A few days ago I met with a seasoned, experienced CEO managing a well-known brand. After business on hand was done, the conversation went to licensing in general and we had the following discussion:
CEO: Why don’t we license the category to Walmart?
Me: What happens, when the license tanks?
CEO: Walmart is known to treat its licensors well.
Me: Will other retailers carry the licensed goods?
CEO: Of course not.
Me: What happens, when Walmart drops the license after 5/10 years?
CEO: Then the brand is dead.
Me: Will another retailer or manufacturer pick it up?
CEO: No, but after 10 years we’ve made our money.
Of course, the CEO is compensated based on annual performance. And statistically the CEO is unlikely to be around 10 years from now. Imagine having this discussion with a brand manager judged and compensated by quarterly results.
And that’s why we do not do direct-to-retail licenses with “our” great brands. We are in for the marathon, not the sprint. I know, the shareholders appreciate it.