India is fast becoming a hot spot for the consumer products and licensing industry. Although experts state that online and offline retail will propel the industry, fragmentation and expensive real estate act as hurdles in this market. With children being loyal to brands as opposed to millennials, licensors and licensees are doing everything from entry-level meet-and-greet to creating theme parks, globally. At the recently concluded India Licensing Expo, Viacom’s Dan Frugtniet shares with BrandWagon’s Chandni Mathur his insights into the global licensing market and the opportunities that India holds. Edited excerpts:
How is the consumer products and licensing industry evolving, globally?
We are seeing double digit growth across many markets. The beauty of it is that there are so many new markets which are yet to evolve, so there is always a virgin territory to crack. Even in markets like India, where we have a viable business since 2000, we still have a long way to go. It’s a very exciting space with lots of opportunities and nobody has cracked everything. There is always a new product range or category that could work with licensed brands. An interesting dynamic is clip licensing — which uses the brand’s IP in a media campaign — which is becoming very popular in the UK and is a non-traditional way of using IP as it resonates well with consumers.How much is licensing and merchandising contributing to Viacom’s
How much is licensing and merchandising contributing to Viacom’s topline?
As a broadcaster, we are in a content-first business. But we need all these pieces in the chain to link together to activate the consumer products business. In the last seven years, our business has quadrupled and consumer products within a big corporation like Viacom are becoming more important.
What challenges and opportunities do you see in the Indian licensing industry?
The fragmented retail landscape is a big challenge, whether it’s independent retailers or specialist retail channels. Hamleys is a key toy retailer and I think it has around 36 stores in India but Toys ‘R’ Us is launching in India only now. So there is a long way to go. Toys ‘R’ Us usually breaks open the market for toy retail channels but the speed of reach to market of online retailers like Flipkart and Amazon is very impressive and important. There are a lot of new opportunities, in that way.
In terms of mass retail, we have a trend that has evolved out of Europe through mass loyalty promotions where a consumer will go into a supermarket and if she spends some minimum amount, she gets an instant reward, and the kid pushes the parent to go and spend that amount. That is an interesting model that hasn’t entered India but it will in the future.
What can a market like India learn from global markets?
India can really learn from the key developments we have had in other markets. With technology, India has been able to leapfrog quickly which is similar to what is happening in Africa, where it missed out a whole generation of phones and went straight to smartphones. It’s a very positive trend that India can run with and is exciting. But I also feel that it’s not the job of a licensor to tell a company in India how to run its business. It’s a two-way street. India is a very dynamic market and there are trends that you can adapt to at the same time as a more mature market like the UK.
Typically, which categories within licensing perform well? Does it differ market to market?
The biggest category for most licensors would be toys. Apparel and back-to-school stationery is a huge business as well. What is becoming more important, particularly in emerging markets like in Africa where the manufacturing base is not particularly strong and the retail network is not as advanced as other markets, is to use promotional instead of traditional products. This means using food and drinks where kids can buy into the product but for a dollar or so.
I think it’s important that brands always make their products accessible for any GDP and economy around the world. For example, in some places our toys may not sell as much because they are expensive, but customers can pay one euro for a snack or drink with Dora the Explorer, Spongebob or Paw Patrol. So it is about adapting your business to the territory, and promotional licensing is an easy way forward for the licensor and licensee as they are not changing their product apart from the design.
I find it fascinating that the fidget spinner has been a trend in India in the same window as the UK. That trend is now fading fast in both markets and not many licensors have managed to launch innovative products in time.
With counterfeits dominating a market like India, is it difficult for a licensed brand to establish itself?
Being price sensitive is the key in getting consumers to purchase the product. This is one of the challenges in this business — if you have a successful brand and IP, you are going to have counterfeits. It’s just a fact of life. In Russia, many years ago, I converted ex-counterfeiters to become genuine licensees; sometimes they don’t even realise they are doing something illegal as the markets don’t crack down on them. In China for example, they are now taking effective steps in dealing with this. The second strategy is educating the market on not buying counterfeits and buying the genuine product that is safer for children in return for a higher recommended retail price; it’s all about helping educate parents, retailers and the market.
What are the plans to expand Nickelodeon’s international consumer products business?
It is difficult to consistently stay relevant and it’s important to realise that. Kids and teenagers are always looking for the new trend and brand now, so it’s important to keep investing in the IP. With retro Nickelodeon IP, there are some brands from the ’90s that we have the appetite to bring back. So in some markets where it makes sense, we will do that. The core category we will roll out is apparel, with a few collectibles as well, in markets like the US, the UK and Australia.
Nickelodeon is Viacom’s core brand portfolio for consumer products as children will always want the merchandise — whether it is toys or books, and will remain loyal to a brand for years.