CAA-GBG: A New Model

The exclusive story of how CAA-GBG became the world's largest brand management company and licensing agency, its impact on the licensing sector and its potential for growth.

When the joint venture of Creative Arts Agency's licensing division and Global Brands Management Group was announced June 15, just in time to coincide with the company's release of final year results, it did so with a simple press release, little fanfare and select media coverage.

So while partly under the radar among the general business media, the scope of the deal was huge news for the business of brand licensing–the joint venture created the world's largest brand management company and licensing agency, as it combined with The Licensing Company and three other agencies previously acquired by GBG.

The mega deal also established a new set of initials–CAA-GBG–that will forever be etched into the minds of licensing executives around the globe. And most importantly, the deal will have a far-reaching impact on the licensing sector as CAA-GBG implements a new business model that leverages the synergies of its best-in-class global businesses and clients with a huge upside potential for growth.

CAA-GBG–which also includes TLC–is now the world's largest licensing agency (or brand management company, which is the descriptive term its executives prefer), reporting $11.8 billion in retail sales of licensed merchandise in 2015. (See the Top 20 Global Licensing Agents report.) Its client list is a balanced portfolio of entertainment, corporate, celebrity and lifestyle brands that includes Jennifer Lopez, David Beckham, Dwell Studio, Spyder, Ram/Dodge/Fiat, Jeep, Hershey, AB InBev, Coca-Cola, Discovery Channel, Jelly Belly, Iconix Europe/Middle East/China/Korea, Bethenny Frankel (Skinnygirl), Carrie Underwood (Calia), Cheesecake Factory, Eva Longoria, Gordon Ramsey and Kate Hudson, just to name a few.

CAA-GBG represents a blend of best practices, seasoned executive leadership and corporate cultures that may appear strikingly different on the surface, but are actually quite complementary, which is a characteristic that its executives credit as the impetus for the joint venture.

"We have enjoyed a long-standing relationship with the leadership at Global Brands, having collaborated on behalf of our clients for many years," says Perry Wolfman, chief executive officer, CAA-GBG, and former head of CAA's licensing division. "With like-minded collaborative cultures and an innovative approach to global brand building, the combination of these two companies joining forces to provide best-in-class opportunities to our clients is immensely exciting."

For its executive team, it's not really about being the largest agency or having the biggest list of clients or even doing a traditional licensing deal; rather, it's about delivering brand value to its clients.

"The size and scope of the joint venture is not that important," explains Dow Famulak, president and chief operating officer, Global Brands Group. "We believe at best that we are only scratching the surface and there's a huge amount of room to grow. Size matters only because big companies like to deal with big companies. They know exactly what they are dealing with from royalty reporting to brand protection to looking after the IP, and that's where size does matter. Size begets reputation.

"CAA makes us much stronger in the U.S. and much stronger in the celebrity space," he adds. "The CAA deal completes the global mosaic in the parts of the world that we are really focused on: Latin America, North America, Europe and Asia."

The addition of CAA offers the licensing division of the well-known talent agency a much greater global presence and the ability to leverage internal resources for its clients as it is fully integrated into the day-to-day operations of GBG. Conversely, TLC will now be able to share the additional resources of CAA, including its celebrities and creative and design group, with its clients, expanding its potential offerings and opportunities.

Understanding the evolution of GBG and its controlled brands and licensed brand businesses underscores its strengths in product development, retail expertise, global influence and how it became interested in the licensing business.

GBG was formed as a division of Li & Fung in 2005 and spun-off as a separate company traded on the Hong Kong Stock Exchange in July 2014.

For GBG, the vision of building a brand management business that brought together key agencies began in 2011 when Jared Margolis, now president of CAA-GBG, was tasked with building a distribution network throughout Asia.

"I was very impressed with the local licensing agencies," Margolis recalls. "I thought if GBG were to get into this business, we could do it better."

And the company is indeed doing it better, growing into the largest brand management company in just a few years. In 2012, GBG established its brand management business with the acquisition of The Mint Group, which specialized in children's character licensing in Southeast Asia. In 2013, GBG acquired RM Enterprises Group, a character licensing agency in Asia. In 2014, GBG further expanded its brand management business with the acquisition of TLC, one of the top licensing agencies in the world, founded by Melvin Thomas and Angela Farrugia in 1996 and which is celebrating its 20th anniversary this year. That same year it also acquired Cocaban Co., a licensing agency in Korea, and entered into a joint venture with Iconix Brands Group to provide brand management services for Iconix's fashion and lifestyle brands in Europe and Korea.

Now in June, GBG announced the joint venture with CAA's licensing division. GBG holds approximately 73 percent interest, while CAA holds 20 percent and CAA-GBG's Wolfman holds 7 percent.

Last month, CAA-GBG culminated its first three-year strategic planning meeting and the action plans can be summed up in one simple word: potential.

While the company will not disclose its specific brand initiatives, it will focus on building the business of existing brands and celebrities in key categories, key global markets and with key retailers.

"Our goal is to truly create a best-in-class global brand management company," says Famulak.

"The key to this is to have the strongest character, lifestyle, corporate and celebrity business, and to truly be a full-service model that is beyond transactional licensing and actually about brand building," says Wolfman. "Another key part of the joint venture is Brand Studio, a separate creative group within CAA that runs creative in-house to help build retail platforms and design all aspects, from logo to products providing an added value that most licensing businesses don't have."

"TLC called themselves a licensing company but they were for all intents and purposes a brand management company," says Famulak. "A licensing company just goes out and does deals and moves on. TLC started the concept of best-in-class brand strategy and development."

"Another element we bring to the table that most other companies don't is activation on retail sales and marketing," says Margolis. "It's about having that expertise and boots on the ground to make sure activation is done and day-to-day operations are being managed to the level that our clients expect their brand to be."

"Licensing is just one component of a much greater brand management solution," Famulak adds.

"Our view has always been that licensing is just a contract between two companies," says TLC's Melvin Thomas. "It's what you build around it that's important."

This differentiation between traditional licensing and true brand development and partnership is one of the key factors that CAA-GBB will further develop and expand in the future.

"It's about how we build strategy, implement creative design, how we penetrate retail, use our geographical reach and focus on market management, because our clients want a well-controlled program," adds Thomas.

Wolfman says that a key part of the CAA business approach is to build brands like Skinny Girl, rather than a brand under just a celebrity's name, such as Bethenny Frankel.

"There are many different ways to build or utilize the celebrity," he says. "CAA now has an entire international platform that we really didn't have. We used to be a domestic agency that used to do some international deals. Now we can offer our current clients a more global reach, and the TLC business can expand their reach into the relationships that CAA already has or utilize its celebrities within their businesses."

"We are focusing on the core opportunities for each of the core vertical businesses–entertainment, lifestyle, corporate and celebrity, providing a true global platform," says Famulak. "We have taken the best in the business from three well-established organizations and their management teams and melded them together to cover the world. We are not just sending people out from the home office like many companies tend to do."

Wolfman says that CAA-GBG can now offer clients "the opportunity to be region-specific, which the connectivity of the companies enables us to do."

Jennifer Lopez is clear example of how CAA-GBG has been able to leverage synergies of the company and build a global brand, such as with her recent footwear and accessories collaboration with Giuseppe Zanotti. (For more on this deal, see "JLo Steps Out with Giuseppe Zanotti".)

"Fashion is always going to be important, but there are significant opportunities in other lifestyle categories including food, beverage, insurance and banking," says Wolfman. "It's not just about a client saying 'I want an apparel line or shoe line or accessory line,' it's about 'I want to reach this type of consumer because this is something I am passionate about.'"

Famulak says that the company will continue to look at acquisitions, but will focus more on maximizing its existing business platforms while sticking to the agency model rather IP ownership.

"We would rather have a large portfolio of brands rather than own two or three," says Famulak.

CAA-GBG is certainly well-positioned for future growth considering both existing and potential new clients, and retail sales of licensed merchandise will likely grow considerably over the next several years further impacting the landscape of brand licensing.

"We want to build a new paradigm and be the best at it in every aspect of the business, from strategy to execution," says Famulak. "When I look at our three-year plan and everything that is in the pipeline, we really are just scratching the surface of the brand management business."