Cosmetics players missing out on brand licensing's ‘easy’ money

By Katie Bird

- Last updated on GMT

Related tags Brand

Cosmetics companies could make big money by licensing out their brands, especially in difficult economic times.

Although the industry is well versed in licensing-in, producing products under a multitude of names including celebrities, car names and fashion designers, it is rare to see a cosmetic brand name appear on products in other categories.

Philippe Lebard from accounting and consulting firm Deloitte explained how the cosmetics industry is losing out on substantial revenue.

“There are a lot of opportunities in terms of revenue and brand strengthening for cosmetics companies to license out their brands, which they are not taking advantage of.”

A well known but perhaps not very vibrant cosmetics brand could revitalize its image by entering different categories such as accessories and fashion, Lebard said, as well as gaining additional revenue from the deal.

For Lebard, the opportunities presented are even more important at times when the core revenue stream is suffering, which is the case at the luxury end of the fragrance and cosmetics world today.

In addition, the idea fits in well with today’s mega brands culture.

“In a world of brand confusion, recognising a favourite brand in another category can reassure consumers who will feel more comfortable buying it and ultimately retailers, who are not taking on a totally new idea,”​ he said.

However, cosmetics companies do not seem to be taking advantage of this opportunity, which Lebard suggests could be down to ignorance of its potential as well as a fear of diluting the brand.

Good management imperative

But with good handling of the deal these things can be managed, Lebard maintained.

A brand cannot be licensed into any category, so careful choice of the kinds of products that would fit the image, as well as choosing the licensing partner well, is imperative.

The categories open to cosmetics and fragrance brands would fall in the lifestyle categories including fashion, jewellery and accessories. Another close fit, according to Lebard, would be entering into the spa and services industry.

Indeed, Borghese a New York-based luxury cosmetics brand has recently signed a licensing deal that will allow Icon Eyeware to produce reading glasses and sunglasses under the brand, in a rare example of a cosmetics company reaching out into other product categories.

"There is an art and science to these things",​ claimed Lebard, but done well licensing can be a way of making ‘easy’ money as with fairly minimal costs, significant benefits can be reaped.

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