Tuesday 6 May 2008

Astute Ethiopia

Ethiopia has opted for increasing brand recognition and demand through licensing rather than immediate royalty income streams in an effort to generate longer term wealth. Ethiopa's strategy reported on Afro-IP here and on News Blaze here has been hailed as the first time an that an African nation has undertaken such an innovative approach to protecting its economy. Ethiopia selects the global distributors for its coffee and sets the conditions for sale. Ethiopia charges no royalty fees for coffee distribution licenses, but, in return, asks the distributors to market each coffee under its separate brand name.

It is sometimes easy to overlook that brand licensing is motivated by numerous factors, apart from money. For example, Allied Domecq succesfully used brand licensing to reposition its Courvoisier brand to a younger market by introducing a trendy clothing line under the brand. Dunlop Slazenger used sub-licensing as a means of keeping it afloat long enough to attract a suitor in the form of Mike Ashley's Sports Direct, whilst the legal proprietor of the Dunlop brand (at the same time) used licensing simply as means of preserving the trade mark right across sports, tyre and other categories. Al Gosling's Extreme Group (ala Richard Branson) use licensing as means of building brand recognition and developing a complete lifestyle brand. Other companies use licensing to reduce their tax liability through complex transfer pricing schemes and others, to settle disputes or co-brand products.

There are not many other assets that can be used in such a flexible way and it is also easy to forget that not all that long ago, legal systems were reluctant to recognise trade mark licensing at all. Ethiopa's decision is progressive because it entails determining and creating a brand and then marketing that brand through worldwide strategic partnerships (not least with Starbucks) and licensing. The efforts are aimed at increasing longer term demand whilst ignoring a politically tempting income stream.

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