Posted by: itm2011 | May 17, 2011

Skinny Nutritional Corp Enters International Licensing Agreement

Skinny Nutritional Corp Enters International Licensing Agreement for Its Brand Skinny Water(R) in the Countries of Brazil, Argentina and Costa Rica.


Reasons for Interest
When I began my coursework in International Trade and Marketing, I was unsure of what to expect. I was aware that the major covered a broad range of business within the fashion industry and suggested concentrations within the major. However, the required coursework seemed to be heavily concentrated in import and export dealings. Rightfully so, because import and export transactions are a vital component to international trade. At any rate, I wanted to discover my role in the international business arena where I could utilize my legal background and fuse it with fashion. With the help of electives, I stumbled upon the concept of licensing. I remembered covering licensing briefly in one of my law school electives, but I received a more in depth look into licensing and the logistics behind the business here at FIT. I realized that my background coupled with my deep rooted interest in fashion could lead to career in licensing.
Since my revelation, I have actively sought out business articles dealing with licensing on sites such as licensing.org or any other site that would provide me with valuable information about the industry. It is important to know the essential terminology and different aspects for one’s potential career. It has been this belief that led me to search for a licensing article for this paper. In addition, licensing is currently being used by both large and small companies to extend their brands and increase profits, which has contributed to the fast growing industry, especially within fashion. Even if I had not been interested in licensing, it is beneficial to stay abreast with current developments in fashion.
Because International Trade and Marketing (ITM) focuses on international business operations within the fashion industry, this article falls within the ITM scope.  Although this case does not particularly pertain to apparel or accessories, this particular product, Skinny Water, has caught the eye of style and beauty magazines. And the expansion of their business to foreign countries is exemplary of what some ITM students may witness once they enter international business in the fashion industry. International licensing contracts need to be well calculated and negotiated, which call for individuals who can identify pertinent business issues and conduct competent research for their company.  ITM trains its students to understand international business challenges and create solutions for those challenges, as well as how to assess international business opportunities, much like the company in this case.

Summary
On March 22, 2011, there was an announcement by Skinny Nutritional Corp. (SKNY Corp.) to enter into an international licensing agreement.  SKNY Corp. specializes in the development, distribution, and marketing of a line of nutritional beverages, that are all branded with the name “Skinny.” SKNY Corp. currently offers several nutritional beverages, such as Skinny Java, Skinny Tea, Skinny Smoothies and more distinct to this article, Skinny Water.  The company targets the health and weight conscious consumers of mainly the United States, but is now expanding internationally. Skinny products have been featured in numerous health conscious and style magazines, including Allure, Us Weekly, and Women’s Health. Presently, SKNY Corp. has established a license agreement with Peace Mountain Natural Beverages Corporation, who bottles and distributes the beverages worldwide. Skinny Water is now sold through 47 distributors in the U.S.
As a result of the company’s accomplishments, SKNY Corp. decided to take its success internationally and sign another licensing agreement. SKNY Corp. entered the agreement with G&K Enterprises to manufacture, distribute, and market their product, Skinny Water, in Brazil, Costa Rica, and Argentina. This license is the first international license of Skinny Water outside of the United States.  The company reasons that Brazil, Costa Rica, and Argentina have a desire and need for healthier beverages that is rising. SKNY Corp. saw the countries’ large combined population of about 230 million people as a promising business opportunity. Subsequently, the company hopes to increase brand awareness and availability amongst the consumers of these countries. Moreover, CEO, Michael Salaman, asserts that their goal will be achieved by using the upcoming and globally acknowledged 2014 FIFA World Cup and the 2016 Summer Olympics, hosted by Brazil, as leverage.  Salaman also hopes to gain other international consumers who will come to these immense events; creating more expansion opportunities for the company.
Under the licensing agreement, SKNY Corp. will be receiving royalties for every case sold. Salaman is quite confident in their declaration to go global and increase profits. His confidence comes from last year’s success, in which Skinny Water’s net revenues totaled $6.9 million, compared with 2009‘s total of $2.8 million. The company attributed the increase in sales to Skinny Water Sport and the influence of new distributors and new chain authorizations.
SKNY Corp.’s decision to go international is backed with confidence, success, and research. It is apparent that SKNY has worked diligently to improve their products, increase brand awareness, and expand their growth through their fast growing company. The company entered a market where healthy beverages are becoming more prevalent and where competition is stiff with larger companies who provide similar healthy drinks. Somehow SKNY Corp. has set their product apart from the more established drinks. It seems the company has been doing its homework through their successful penetration of the U.S. and global markets. If SKNY Corp. is successful with this licensing agreement, it will demonstrate effective leadership skills among its executive office and competent expansion skills. Skills that can be learned from by students in the ITM department.

Critique

      In going global, a company must devise a business plan and must address the pros and cons of taking their business internationally. It must be well researched and well timed. Additionally, the company should have the resources to make such a leap by establishing a strong foundation and presence in their market.  Not only must cultural differences be addressed, but the company must also know how to negotiate and interact with individuals from those cultures.
In this instance, SKNY Corp. made that leap with properly conducted research. However, there are two reservations I have about their decision and it is whether their brand is as nationally recognized as they perceive it to be and whether it is too ambitious to enter into an agreement for manufacturing, distribution, and marketing for three countries simultaneously. SKNY Corp. is a fairly new company, which could serve as a weakness in penetrating the international market.  Perhaps if the company was older with more years of market experience under their belt, there would be less risk involved. It is possible that SKNY Corp. could be too confident and optimistic about its future sales in the Latin American market. A premature choice to go global can be detrimental to a young company like SKNY Corp.
Despite my reservations, the article proved to be informative because it is often satisfying to read actual business cases that I can use towards my career. Being afforded the opportunity to delve into a company’s strategic plan to expand is always insightful. Furthermore, it is fascinating to see how a company assesses its strengths and opportunities when it comes to brand development. Although, it would have been beneficial if the article would have provided some of the company’s research of how SKNY Corp. chose Argentina, Brazil, and Costa Rica and why they chose to enter those countries simultaneously. In conjunction with providing some of the aspects of the company’s research, the article could have given more information about G&K Enterprises and their reputation in Latin America.
This article was informative and useful for not only the marketing classes that I am taking now,  but also for my upcoming internship with Continental Reliance Group (CRG), a license and brand management company.  Currently, I am taking Global Marketing and our current project is to market nasal strips to an international target market of our choosing. We have to assess the demographic of that country and their need of nasal strips. In doing so, we have to keep in mind a budget and how we plan to market our product. A SWOT analysis must be developed for our product, so we can adequately determine if it is appropriate to go global, and if so, if that particular country is the right choice. The article identifies SKNY Corp’s evaluation of their opportunities, which have sparked some thoughts for my own project.
Reading this article further familiarized me with international licensing deals and encouraged me to be inquisitive about various components about going global that did not know, which will assist me with my internship. My internship this summer, will grant me the opportunity to witness how CRG builds partnerships between brands and manufactures, distributors, and retailers, how the company increases their clients’ brand awareness, and how the licensing royalties will be handled. I will also be afforded the opportunity to work on trend forecasts, strategic plans, and revenue analysis. This newly gained knowledge will allow me to better understand licensing and how companies determine when and why they want to enter the international realm.
To conclude, SKNY Corp’s ambitious decision demonstrates the importance of conducting adequate and thorough research for your company. The quality of a company’s research will be a determining factor in their success overseas.

Sources Cited

  1. “Skinny Nutritional Corp Enters International Licensing Agreement for Its Brand Skinny Water(R) in the Countries of Brazil, Argentina and Costa Rica.” Internet Wire 22 Mar. 2011. General OneFile. Web. 27 Apr. 2011.
  2. http://www.drugstorenews.com/article/skinny-water-achieves-record-sales-looks-expand-distribution. Drug Store News. 19 April. 2011.
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Categories

%d bloggers like this: