IMC Licensing

    March 14, 2013

  • A Tale of Two Cracker Barrels

    When I saw that Cracker Barrel, the southern-fried restaurant chain, had recently licensed its brand to John Morrell Group, a…

    Stephen Reily

    February 6, 2013

  • Why Does Licensing Love the Holidays?

    In the licensing world, most royalty payments are made on a quarterly basis. Any licensing professional can immediately tell you…

    IMC Licensing

    December 20, 2012

  • The Slow Death of Commission-Only Deals

    Truly successful brand extensions are the result of pairing leading consumer brands with products that enhance the brand’s reputation and…

    IMC Licensing

    November 26, 2012

  • Why Licensing?

    As advertising as we know it is faced with a rapidly changing environment, brand owners and brand managers are looking…

    IMC Licensing

    November 1, 2012

  • Reinforcing Your Brand Through Licensing

    Some licensed products are very much like the brand’s core product itself. They may be used the same way (like…

    IMC Licensing

    October 15, 2012

  • A Primer on Licensing

    Wherever industry regulars gather, they’re sure to discuss the world’s largest licensor; the world’s citizenry buys more than $23 billion…

    Stephen Reily

    July 27, 2012

  • Working With Licensing Agents and Consultants

    Licensing agencies and consultants can play a central role in the development of an effective licensing program. Whether your company…

    IMC Licensing

    November 22, 2010

  • Why Use an Agency for Licensing?

    Even if your company has an in-house licensing director or staff, there are several reasons to hire a licensing agency…

    IMC Licensing

    May 10, 2010

  • National Brands, Private Label and Licensing

    During a panel discussion about product innovation at the 2009 Grocery Manufacturers Association’s Merchandising, Sales and Marketing Conference, one participant…

    IMC Licensing

    April 15, 2010

  • Licensing 101

    As an agency that develops and manages licensing programs for our clients’ trademarks and brands, we often get asked Why…

    IMC Licensing

    November 8, 2009

  • Retail Strategies Beyond the Top 10

    Every day the list of victims of the faltering economy grows longer.  Circuit City (#32 on National Retail Federation’s, Top…

    IMC Licensing

    September 25, 2009

  • Beyond Royalty Revenue: Measuring ROI from Licensing

    In recent surveys senior marketing professionals say that accountability for marketing services is more important than ever, and that they…

    Stephen Reily

    September 16, 2009

  • Trends in Inbound Licensing

    In the licensing industry, attention is typically focused on strategies to license a brand “out,” extending a brand into new…

    Emily Wickerham Randles

    August 19, 2008

  • The Licensing Professional – Not One Size Fits All

    I cannot count the number of times I have heard companies talk about whether they should hire a “licensing professional”…

    Stephen Reily

    February 19, 2008

  • Licensing Agency Compensation: The Inside Story

    One of the needless mysteries of the licensing industry is the topic of agency compensation.  Although talented professionals neither gain…

    Stephen Reily

    February 19, 2007

  • Food for Thought (on Food and Beverage Licensing)

    Food and beverage licensing is everywhere. A quick trip to the supermarket will produce Nesquik chocolate milk, Oreo ice cream, and…

    IMC Licensing

    August 28, 2006

  • The Bankruptcy Clause: Comforting but Useless

    An experienced reader of license agreements would know exactly where to find what I call the “bankruptcy clause” (about three…

    Stephen Reily

    March 1, 2003

  • When Trademark Licensing looks like Franchising: Avoiding Legal Risk

    If anyone doubted that trademark licensing has become an essential part of brand management, the recent Annual Meeting of the International…

    Stephen Reily

    September 8, 2002

  • The Risks a Licensor Poses to a Licensee: How Can They Be Limited?

    Most form license agreements assume that licensees pose greater threats to licensors than the other way around.  Aside from the…

    Stephen Reily

    August 8, 2002

  • Licensing to Preserve Trademark Ownership

    As all IP counsel know, registration of a trademark depends on that trademark’s use.  A trademark cannot be reserved indefinitely…

    Stephen Reily

    July 9, 2002

  • Trademarks Around the Edges

    Many years ago, companies that made a branded consumer product thought they did only one thing: make that product.  Their…

    Stephen Reily

    March 9, 2002

  • Watch What the Licensor Does, Not What it Says

    Hiring the best trademark counsel – and getting them to draft the best possible license agreement – will not alone…

    Stephen Reily

    March 9, 2002

  • How Accountants Will Change the Face of Trademark Licensing

    As the licensing industry frets about whether the biggest event of the year will be the performance of Harry Potter…

    Stephen Reily

    November 9, 2001

  • License Agreements: Partnerships Worth Getting Right

    Whenever you see a licensor and licensee in litigation with each other you should assume that something has gone wrong…

    Stephen Reily

    September 9, 2001

  • How Many People Does it take to Screw in a Trademark Licensing Agreement

    Because so many brand owners fail to appreciate how important licensing can be for their brand, many of those who…

    Stephen Reily

    August 9, 2001

  • Developing Branded Consumer Products like Consumer Products

    Last month I described how companies find themselves distributing or authorizing branded products that either weaken the protection of their…

    Stephen Reily

    July 14, 2001

  • Why Most Companies Have Too Many Licensors

    If you looked to a corporation’s internal licensing department for evidence of trademark usage and enforcement, as well as development…

    Stephen Reily

    May 20, 2001

  • Licensing Corporate Brands and Trademarks: Knowing What it Should Cost

    As someone who runs a licensing agency for the owners of brands and trademarks, I can be expected to argue…

    Stephen Reily

    February 19, 2001

Services

Licensing is a relationship not merely between brands, but among people. At IMC, we build and nurture both of those relationships while delivering top-notch customer care that treats — and protects — your brand as if it were our own.

About Us

We’re committed to fostering dynamic brand alliances. Often those alliances are born from one brand’s need and another’s ability to meet that need. The IMC team are experts at recognizing and creating those opportunities, but our real expertise is people. Standing side by side, as consultants, partners, peers, and as friends, we’re driven by a singular purpose: creating a smart idea.