In this close-up and exclusive report, Bob Chapek, president of Disney Consumer Products, reveals his vision for the group's new structure, its new team and what it all means for licensees, retailers, consumers and the future of the world's largest licensor.
When Bob Iger, chairman and chief executive officer of the Walt Disney Company, tapped 18-year company veteran Bob Chapek to head up the Disney Consumer Products group last September, there was much more to the announcement than just the executive appointment.
Iger's move, which came swiftly and confidently just three days after Andy Mooney (who served as president of Disney Consumer Products for more than a decade) announced his resignation, actually marked the beginning of a new era, new character, new culture and new structure for Walt Disney's increasingly important division based in Glendale, Calif.
In essence, one Bob gave another Bob his backing, his trust and his goal to drive growth at Disney Consumer Products and to implement significant changes that would better position the world's largest global licensor for the future, and that in some ways would perhaps set a new standard for a more contemporary and streamlined organization with an integrated retail approach to brand licensing, franchise development and sales management.
"Bob's vast experience, talent and proven track record will be key to implementing a consolidated approach to retail, resulting in a more efficient and effective organization," says Iger. "As the retail market becomes more centralized, it is important to provide the consumer with an array of choices in a seamless, coordinated way."
Chapek, who has quickly become immersed in the internal re-structuring process and meetings with key partners since last fall, is now well-prepared to address all of DCP's licensees and retail partners in one place for the first time during this month's Licensing Expo in Las Vegas, Nev. In a way, it's Chapek's executive debut and he's ready to take the stage to explain the division's new structure, new initiatives and plans for the future and how it will all enhance its partnerships with licensees and retailers, as well as drive growth.
Chapek's extensive experience has undoubtedly prepared him for his role and he is embracing the challenges of the next chapter with excitement, confidence and competiveness.
"I felt that my whole career has led up to this," he says. "This was the culmination of my past retail experience, my brand management experience and product development experience."
Most recently, Chapek was president of distribution for The Walt Disney Studios, and prior to that he was president of Walt Disney Studios Home Entertainment, where he played a key role in the commercialization of Disney's live-action and animated direct-to-video business. Earlier in his career, he was in the packaged goods business with H.J. Heinz and the advertising business with J. Walter Thompson.
Within 10 weeks of his appointment, Chapek named former Marvel Entertainment executive Josh Silverman as executive vice president of global licensing for DCP. Several other changes have been implemented since, including the recent formation of an integrated retail team, comprised of three veteran Disney execs–Julie Sneddon was named executive vice president; Bruce Morrison was named senior vice president of retail sales; and Jeanne Hobson was named senior vice president of retail strategy and solutions.
Chapek's vision for DCP, which touches on all aspects of the core business strategies and best practices, better aligns the group with the overall vision of the Walt Disney Company, its partners, approach to brand licensing and retail and how its consumers ultimately shop and make purchasing decisions. The key driving factors can be summarized as follows:
- Focus on franchises;
- Focus on the consumer;
- Recognition of licensees as category experts;
- One-stop shopping for retailers;
- Ability to be more nimble and efficient;
- Need to be quicker and faster to market;
- Focus on new content and new franchise development.
"The Walt Disney Company's focus is returning its attention to the consumer as our end customer and that will drive so much of what we do," says Chapek. "Disney Consumer Products will focus on franchises to align with the rest of company in the way that they have been thinking about our business."
DCP's new structure consists of six franchise groups, each with its own senior vice president of licensing:
- Disney Princess and Fairies–Chris Connolly
- Disney and Pixar Animation–Mary Beech
- Disney Classics and Moms and Babies–Jessi Dunne
- Disney Media Networks and Games–J.D. Edwards
- Live Action Film–Jonathan Symington
- Marvel–Paul Gitter
In addition, there are three product development leaders responsible for working with franchise licensing teams and licensees to maximize their respective category expertise. They are:
- Joann McLaughlin, senior vice president, hardlines
- Stephanie Kraus, vice president, softlines
- Embola Ndi, vice president, consumables
"The new structure is really a reflection of how we are thinking of our business...Everything we do is about trying to align our organization, its resources and its efforts to cater to what the consumer ultimately wants," says Chapek.
"In the past, category alignment was a shadow function of our licensees that sort of replicated how our licensees were organized and how they were structured," explains Chapek. "What we do best is create and sustain these franchises and commercialize them, and what our licensing partners do best is to be category experts, and it's the intersection of these two that will make Disney Consumer Products the most efficient and effective organization in the marketplace.
"Every meeting I had in my first days at DCP were always around the franchises," he explains. "We had Toy Story meetings, Cars meetings, Princess meetings, Fairies meetings, Winnie the Pooh meetings, Mickey Mouse meetings, but we didn't have meetings about t-shirts, we didn't have meetings on health and beauty care, we didn't have meetings on stationery. So to me it was fairly obvious that what we really brought to the party in terms of the value chain was a focus on what made us different and that's the brands and franchises."
Adds Chapek: "This is a welcome move for our content partners inside the company, as we are now aligning toward the commercialization and development of those franchises. Also, it is a recognition that Disney Consumer Products plays a vitally important role inside the company in the sustainment of our franchises because what keeps us healthy is the merchandise in the marketplace."
For its licensing partners, Chapek believes the new structure also recognizes that they are experts in their respective categories and DCP does not have to replicate what they do.
"If licensees are experts in toys, then we should acknowledge that and let them be the experts in toys and let them add to and bring something incremental to the party," he suggests. "Take a look at one of our largest licensees, Hallmark. We would be kidding ourselves to ever think we can ever become greeting card experts like Hallmark is."
According to Chapek, DCP is playing a much larger role in helping to create a symbiotic relationship between content and merchandise.
Says Chapek: "Merchandise does not exist without great content, and content can't sustain itself without return from commercialization of those equities in the merchandise space. It's always been strategically important, but playing a bigger role in the economics of the return on investment for content."
Chapek admits that Marvel, which is now integrated into the overall group, added another very important piece to the Disney arsenal.
"Disney has always been a company whose equities have been more aligned in the girl orientation than the boy orientation, so we have become a much more balanced organization," he says. "Marvel and its inherent appeal to a male audience, and older audience as well, has really balanced out our portfolio strategically and made us a more dynamic player."
In addition to the integration of Marvel, the re-structuring is also influencing the mindset and culture of DCP.
"I am wondering how can we raise the profile of technology and innovation within the segment and take our products and make them smarter in marketplace so that the appeal to the consumer grows and our business can inherently grow as the consumer adapts to new technology," he says.
Another important aspect, says Chapek, is the willingness to be agile and nimble.
"We are the largest licensor in the world–and size, scale and scope is important–but I want to be as nimble as a small company," he emphasizes. "That's the cultural value of our Marvel brand and it is a perfect example of taking the quality of the small and nimble Marvel and combining it with the scale and scope and multi-generational appeal of Disney to create a best style culture."
Another critical aspect is how the new structure of DCP will benefit its relationships with retailers worldwide.
"Retailers can look to Disney Consumer Products as the hub of all retail efforts across all channels of distribution and lines of business across the Walt Disney Company," he says.
In addition to stores, publishing and licensing, DCP will now encompass the entire breadth of the company, including music, movies and games.
"It's now one-stop shopping and one voice at retail. Disney Consumer Products now has the ability to build programs around all brands and franchises, and bring them together without regard to the line of business and construct them the way a consumer looks at it. If a consumer loves Fairies, they love Fairies across all lines of business. If they love Princess, they love Princess across all lines of business. If they love Avengers, they love Avengers across all lines of business."
Chapek explains that the focus on accounts or channels of distribution is very different today than it was just a few months ago.
"If you talked to our sales people three months ago, they would say they were either music sales people, game sales people, movies sales people, publishing sales people or licensing sales people," he says. "Now they say we are Walmart sales people or Target sales people or TRU sales people. That's a key difference, because now they represent the total breadth of the Walt Disney Company for their customer base."
Within those teams, Chapek says, there are still experts in music, games and so forth, but the primary orientation, just like the primary orientation of its licensing people is its brands and franchises. The primary orientation of its sales people is specific accounts and channels.
Overall, Chapek believes that working with the "new" DCP will be easier and more rewarding for licensees who can benefit from the potential of robust business growth.
"The robust growth we enjoyed in the past will continue into the future, and with new content sources and the new alignment we have, we believe we can accelerate that moving forward," says Chapek.
For 2011, according to the Top 125 Global Licensors Report, published by License! Global magazine, DCP reported total retail sales of licensed merchandise of $37.5 billion, up from $34.2 billion in 2010.
In terms of revenue, in fiscal year 2011 (ended Oct. 1, 2011), the DCP segment posted a 14 percent increase in total revenue over the prior year to $3.049 billion. Operating income rose 21 percent over the prior year to $816 million.
Chapek views DCP as a growth engine for the Walt Disney Company that helps to sustain its franchises.
In order to maintain its position as a global leader, Chapek believes that DCP must become a "more nimble and more collaborative company that is fully leveraging technology to its fullest."
What started last fall when one Bob, chairman Iger, turned over the helm of DCP to another Bob, is now into the stage of implementation worldwide as Chapek looks to strengthen partnerships with licensees and retailers, leverage the Marvel superhero franchises as well as other new content, and shape the future of brand licensing and consumer products.
The New Franchise Model
There's no doubt that Marvel Entertainment has had a strong impact and influence on the Walt Disney Company and DCP, not only in overall content franchises that it brought to the studio, but also in its small company mindset and approach to brand licensing and product development.
So the appointment of former Marvel executive Josh Silverman to executive vice president of global licensing, Disney Consumer Products, was an appropriate and opportunistic move considering his experience and knowledge of brand licensing and the superhero mindset, as well as his understanding of franchise management.
"Chapek's approach allows us to take advantage of the content that is being developed around the organization, in addition to the content we have always focused on," says Silverman, who began his career with Marvel in 2001 as a corporate attorney. "Not being limited to toys or one area has allowed the licensing franchises to think about what is the right approach for a specific property. That, combined with our new integrated retail team, is really where the magic is."
One of the benefits to Disney's licensee partners, according to Silverman, is for new licensees.
"If you didn't work with Disney before, now we have a lot more pieces of IP, so there is a greater opportunity to work with us.... to help to innovate and to push quality and quick executions, as speed is key," he says.
"Where's My Water?," says Silverman, is the first example of the greater efficiency of the new structure and a step in the right direction.
"It is about identifying opportunities and capitalizing on them in a quick, speedy and nimble fashion."
The Retail Quotient
Disney Consumer Products has created an entirely new integrated retail team to maximize its brand equity across all company divisions and make more powerful product statements at retail.
Several Disney veteran executives were tapped to spearhead retail development: Julie Sneddon will lead the retail team as executive vice president; Bruce Morrison was named senior vice president of retail sales; and Jeanne Hobson was named senior vice president of retail strategy and solutions.
The retail team will operate across the newly established franchises and content divisions with the ability to present a cohesive look at all the different brands and initiatives.
"For retailers, it will mean a more streamlined way of doing business with Disney Consumer Products," says Sneddon. "This is great news for retailers to hear because we are able to be nimble and to work in a more long term plan across business units. We've done a great job in all the different lines of businesses over the years, but we may have fallen short by not being able to put all those pieces together."
Sneddon says that the retail team will align closely with how the retailers buy and mirror their structure to make it as easy as possible to work together.
"One of the benefits to the retailers is that we can now look holistically at their business in terms of sales data, tracking data or key measures as one group and focus on those areas that are the biggest wins for the retailer," says Sneddon.
Sneddon says that the retail team is evaluating how retail will evolve in order to identify key areas of growth such as the grocery channel, drug channel, value channel and e-commerce.
The New Content
In addition to the classic and iconic franchises, Disney has an interesting roster of new content in the pipeline that could mark the beginning of new franchise development and additional opportunities in licensed products.
There's no doubt that Marvel has brought an entirely new dimension to the world of Disney in terms of culture, business practices, consumer products and, of course, content.
- Marvel–The ability to commercialize the Marvel properties is top of mind for DCP, according to Chapek, especially after the record-setting performance of The Avengers at the box office, which has already topped $1.3 billion in sales worldwide ($525 million domestically) through the end of May, making it the Walt Disney Company's highest grossing film exceeding Pirates of the Caribbean: Dead Man's Chest and Toy Story 3. In the pipeline are Avengers 2 (2014), Iron Man 3 (May 3, 2013), Thor 2 (Nov. 15, 2013) and Captain America 2 (April 4, 2014).
- Live action films–Major theatrical releases include Oz: The Great and Powerful (March 8, 2013) and The Lone Ranger (May 31, 2013).
- Animated films–In addition to Brave, which hits theaters June 22, Pixar will release Monsters University (June 21, 2013) and from Disney Animation is Wreck-It Ralph (Nov. 2, 2012).
- Television–"Phineas and Ferb" continues to be a strong show and along with other properties like Doc McStuffins and Mickey and Minnie's Clubhouse, television is driving consumer products development.
- Game apps–This content area presents future growth potential, especially after the instant success of "Where's My Water?." DCP quickly unveiled a new consumer products program last month, after the app's resounding success.