Staying in Character

You may not instantly recognize Brand X Canned Ham. But slap Shrek or Bart Simpson on the label, and the product is instantly an old friend.

Recognizable icons like animated characters and sports team logos are showing up everywhere these days. Total retail sales of licensed products hit $107.4 billion in 2006, according to the Licensing Industry Merchandisers Association (LIMA). Entertainment and character licensing — accounting for 44% of the market — led the pack in 2006 retail sales with $48 billion.

Trademarks and brands totaled $19.6 billion, reports LIMA, noting that trademark and brand revenue hit $1.08 billion in 2006, $4 million more than the 2005 total.

Promo’s own 2007 Marketer Trends Study reports that 2.6% of marketers spent more money on licensing in 2006. Royalties grew by 1.5%, to $6.04 billion, in 2006, reports LIMA, which attributed the slight boost to last year’s blockbuster films and famous trademark brands. And this past summer’s tent-pole films “Spider-Man 3” and “The Simpsons Movie” will be sure to drive the 2007 entertainment and character licensing numbers when they’re calculated next year.

Meanwhile, licensed fashion outpaced sports sales at $14.9 billion, compared to $14.8 billion. Royalties from fashion brands last year rose 1% to $830 million. Sports royalties jumped 1.9% to $825 million.

Entertainment properties and licensed characters royalties alone reached $2.68 billion in 2006, up 2% from 2005. Art royalties in 2006 increased $7 million to $182 million, while music royalties went up $4 million to $132 million.

But all is not rosy.

Food and beverage marketers are struggling with concerns over childhood obesity and the use of licensed characters to sell sugary cereals and snack products. Some manufacturers like Kellogg will stop using these icons to promote foods that fail to meet certain nutritional standards.

But LIMA says that impact will be minimal. Instead, Marketers will forge licensing deals with more nutritious items bringing about new opportunities, says Charles Riotto, the association’s president.

“I don’t see it having a negative impact,” Riotto adds. “Rather than seeing character licensing diminishing, we are seeing it move from one aisle of the supermarket to another.”

One such case is Nickelodeon, which signed a deal with General Mills’ to place popular characters on packages of Green Giant frozen vegetables. In a separate deal, DreamWorks Animation launched a spring campaign with McDonald’s around “Shrek the Third.” It featured healthy food choices, including salads and Apple Dippers.

Still, not everyone thought Shrek licensing was a good fit. The U.S. Department of Health and Human Services came under fire for using the overweight ogre in a spring public service advertisement as a pro-health spokesperson. A child advocacy group asked that the ads be removed because Shrek was also linked to other promotional partners pushing candy and other purportedly unhealthy foods.

Another way to stimulate licensing’s relatively flat growth is through developing new products.

Burger King signed a deal with The Inventure Group to launch the brand’s first effort in the salty snack business. Two flavored snack chips will rollout by the fourth quarter in 100,000 locations.

And Pepsi Co.’s Aquafina brand has added skin care products to its line of lip oils and balms. This extension blends the concept of hydration and skin care, says Debra Joester, CEO of The Joester Loria Group, Aquafina’s licensing agency.