Licensed Kids' Food, Beverage Marketers Should 'Stand Proud'

Pressure from the government, parents and consumer groups is undeniably accelerating a transformation in the business of licensed foods and beverages for children.

But rather than being "cowed" by "the public whipping of late by parents, government and consumer groups," marketers should "stand proud" and focus on the opportunities that lie in harnessing licensing to drive healthier new-product development, declares a new report on the sector from the Packaged Facts division of Marketresearch.com.

The pep talk may well be welcomed by licensed kids' product marketers, who are, as PF points out, also under siege from market saturation, aggressive pricing, quality assurance concerns and competition with other branded and licensed products.

The licensed marketing landscape is also being reshaped by kids' changing media consumption patterns, the need for increasingly rapid rollouts of new offerings, and other factors.

PF estimates that U.S. sales of licensed F&B products to kids aged 3 to 11 rose by 10% in 2006, to $746 million, and maintained a compound annual growth rate (CAGR) of 9% from 2002 through 2006.

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However, the array of challenges are expected to slow the licensed sector's CAGR to 7% between 2006 and 2011 (when sales should reach $1 billion), compared to a projected CAGR of 12% for all kids' foods and beverages.

Still, "once through this painful period of reassessment and readjustment, kids' licensed products will again see significant growth," the PF analysts predict.

Indeed, marketers are already beginning to wean themselves from the traditionally heavy emphasis on television as the channel for reaching kids, and healthier F&B options are beginning to enter the pipeline.

According to the FTC, the number of food ads per year on children's TV shows dropped by 34% between 1977 and 2004, from over 4,000 to about 2,700--a noteworthy trend, given that kids' TV shows, along with movies, drive so much of the licensing business. (Across all kids' product categories, the number of commercials declined by about 10% during the same time frame.) On the other hand, a 2007 study by the Kaiser Family Foundation of kids' F&B advertising across 13 U.S. TV networks (all kinds of shows, not just kids' shows) uncovered not a single ad for fruits and vegetables among the 8,854 commercials aired.

But progress continues. This past July, 11 major companies accounting for a large percentage of kids' F&B advertising pledged to curb their advertising of junk food to kids and cease using licensed characters to advertise in online and print media unless the ads are promoting healthier products.

That move followed a 2006 report by the FTC and the Department of Health & Human Services that, among other recommendations, urged marketers to develop more nutritious products for kids and recommended that the Children's Advertising Review Unit of the Better Business Bureau set nutrition standards for products marketing to kids.

Although the FTC subpoenaed 44 major F&B and fast-food industry marketers this past August to gather information on their use of licensed characters and media in marketing to kids, "for now, the FTC seems to be more interested in working with, not against, these companies to come up with new marketing ideas for the future," observes PF.

However, fear of regulatory actions is essentially serving to move marketers even more rapidly in a direction already mandated by the marketplace. "While television remains a staple in kids' daily lives, it is losing significance as an advertising platform" for kids' products as children spend increasing amounts of time engaged with the constantly growing array of other media available to them, including the Internet, electronic games, and personal music and video devices, points out PF.

Marketers of licensed products, and all kids' products, are of course keenly aware that multimedia marketing strategies are now essential for survival. PF notes that video games are an emerging source of licensing, even for F&B products, and that U.S. marketers are also looking to use vehicles such as the Japanese comic books (manga) and "lite novels" that are increasingly popular among American youngsters.

At the same time, in response to the tremendous pressure to continually release new licensed products and maximize the performance of existing ones during their short lifespans, marketers are shifting their retail distribution strategies.

Because mass retailers like Wal-Mart are relatively slow to launch new products and tend to "cram licensed products haphazardly" into their stores, licensors are developing relationships with smaller, even niche, retailers willing to move quickly and give licensed products special treatment. PF cites 7-Eleven's transformation of some of its stores into "Kwik-E-Marts" to promote this year's "Simpsons" movie release as a dramatic example of alternative approaches to licensing.

Achieving a major shift in the actual F&B product offerings for kids--that is, moving away from reliance on appealing to kids' sweet tooth in favor of more nutritious fare--looks to be a longer haul. According to Productscan data, the top flavor tags for licensed kids' F&B products in 2006 were chiefly (sugar-containing) flavor blends, followed by traditional fruit flavors.

However, PF predicts that a growing number of licensed product introductions will be "driven partly by nutritional content rather than sugar content," and there's already some evidence of this movement.

Among the 359 total licensed kids' F&B product introductions in 2006 counted by Productscan, at least 21 were tagged as "natural/organic," 20 as "high in vitamins," 11 as "low fat," nine as "high calcium," nine as "low calorie," six as "high in minerals" and six as "no preservatives."

PF identifies organic kids' F&B offerings as an area of particular opportunity for appealing to "gatekeeper" parents, citing examples such as Disney's teaming with organic marketers/manufacturers like Hain Celestial Group and Buxton Foods' deal with Penguin Young Readers Group, the licensors of the beloved Peter Rabbit character, to introduce organic and healthier snacks in the U.S.

New partnerships aimed at using licensing to sell kids on eating fruits and vegetables are also emerging. Nickelodeon and Viacom Consumer Products began licensing characters for fruits and vegetables packaging in 2004, and this year extended that strategy by partnering with General Mills' Green Giant brand and Pandol Bros. Starting late this summer, SpongeBob Squarepants joined the Jolly Green Giant on 19-ounce bags of frozen green beans, and Dora the Explorer and Go, Diego, Go! are being featured on packages of vegetable blends. The packages include collectable stickers of the characters. Other healthy licensed offerings will include canned vegetables and fresh grapes.

The partnership, supported by couponing and PR by General Mills, ties into Nickelodeon's "Let's Just Play Go Healthy Challenge" initiative, which seeks to inspire kids to make healthy lifestyle choices and model healthy behavior for their peers.

Kids' documented propensity to perceive branded foods as tasting better than non-branded foods (as shown in a recent study by the Stanford University School of Medicine and Lucile Packard Children's Hospital) represents a major opportunity for marketers to succeed in introducing healthier products using licensing as a "weapon of choice," deadpan the PF analysts.

"It may be the height of manipulation, but if branding green beans with Sesame Street's Elmo (as Del Monte Foods did) means that kids consider eating them," following this strategy will produce "a happy time for marketers and parents alike," they conclude.

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