By Glenn S. Demby, Esq.
Just a few years ago, the BRIC countries of Brazil, Russia, India and China seemed to be emerging powerhouses of licensing, posting growth rates that left the world’s mature economies in the dust. But now the BRICs are going through hard times, as documented by findings from the 2016 TLL Annual Licensing Business Survey.
China Still Growing but at Slower Rates
For much of the past decade, mainland China and its growing middle class has consumed branded products at staggering rates. But while the future still remains bright, 2015 was a setback. China’s 6.0% increase in licensed sales for the year, although more than double the global average, was a significant falloff from the 9.2% and 8.0% gains of 2014 and 2013, respectively. After so many years of sustained growth, the economic slowdown hit consumers hard, especially in the second half. Government “anti-corruption” policies and devaluation of the yuan slowed luxury sales. The Chinese people saved more of their household income. Other challenges include competition from local brands, unreliable trademark protection, and a massive market for counterfeits that preys on consumers’ lack of education.
Russia in a Downward Spiral
The former darling of western capitalists has become an international pariah with a radioactive economy. After 2014’s 10% decline, the Russian market for licensed goods fell another 18.9% to $226 million in 2015. War in Ukraine led to EU and U.S. sanctions; oil prices fell; inflation was above 15%. Consumer confidence and the purchasing power of Russian consumers eroded. “The ruble’s decline has been the rough equivalent of a 45% price increase for foreign brands,” explains a Moscow-based licensing consultant. Even the billionaires were staying away from the stores. Even so, long-term prospects for licensing in Russia remain bright as foreign investment continues to flow into the retail sector and local brands sprout up, perhaps the most successful example of which, Masha and the Bear, has become a billion-dollar global entertainment property.
Brazil’s Bubble Bursts
Brazil, the biggest market in Latin America, lost 3.8% in 2015. Continuing recession, high inflation, and a mid-year sales tax hike made for a retail blood bath with over 500 stores shuttering by year’s end. The luxury and fashion sectors were particularly hard hit; but their losses were to some extent the value channel’s gains.
India Proves the Silver Lining
The one BRIC country that has defied the negative pattern is India. Already Asia’s third richest licensing market, India’s growth of 9.2% was the highest in not only Asia but the entire world (at least among the top 50 markets). And that estimate is conservative. “Retail in India is growing 10% to 15% year-over-year, thanks to online,” according to a local agent, propelled by e-commerce which has enabled the retail sector to thrive and overcome the logistical challenges posed by the country’s undeveloped transportation infrastructure and high labor and real estate costs.