If visions of moderately priced, stylish furniture and clothing are usually what pop into your head at the mention of Scandinavia, you might be interested to know that when it comes to consumer products, the region’s 23 million people – and particularly its 4.4 million kids under age 14 – cannot live by IKEA and H&M alone. In fact, roughly 80% of sales that contribute to the US$500-million Scandinavian/Nordic licensing market (which traditionally encompasses Denmark, Finland, Norway and Sweden) are generated by U.S.- or U.K.-based properties. And with sales of Spider-Man and Bratz merch contributing to a healthy 10% growth in licensing in 2003 – a pace that’s expected to continue over the next few years – it’s unlikely you’ll see homegrown characters like Sweden’s Pippi Longstocking taking over the scene any time soon.

While Scandinavia runs a good seven months or so behind the rest of Europe when it comes to introducing imported kids properties, the list of what’s hot at the moment sounds pretty familiar. Parents buy Disney (especially Winnie the Pooh and Disney Princesses), boys beg for Beyblade and Spider-Man, and it’s all about Bratz for girls. In fact Bratz’s Scandinavian sales are some of the property’s highest per capita. Morten Geschwendtner, CEO of the doll brand’s Denmark-based Scandinavian agent Kidz Entertainment, expects it to ring up US$75 million in sales and break seven figures in royalties for the first time this year.

Property development seems to follow U.S. and U.K. patterns as well. Roland Lindholm, managing director of Stockholm’s Alicom Licensing, which represents companies including DIC Entertainment and Scholastic, says launching product in the toy, publishing and interactive categories simultaneously is key with a kids property.

He adds that you should hold off on apparel, home furnishings/décor and stationery until sales have been established in these fundamental product groups. (Ernst Holme, licensing manager for Contrast, one of the region’s largest apparel licensees, says he won’t consider picking up a kids license if it doesn’t have an established toy program with good distribution.) These six categories, along with home video, make up the core of most programs and are fairly mature, with royalty rates usually running somewhere between 10% and 14%.

Once a program gets off the ground, home furnishings and apparel can prove to be two of the strongest categories for a property. Geschwendtner says home décor products (particularly bedding) launch much earlier in Scandinavia than in other markets – sometimes as early as three months into a program. He says Jysk, the main retailer in the category with 450 stores in the region, is driving sales, noting that the chain stocked more than 20 licenses in its kids bedding department this past Christmas. Similarly, Niels Juul, Lego’s senior director of partnership and alliance management, says sales of licensed Bionicle bedding exceeded expectations, and he’s looking at double-digit growth for Lego licenses in kids bedroom products in 2004.

Even though the region’s apparel market is dominated by trend-setting retailer H&M, which has 265 stores across Scandinavia and designs and manufactures its clothing in-house, Plus Licens executive VP Eva Brännström says apparel is the largest category her agency deals in, repping properties that include Spider-Man, Bob the Builder and the Warner Bros. stable. She says apparel retailers and department stores in the region are on top of trends and opt for quick inventory turnarounds accompanied by consumer contests and in-store promos to move merchandise, but they shy away from in-store boutiques and cross-merchandising.

Alicom’s Lindholm, for one, sees the move towards quick inventory turnover – characterized by bringing new collections into stores all year long, not just for the fall/winter and spring/summer seasons – as an opportunity to better position movie properties that launch in between seasons. Instead of a major launch, you can produce a smaller range that appeals to retailers looking for a mid-season refresh. He’s intending to pursue the strategy with Twentieth Century Fox’s CGI flick Robots, which is slated for release in March 2005.

As for growth categories, Kidz Entertainment’s Geschwedtner feels that food, personal care and third-party promos are underdeveloped. He says institutions like banks, for example, are just cottoning on to the value of being associated with licenses. This August, Nelvana’s Franklin will start appearing on savings account books, sending birthday cards and making personal appearances at Denmark-based Handelsbanken/Midtbank.

Brännström and Claes Kalborg, VP of sales and marketing at Plus Licens, also peg music as a category to watch. Plus has started working with Scandinavian tune producers to build on their reputation as hit-music factories and broker local and worldwide licensing deals. Although producers such as Stockholm-based Murlyn (who shepherded Britney Spears’ recent hit ‘Toxic’) don’t always have a pop superstar lined up for their tunes, they are expert packagers who see value in hooking up with strong characters to appeal to kids – tween girls being the most lucrative target. Kalbourg most recently paired Murlyn with Betty Spaghetty, and he projects the resulting CD will rack up worldwide sales between one and three million units.

Of course, Scandinavia is not without its challenges. While the region is nicely contained geographically, it’s made up of four different countries, each with its own language and cultural quirks to take into consideration.

Danes, Swedes and Norwegians share the same language root and can, for the most part, muddle through and communicate with each other. But Finnish, which grew out of the Russian alphabet, is completely different and makes Finns incomprehensible to the other nationalities. So when it comes to designing consumer products, licensors and licensees have to produce packaging that displays all four languages and avoid putting words on the finished goods. When character names and phrases can’t be side-stepped, Contrast’s Holmes says he defaults to English rather than incur the expense of producing four localized versions.

But English is not an option when it comes to TV, and bringing a program to the market often involves dubbing it into the four languages, a costly venture for terrestrial broadcasters. Additionally, advertising to children under age 12 is prohibited in Sweden and Norway, eliminating a key revenue stream for commercial broadcasters in those countries. But TV is still held up as the main driver for kids properties in the region, so Geschwendtner says it’s typical for licensees and home video and promotions partners to underwrite the cost of the dubbing to get a program on air.

Plus Licens does this, but finds that costly dubbing is not the only hurdle to landing a broadcast berth. Terrestrial airwaves are dominated by three to four broadcasters in each country, including one large pubcaster each, thus limiting programming slots. But these days, Kalborg has noticed that broadcasters are warming up to shows with established licensing programs. ‘A few years ago, it wasn’t easy to work with broadcasters,’ he says. ‘Now they come to us for assessments on shows we don’t even represent. Broadcasters realize now that the licensing business is helping to drive their ratings.’

Also, he notes that commercial broadcasters in the region are now anxious to set up property-specific websites to appeal to Scandinavia’s computer-happy kids (the region has one of the highest penetration rates of in-home computers in the world) and drive them back to the TV show.

Geschwedtner has embarked on a new model for program placement by turning to pay-TV channel Cartoon Network, which reaches 2.5 million Scandinavian households. In May, Cartoon and Kidz Entertainment launched a one-hour morning block called LilleToon that runs from 8 a.m. to 9 a.m. on weekdays and 7 a.m. to 8 a.m. on Saturdays. LilleToon features a rotating lineup that initially showcased American Greeting’s Care Bears, with The Koala Brothers (Spellbound Entertainment), Noddy (Chorion) and Babar (Nelvana) joining the sked this fall. The block allows Cartoon to draw in younger eyeballs (since its launch in May, viewing by four- to 11-year-olds is up 9% on weekdays and 18% on weekends), and the net will also get a small cut of the licensing royalties.

Kidz Entertainment’s merch programs, meanwhile, benefit from the increased exposure. The Care Bears line is set to launch in August, with a high degree of early sell-in to major retailers. Products for The Koala Brothers and Noddy should hit Scandinavian shelves in January. Not surprisingly, Geschwedtner is keen to pursue this type of relationship with other broadcasters. Patchwork retail turf makes toys tough

Toys are considered a key category in getting a kids merch program off the ground in Scandinavia, but making a go of it with existing toy retail outlets can be be tricky. It’s a tight market for licensed toys.

Denmark-based construction toy giant Lego dominates the region’s US$1-billion toy market, capturing a 12% market share in 2003. And according to Carsten Nielsen, sales and marketing director for Danish toy wholesaler K.E. Mathiasen, sales of private-label and non-branded toys have been rising steadily and now control 50% of the market. That said, it’s worth pointing out that private-label offerings are far more prevalent in infant toys; moving up the age scale, licenses have escalating presence due to the influence of TV on kids.

Toy retail channels differ in the the various regions, but pan-Nordic chain Top-Toy – which owns 153 BR Toy stores and operates 29 Toys ‘R’ Us mega-store franchises, with annual sales for both chains averaging US$429 million – moves a good chunk of the region’s toys. Nielsen estimates that Top-Toy accounts for about 40% of toy sales in Denmark, 30% in Sweden and about 10% of Norway, which has several hundred mom-and-pop specialty shops.

Norwegian toy manufacturer Brio also has a strong retail presence in its home country, and in Sweden, with 250 outlets. Three large mass-market conglomerates control 95% of Finland’s toy market, says Nielsen, adding that similar centralized mass retailers in Denmark and Sweden are now encroaching Top-Toy’s territory. These mass players are initiating holiday pricing wars (more than 50% of the region’s toy sales are rung up at Christmas) much like the ones that plagued the U.S. this past year, and price is becoming an increasingly important market element.