There is nothing that whets the appetite of the licensing business quite like the potential of a brand-new territory opening up for business. After spending the past 20 years functioning in a free market economy, Ukraine is making considerable progress towards becoming a viable market for licensed goods. Its population of 45.7 million makes it the 28th most populous country in the world, and with 70% of its citizens under 64 years old and a birth rate that’s edged upwards ever so slightly (0.18%) in the last decade, the territory might just be ready to support a vibrant consumer products biz.

“The Ukraine consumer market is pretty young,” says Clara Bodin, new business development director at Plus Licens. “It has only 20 years of being a free market economy and there are still legacies from the Soviet Union—like bureaucracy, an unstable political situation and a troubled economy—that need to be overcome. But we believe that Ukraine has a chance, it will follow the rest of Eastern Europe economically, and it’s really just a matter of time.”

With recent numbers indicating a more stable economic outlook, including the lowest inflation rate experienced in the last eight years, the time for outside investment in Ukraine might just be at hand.

“There is definitely an increasing awareness about intellectual property rights in general and licensed goods in particular,” asserts Bodin.

TV prevails, but movies drive licenses
One of the necessary conditions for fostering a licensing environment is exposure to IP, usually through TV or movies. In Ukraine, TV is the most popular medium, as internet penetration has not yet reached the mass market.

“It will take years before the internet will be able to compete with TV,” says Zeljko William Krnjak, industry org LIMA’s representative for New Europe. “It’s a big territory and the infrastructure thus far is lacking.”

While there are more than 45 TV channels broadcasting throughout the country, according to Bodin only seven of them draw the numbers capable of driving a licensing program. Inter 1+1, ICTVI, Novy Kana and TET are the highest-rated nets currently airing kids content. The sole dedicated homegrown children’s channel, Malyatko TV, however, is currently only broadcast via cable or satellite and does not have penetration even close to approaching that of the terrestrials, which sit at 90%.

“At this point, it’s very hard for satellite or cable to compete with free-TV. And, in general, advertisers on those channels are looking for an 18-plus audience,” says Bodin. “There is much work to do to have them recognize a younger audience.”

That said, a Ukranian version of Disney Channel launched in October 2010, delivering classic US-made cartoons with a promise to develop and produce Ukrainian content to meet local quotas, and the landscape has begun to shift. “The market has been developing, and the arrival of such a giant is remarkable,” said Irnya Kostyuk, head of Media Resources Management, a media consultancy based in Kiev that concentrates on the region.

Disney’s entrance notwithstanding, the high cost of local production, related content quotas and restrictions on advertising makes TV a difficult environment for getting a kids IP off the ground. As such, movies have become a more logical place for potential licensors to start. To date, there are 148 different cinemas located throughout the country, and family-friendly fare tends to dominate the Ukrainian box office. Of the top 10 movies from 2011, seven of them, including Puss in Boots, Cars 2 and Rio, were kids titles.

Grocery tops retail
“The undisputed leaders of in-store retailing are the grocery stores,” says Bodin. “The major problem in the retail business is inefficient bureaucracy, low incomes and high inflation. These factors make it difficult for foreign retailers to enter the Ukrainian market.”

For this reason, Bodin suggests licensors looking to enter the market are wise to choose food and grocery items to break a program in Ukraine.

The major players are still Russian-based retailers including Silpo, ATB, Epicenter and Perekrostok. There are also smaller chains that specifically cater to the kids market like Antoshka and Bodynkok Igrashok, as well as the Polish children’s goods chain SMYK. “These stores sell toys, clothes, footwear, accessories, books and stationery,” notes Bodin.

A unique feature of the country’s retail scene is the largest wholesale market in Europe, the “7 Kilometres” outdoor market located in the capital city of Odessa. While the market is a sign that capitalism is flourishing in Ukraine, it is also the biggest retailer of counterfeited goods in all of Europe, which isn’t great news for IP owners.

In terms of individual categories, despite the dominance of grocery, stationery and publishing have the most advanced licensing heritage in the region. Plus Licens country manager Oksana Pariienko, however, says the biggest growth category is licensed food and grocery. She is currently concentrating on brokering deals to bring Madagascar 3 to chocolate, dairy goods and snack foods.

Looking ahead
As for regional IP, with the exception of Luntik, a Russian cartoon about two caterpillars that debuted in 2006, most of the popular properties in Ukraine are imports like SpongeBob SquarePants, Naruto and My Little Pony. Movie-based properties, including Shrek and Madagascar from DreamWorks, also garner their fair share of traction.

That’s not to say that licensors are flocking to set up shop in Ukraine. With the exception of one, all the licensing operations for the country remain headquartered in Russia. Currently, only Plus Licens has an office in Kiev.

“We understand the peculiarities of this market and see its potential,” says Bodin. “We are currently thinking of starting a country-based licensing organization to see who else is interested in joining.”