Wake up and smell the profits! In a brand protection first, Ethiopia has launched its own coffee brand – to build the value of its famed exports, exercise its right to control them, and capture a greater share of the retail price for their coffee-growing farmers.
In a more familiar context, intellectual property protections, when invoked by industrialized countries, have been criticized as harming poor people in developing nations by blocking their access, for example, to affordable generic drugs. Today, however, Ethiopia, an African nation, is seeking to use the modern IP system to enhance its economy.
Almost three years ago, the country applied for trademark registrations of its specialty coffee brands in the United States, Canada and other countries – a project that is gaining momentum – as well as started negotiating with coffee roasters to sign agreements acknowledging Ethiopia's right to control these brands. Starbucks was one of the first in the industry to sign a licensing agreement with Ethiopia – and help the country gain a greater share of the retail price for its farmers.
Now, the country is moving forward with the next phase of its savvy and forward-thinking approach to its most famous export. Ethiopia, birthplace of coffee and exporter of more than 177,000 tons of coffee each year (representing 15 percent of the world's total coffee production) recently launched its own coffee brand in the 20th Annual Conference of Specialty Coffee Association of America. According to Getachew Mengistie, Director General of the Ethiopian Intellectual Property Office, this move to proactively manage and promote Ethiopia's fine coffee so its coffee farmers can reap the short- and long-term rewards is a landmark moment for the nation. It is also a great opportunity to increase consumer awareness of the country's Yirgacehfe, Sidamo, and Harar coffee brands.
The new brand identity – created by leading brand specialist Brandhouse and inspired by the coffee bean itself – is comprised of a central logo for Ethiopian Fine Coffee, with individual designs for each particular kind of coffee. Licensees are now required to include this logo in their marketing as part of the licensing agreement.
Why brand licensing? According to a post in the ipfinance blog, Ethiopia is using its smarts by opting to increase brand recognition and demand – and generating longer-term wealth – by using licensing, instead of immediate royalty income streams. In doing this, Ethiopia selects the global distributors for its coffee, sets the conditions for sale and, instead of charging royalty fees, requires its distributors to market each coffee under its separate brand name. This approach ignores immediate income and opts for increasing long-term demand by creating and marketing a brand through strategic partnerships
Bottom line: Since it initiated its trademark and licensing efforts for its coffees in 2004, Ethiopia has concluded licensing deals with more than 70 companies in North America, Europe, Asia and Africa. The new coffee branding initiative should boost its coffee industry – and economy – even more.
As Getachew Mengistie said, "…few developing countries have realized that intellectual property plays a crucial role in income generation in the [global] economy. Ethiopia is really proud to be among the first to see IP management as a tool for development and poverty alleviation."
Brand licensing is the process of creating and managing contracts between the owner of a brand and a company or individual who wants to use the brand in association with a product, for an agreed period of time, within an agreed territory.
Licensing is used by brand owners to extend a trademark or character onto products of a completely different nature. Trademark licensing, for example, has a rich history in American business, beginning with the rise of mass entertainment such as the movies, comics and later television. A trademark's popularity (Disney characters, etc.) usually results in an explosion of toys, books, and consumer products – none of which are manufactured by the original company – with the trademark's likeness on them. This process accelerated as movies and later television became a staple of American business.
Brand licensing, however, started when corporations found that consumers would actually pay money for products with the logos of their favorite brands on them. McDonalds play food, Burger King t-shirts and even Good Humor Halloween costumes became commonplace. Brand extensions later made the brand licensing marketplace much more lucrative, as companies realized they could make real dollars renting out their equity to manufacturers. Instead of spending untold millions to create a new brand, companies were willing to pay a royalty on net sales of their products to rent the product of an established brand name. Breyers yogurt, TGI Friday's frozen appetizers, and Lucite nail polish are only some of the products carrying well-known brand names which are made under license by companies unrelated to the companies who own the brand. The process has become so successful that some companies like Harley-Davidson and Nathan's make more money from licensing than from manufacturing. |
