NRA Show Panelists: Restaurants Must Take a Strategic Approach to Retail Licensing

Planning is key to entering the retail licensing and commercial products space, say panelists at the National Restaurant Association (NRA) Restaurant and Hotel, Motel Show. In the education session on May 21, "Is Your Brand Ready for Licensing?," they emphasized the need for restaurateurs to take a strategic approach to brand licensing, despite the windfalls that often come to those that play the game.

Consultants from the Valen Group, a Cincinnati-based foodservice strategy and consulting firm, as well as senior Wal-Mart "gatekeeper" for restaurant brand products to thousands of U.S. grocery outlets agreed on this point.

The Session Panelists included Janna Markle, vice president, Valen Group, Tyler Lehr, vice president, DMM of Frozen Foods, Wal-Mart, and Rick Celio, restaurant practice leader, Valen Group. Gus Valen, managing partner for the Valen Group, moderated the session.

This NRA Show 2011 session was timely, following a wave of quick-service restaurant (QSR) brands expanding or entrenching themselves in commercial products. In growing its own Commercial Products Group (CPG) portfolio, Starbucks emphasized CPG as a major prong in its strategic plan, growing the VIA Ready Brew coffee line and shifting into Keurig single serve K-Cups, an estimated one billion-dollar business. Similarly, Jamba Juice recently reported the commercialization of all nine product lines, achieving a major milestone in its BLEND plan.

In the aftermath of major moves by brands into retail, the industry has been abuzz. What opportunities remain for restaurant players, regardless of segment? The three industry veterans served up following advice:

• Be strategic in your approach to licensing. Evaluate how well it fits into the overall brand's plans, and determine what products and categories will likely succeed.
• Dedicate the right amount of resources to the retail program, and be certain to get commitment from the top.
• Be aware of “cannibalization.” Restaurant groups may be best served by developing commercial products that are clearly not its menu winners, but complement its in-store offerings.
• Get it right the first time. Know that with retailers, you only get one shot at it.

During the light, informative and well-paced discussion, it became clear that many of the brands that have moved toward retail licensing, like Starbucks, Jamba Juice, TJI Friday's, and IHOP, have done so with care and conviction. Panelists urged restaurants to take a strategic approach: Plan carefully, understand whether their brands are recognized enough to move into retail, and become skilled at finding "white space" on shelves.

Panel member, Celio, says restaurants can't take the implementation of retail licensing lightly. Assessing the market is key, but so is understanding the amount of resources needed to carry out a project of such weight.

He elaborated to say that restaurants must work closely with their retail broker to maintain high quality manufacturer/licensee standards, and remain involved throughout product development. Celio added that an organization must be committed, have clearly assigned roles, and involve the marketing department.

Robbing Peter to Pay Paul

Panel member, Markle, suggests a technique she knows works: "Know how to shift certain products and flavors onto shelves," she said. Rather than risk cannibalizing and commoditizing your restaurant's winners, develop complimentary products, says Markle. She noted high profile brands that have moved into commercial products move products by utilizing brand recognition.

Whether the risk of retail brand cannibalizing exists is nebulous. The Valen Group’s Cello points out, "You won't know until you try it."

For T.G.I. Friday's, tests concluded the move into retail did not cannibalize sales.  In fact, according to Markle, retailing resulted in a "halo effect" for the brand's storefront operations.

From the Mouth of the Retailer

Access to a distribution channel that produces quickly is a big win for companies embarking on a retail strategy, said Wal-Mart's Lehr. With limited opportunity for restaurants to get retailing right, they need a marketing plan that supports the type of exposure that puts them first in consumers’ minds and shifts shopping preferences.

Great success stories in retail belong to those that have advertised, sampled, and introduced their products to consumers.

Lehr emphasized the importance of building credibility with retailers. From a retail perspective, brands are evaluated based on their innovation, brand recognition, and the anticipated longevity of the brand. Retailers and grocers execute several layers of decision-making, sourcing shifts and shelf logistic planning to get a new product in the aisles.

Learn from IHOP

The Valen Group's Markle confirmed to Kandessa post-NRA Show that IHOP is a major success story for the firm. Valen worked with IHOP for nearly two years to study consumer behavior, assess the right products that fit the needs of consumers at home, and secure a savvy food manufacturer like Golden County Foods. In an atypical move for most, Golden County gained entry into Wal-Mart stores from the outset.

"Wal-mart stepped up to the plate because they wanted to make a statement about their position in breakfast and capitalize on this consumer need for high quality convenience oriented breakfast products," said Markle.  “This program is targeted to be quite large and successful."

When asked what category is the best bet for the move into retail licensing, Markel says it’s the coldest foods that are hot. "All the action seems to be in frozen foods right now.  Frozen allows restaurants to offer high quality products in a convenient form."

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(05-27-11)

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