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FOOD/BEVERAGE

Food/Beverage in Strong Demand Amongst Corporate Brands

By Karina Masolova

For the sixth straight year in a row, food/beverage outperformed all other corporate trademark and brand segments with 4.5% growth in 2015, according to The Licensing Letter’s Annual Licensing Business Survey. Overall, the eating and drinking-related segments continue to represent the growth area in corporate licensing, although the growth of the restaurants segment evened out to a flat 1.5% in 2015 after 3.0% growth in 2014. Combined, the foodie segments make up 11.9% of retail activity for corporate trademark-licensed merchandise (food/beverage leads with 7.4% of the market). For many brands, licensing is presenting greater profits than the main business.

Survey respondents list several factors that contribute to the demand of licensed food and beverages:

  • Formal mealtimes are declining in popularity in favor of grazing and snacking. Consumers are favoring 5 or 6 quick meals per day. This in turn creates more opportunity for licensed products to target a wider range of consumers at different times of day.
  • Alongside increased interest in home cooking, driven by driven by cooking shows and social media, is the need for convenience. Healthy and cost-effective meals are “assembled” rather than pre-packaged or cooked entirely from scratch. And the stigma against frozen foods has lessened thanks to marketing and product extensions from well-established brands.
  • The taste for exotic flavors, spices and textures, especially among millennials (including moms) and Gen Z. According to market research publisher Packaged Facts, over 25% of parents learn about new food products from their children.
  • The stealth health and real food movements are growing to promote healthy eating as a lifestyle choice—including gluten-, wheat- and dairy-free, organic and unprocessed foods. Innova Market Insights identifies ‘clear’ packaging, rather than info dumps, as the key trend emerging from 2015 as consumers demand more simplicity and transparency when making food choices. Branding is a large part of this equation, even as off-label products have become more accepted.

On the supply side, the fact that the bulk of activity is licensing into related brand extensions works on several layers. The most obvious factor is the consumable nature of the product—even though royalty rates are lower in this segment than, for example, apparel, high turn over and consumer brand loyalty ensures solid sales. And while shelf space is shrinking for other product categories for brick and mortar stores, food and beverages are enjoying a boom. Warehouse stores like Costco, mass retailers like Wal-Mart—even pharmacies, convenience stores and even gas stations are stepping up their game to ensure they have more space for grocery. And “once brands are on the shelf, they don’t leave,” according to one agent.

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