It should come as no surprise, given the corporate craze for brand extensions, that the marketers of Kahlúa liqueur would concoct Kahlúa Iced Coffee.
The unexpected twist is that Kahlúa's parent, Allied Domecq, is not making the new product, which is based on the popular bar drink. Instead, Herbal Enterprise, whose parent company is best known for Arizona Iced Tea, is both manufacturing and marketing the new nonalcoholic coffee drink.
Licensing deals like this one, in which food and beverage companies cross-pollinate their creations, are behind a wide range of new products taking big brand names into new categories at the supermarket. Stroll down the aisle and you will find Jack Daniel's Grilling Sauces and Creamsicle Candy Twists. And, executives in the industry say, more brands created from licensing arrangements are coming to supermarkets soon.
Longtime consumer brands are burgeoning stars in the $93 billion licensing business, a field in which movie tie-ins usually get the most attention. Food and beverage licensing grew 3 percent last year, to about $12.4 billion in retail sales, according to Charles Riotto, president of the International Licensing Industry Merchandisers Association, a trade group in New York. In contrast, the over all licensing industry declined by about 4 percent in retail sales last year.
"The whole point is getting your brand name in front of the consumer where your core product is not," said Diane Stone, general manager of the global licensing group at Advanstar Communications, which produced Licensing 2002 International, the industry's trade show held last week in New York. "It's increasing penetration and exposure of the brand."
Companies are increasingly enthusiastic about these licensing deals - which pay royalties of 1 to 7 percent of retail sales - because they allow their big brands entree to markets where they do not have expertise.
Licensing also gives companies a low-risk way of creating new products, and retailers like the instant brand recognition that comes with them, said Dana Smith, chief operating officer at Equity Management Inc., a San Diego-based corporate licensing company that is the licensing agent for Kahlúa.
"This is just the tip of the iceberg, this business is growing and really taking off," Mr. Smith said. "These are big powerful trademarks that have spent hundreds of millions of dollars on their names and it makes sense to transfer that name into logical equities where the power of the brand is overwhelming in terms of consumer recognition."
Of course, the new products must be appropriate for the brand. Hawaiian Punch Fruit Snacks, a new product, taps into that brand's image for fun and fruity flavor, said Nancy Bailey, whose Nancy Bailey & Associates in Coral Gables, Fla., was the licensing agent. And the distinctive flavor and masculine image of Jack Daniel's whiskey made it a natural for grilling sauces that are being marketed by H. J. Heinz, Mr. Smith who was the licensing agent, said. (Branching into children's cereals, however, would not be such a smart idea.) Jack Daniel's particular brand extension has caught on.
Next year, Cutty Sark, the maker of Scotch whiskey, plans to introduce grilling sauces, said Carole Francesca, the president of Broad Street Licensing Group in Upper Montclair, N.J. "You have to look at the core value of the brand and how the consumer sees it - what is the immediate connotation," Ms. Francesca said. "Licensing gives a brand a whole new identity in a new area and it provides another consumer impression. Another eyeball is looking at your brand."
Kellogg started a program two years ago that licenses its mascots like Tony the Tiger, but also spun off new food products, including Froot Loops Gummi candy sold by Brachs, and Cheez-It White Cheddar Popcorn marketed by Houston Harvest.
Revenue from licensing is relatively small for Kellogg, but it is important to keep its brands contemporary in new markets where Kellogg wouldn't normally sell products, said Elisa Webb, Kellogg's director for worldwide licensing. "We look at it from a brand building perspective," Ms. Webb said.
Mars said that licensed products in this food and ingredients category grew 40 percent last year, to about $10 million in retail sales. Its newfangled products include Smuckers dessert toppings. This year, Mars struck a deal with Aurora Foods to make Duncan Hines Candy Shoppe Brownie Mix, using Mars candies.
"We are looking to develop other synergistic partnerships where we can match our strengths," said Michele Brown, vice president of licensing for Masterfoods USA, a unit of Mars, in Hackettstown, N.J. "We feel food and ingredient licensing has huge growth potential."
Patricia Winters Lauro, The New York Times. June 18, 2002
Copyright © 2002 The New York Times Company. All rights reserved.