Given that its total population is just six million and that its economy is suffering in the face of current geo-political turmoil, Israel may not appear to offer international licensors a wealth of opportunity at first glance. But considering that kids ages zero to 12 comprise 25% of the population, command US$5 million in personal spending power and influence another US$2.5 billion in family purchases (according to 2001 research conducted by Gitam), Israel suddenly begins to look a lot more interesting. Licensors need to keep in mind, however, that for such a small market, Israel poses some formidable challenges.

Market obstacles–When local agent Licensing Dynamics International first set up shop in 1996, the Israeli character licensing market was still in its infancy. ‘There was no consistency,’ recalls president and CEO Simon Philips. ‘There was a lot of parallel importing because local programs weren’t truly established, and piracy was a problem because there was no program running that really warranted a significant anti-piracy operation.’ Along with its client roster, LDI implemented strong anti-piracy measures at the retail and brand development levels, and Philips estimates that parallel importing on character licensing is down by roughly 3% to 4%.

Understanding the diversity of ethnicities in Israel poses another market entry challenge. ‘The population is broken down into orthodox Jews, secular Jews, Israeli Arabs, Palestinian Arabs and Christians, as well as Jews descendant from Eastern Europe, Africa and other parts of the world,’ notes Philips. And each one of those ethnic groups requires its own approach to marketing and licensing. Says Philips: ‘When we do food licensing, we not only have to look at Kosher for the Israeli market, but also Halal for the Arabic market. And aside from doing Hebrew publishing programs, we must also offer programs in Russian and Arabic–all within the confines of a small country.’

Another important point: Coming from such diverse cultural backgrounds, Israeli-born kids have slightly different licensed character tastes than immigrants from the former Soviet Union. ‘Israeli kids are very much into the superhero genre–Spider-Man, Batman and Superman–while kids who are coming in from the former Soviet Union are more into ensemble character properties such as Tom & Jerry,’ notes Philips.

While Disney Consumer Products has successfully developed programs and maintains a local office in Israel, most licensors appoint local agents. Says Bettina Koeckler, VP of international licensing for LDI client Sony Pictures Consumer Products: ‘Setting up an office–including all of the overhead costs–would not be right for SPCP. Having a competent agent with all of the necessary contacts who knows how to conduct successful business by respecting local culture and tailoring programs to match different market needs makes a lot more sense for us.’

Category hierarchy–Interestingly, Israel’s top licensed product category list is a virtual inversion of the typical U.S. pyramid. From most to least lucrative, they are: home textiles & bedding, apparel, back-to-school, food, toys & games and publishing. Why are toys & games not tops with Israeli kids? Because they are generally imported, they become prohibitively expensive, ‘so consumers substitute with other things that kids can have in their rooms, such as bedding and clothing,’ says Philips.

The largest growth category in Israel is licensed car accessories–sunshades, air fresheners and car mats. Not a typical kid category, to be sure, but ‘parents buy these items to brighten up the car experience for their kids,’ says Philips. Trailing behind car accessories is publishing, which Philips predicts will overtake toys & games in 2003.

On the seasonal front, costumes are big business in Israel, but licensors need to adjust their marketing mentality from Halloween to Purim, a Jewish holiday celebrating the Jews’ salvation from massacre by lottery as told in the biblical book of Esther. Licensors looking to capitalize on Purim, which is accompanied by carnival-like fetes, should note that its timing shifts from year to year. While Purim took place on February 26 this year, it will be held on March 18 in 2003; March 7 in 2004; March 25 in 2005; and March 14 in 2006.

Trends–While category hierarchy might not mirror the U.S., the Israeli youth market is wired to the U.S. for hot trends. Young kids–where the bulk of licensing income comes from–are ‘very much focused on the U.S.,’ says Philips. ‘They know what’s going on there–they see it, they feel it and they want it.’ Once kids move into their tweens, however, trend importation is all about the U.K. club scene.