Like member European Union countries whose economies are tied to the Euro, France is likely to start feeling the effects of the currency’s looming fall from the top of the value chain soon. Add to that a record inflation rate of 4.1% this past summer, a trade deficit that swelled to US$8.68 billion in July, and declining domestic demand at retail, and it doesn’t take a fortune-teller to predict tough times may be ahead for the French licensing industry. That said, results from the first six months of the year indicate that the US$5-billion French licensing market is holding steady.
According to NPD, sales of licensed toys from January to June 2008 were up 3.7% over the same period in 2007 – despite consumers experiencing a significant hike in the cost of staples such as butter, milk and gas. And recent data from France-centric industry tracker Kazachok’s new Baromètre study found that licensed goods have a high penetration rate in households where the country’s some 7.6 million kids ages zero to 10 live; 93% of homes with kids zero to three own licensed product, and that figure jumps to 98% for homes with four- to 10-year-olds.
Of course, it may be that French parents are cutting back on most areas of consumption except those involving their kids, and it’s likely that the continued growth of specialty retail channels is helping them locate licensed goods for their wee ones. In 2006, toy retailers, primarily market leaders The Ludendo Group (which owns leading chains Le Grand Recré and StarJouet) and Toys ‘R’ Us, were increasing in both number and sales volume. According to 4Kids International co-MD Sandra Vauthier-Cellier, who oversees the company’s activity in Europe, Ludendo continues to open new stores. Moreover, both retailers are expanding their product mix to include apparel and some food items.
And non-traditional retailers keep entering the kids entertainment licensing market. For example, Kazachok marketing director Virginie Lopez and Cynthia Money, Taffy Entertainment’s president of consumer products, have noticed that music retailer Virgin has become more aggressive in its carriage of licensed goods. Lopez says the drop-off in sales of CDs and DVDs has Virgin turning to music-related merchandise; it’s been active in developing product corners containing tween-friendly categories like apparel, accessories and stationery devoted to a given license. In fact, at press time, Taffy was working on creating just such a corner for one of its properties to play in come November.
Even larger mass retail outlets like E. Leclerc, Carrefour and Auchan are increasingly looking at licensing as a way to drive foot traffic. Marina Narishkin, MD at CPLG France, says her team has mounted 26 retail events in the past six months, and Disney Consumer Products’ Philippe Lavoué says mass retailers are pursuing more licensing promotions. As VP of retail sales and marketing for France and Benelux, Lavoué notes that larger retailers are ‘all looking for new and impactful trend marketing mechanisms,’ and he points to a recent Wall-E promo at Carrefour as an example. Thanks to the advent of consumer loyalty cards that closely track spending habits, the retailer now has the ability to target direct marketing email pieces more precisely. So in the case of Wall-E, it could single out parents and offer them admission to the film at a discount with the purchase of merchandise based on the character.
For all this flurry of activity at retail, however, ardor for new properties is cooling, especially with licensees. Like their counterparts in the US and the UK, French licensees are fighting for shelf space, and recent spikes in materials and manufacturing costs have made them wary about investing in unproven properties. ‘The situation hasn’t affected our current properties,’ says 4Kids’ Vauthier-Cellier. ‘But it will affect new ones. Licensees won’t take the same type of risk they might have seven months ago.’ Marathon Media’s director of licensing, Patricia de Wilde, who’s setting up a French program for red-hot Italian toy property Gormiti, has been told by a number of licensees how difficult it is right now. ‘I’m definitely hearing that they’ll only take the big two or three licenses.’