The Rise of the Brand Collaboration

Brand x Brand

‘Adidas x Yeezy’, ‘Supreme x Louis Vuitton’, ‘Nike x Apple’, ‘Aldi x Brewdog’ – brand collaborations are suddenly everywhere. Why is this? Could your brand benefit from a strategic partnership with another? If so, what are the risks and how should you manage them?

Defined as an 'alliance between two or more brands to create a specific product or service', brand collaborations are one of the latest trends in retail.  From fashion and beauty, to travel and homewares, brands are partnering up to offer fun, quirky and novel experience for consumers. So why the sudden explosion?  The current retail climate makes it difficult for brands to remain relevant.

Digital acceleration has given brands a dizzying range of services and media channels with which to advertise their products, and consumers an abundance of choice. Add to this the global pandemic pushing physical footfall to an all-time low, supply chain disruption and changing consumer demands, and brands and retailers are having to work harder than ever to keep up with the market and adapt to the adversities they face.

Brand collaborations have emerged as a strategic marketing solution to these challenges, and it's easy to see why. The following examples demonstrate just some of the wide-ranging benefits.

Example brand collaborations

'McDonald's x Beyond Meat'

A successful collaboration can put a brand in front of a whole new customer base, thereby expanding market reach, while simultaneously demonstrating that the brand is innovative and original. McDonald’s recent collaboration with ‘Beyond Meat (McDonalds x Beyond Meat)’ to create the McPlant, a vegan plant-based burger, is a good example of this.

On one hand, the collaboration introduces a new vegan customer base to McDonald’s whose traditional clientele would typically be meat eaters. On the other hand, Beyond Meat’s profile is raised amongst meat eaters and vegans alike. The collaboration also signals to each collaborator’s existing customer bases – as well as consumers more widely – that they are in tune with current social trends and preferences, in this case the move to a more plant-based diet.

'Crayola x Fat Face; Crayola x Clinique'

A carefully chosen collaboration can be a great way to reinvigorate a brand. Crayola’s recent collaborations with Fat Face (a collection of children’s clothes, branded Crayola by Fat Face) and Clinique (a limited-edition range of the celebrated ‘chubby sticks’, branded Crayola for Clinique) demonstrate this strategy well.

The toy industry is a rapidly changing and saturated market – by collaborating with other brands, Crayola were able to diversify their offering to remain relevant in the consumer psyche. The playfulness of the Crayola brand lends a sense of ‘retro cool’ to the collaborative product ranges, whilst tapping into the nostalgia of the traditionally adult target markets of the collaboration partners – many of these adults will be parents themselves now, and (having been reminded of fond memories of their own childhood scribbling) may be prompted to buy a set of Crayola crayons or pens for their own children.

'Lego collaborations'

A collaboration can enhance the value of both brands even when they aren’t known to have much, if any, audience overlap. Lego were able to create entire franchises out of their collaborations with Harry Potter, Star Wars and Batman, even though there is very little cross-over in their demographics.

'H&M collaborations'

Brand collaborations enable consumers to experience a familiar brand in a novel way, leveraging social media to create buzz around the products and the brands who make them, leading directly to sales – and all this at a fraction of the cost of the equivalent digital advertising.

H&M’s regular collaborations with high-end fashion brands are a great example of this. From Moschino to Karl Lagerfeld, H&M have successfully, and repeatedly, brought high end fashion to the high street by annually co-creating an affordable capsule collection with a high-end brand. By doing so, H&M ‘cash in’ on the exclusivity factor of these high fashion brands and continue to position themselves as an attractive place to shop.

The high-end fashion brand also benefits as they gain access to a wider customer base, greater brand recognition and broader advertising potential with more people wearing their logos and brand imagery day to day (not to mention the royalties they are presumably entitled to in respect of sales of the H&M range).

However, while both parties stand to benefit from a successful collaboration, publicly associating your brand with another involves taking on some significant risks. What happens if your chosen partner suffers negative publicity? Or they decide to terminate the agreement?  Who owns, protects, and manages the intellectual property created during the collaboration, and what happens if there is a dispute?

An effective, well-drafted agreement will be your best bet in seeking to mitigate these legal risks, and in the remainder of this article we consider some of the key issues that any brand collaboration agreement should address. Many of these issues are relevant to more traditional one-way brand licences and merchandising agreements too, although where each party is licensing its brand to the other (so-called 'cross-licensing') additional complexities can arise in the drafting and negotiation process.

Clarity and oversight

As with any contract, clarity is key. Setting out exactly how each party will be entitled to use the other’s brand, as well as any limitations on those rights, will reduce the risk of misuse and any resulting reputational damage or brand dilution – generally the main concerns of any business allowing another to use their brand.

Hand in hand with clear rights and obligations comes oversight and control. For example, in most product-based collaborations one party will license their brand for use on a specific range of products to be designed, manufactured and supplied by the other – the H&M collaborations are a good example. In these circumstances, the party granting the right to use its brand should seek approval rights over each of the designs, prototypes and final products, as well as setting out clear instructions (often by reference to a brand manual or style guide) as to how the brand should be used.

The same principle applies to social media/ content-based collaborations – any content that will feature or be associated with your brand should ideally be subject to your approval before being posted. Alternatively, if spontaneity and independence are important to the credibility of the content (for example when collaborating with an influencer or celebrity) the content should be required to adhere to clear guidelines communicated in advance.

The ownership, protection and management of intellectual property (IP)

Something new will be created in the course of most collaborations, whether in the form of new designs for the collaborative product range, or new online/ social media content. It will be important to make sure that your agreement sets out who will own, protect, and commercialise the new IP, as well as responsibility for any associated costs. By considering these things at the outset, you reduce the risk of disputes arising down the line.

Co-ownership of new IP often seems appropriate within a collaboration arrangement, and although this is possible, we rarely recommended this approach as it is complex to manage properly. The rights of co-owners vary depending on the type of IP right concerned and there is no harmonisation of these rights between jurisdictions, so without careful consideration and much additional drafting, co-ownership of IP often introduces more problems than it solves. As a result, we recommend that you seek legal advice if any potential collaborator insists that you co-own any new IP. 

Royalties

Where revenue (as opposed to hype and increased brand awareness alone) is a key driver behind the collaboration, money will form a significant part of the commercial negotiations. Unless the value, profile and bargaining positions of the collaborating brands (as well as the ability to generate income) are evenly matched, the likelihood is that one party will be required to pay something to the other, commonly – but not always – in the form of royalties.

Parties will often lean towards some form of profit-sharing arrangement, but it can be difficult to define ‘profit’ with any certainty, creating the potential for manipulation. Where possible, we generally recommend basing royalty calculations on a set price per unit or net sales price. Whatever the mechanism for calculating sums due, the agreement should address the timing and method of invoicing and payment and include reporting requirements and audit rights allowing the payee to check that royalty calculations are correct.

Termination rights

Pulling the plug on a collaboration before it has run its course will generally be a last resort, carrying with it the implicit and very public admission that the collaboration has failed, and potentially damaging both brands.  However, it is essential to have the right to do so where continuing with the collaboration would cause more harm than good.

In some cases, it will be important to publicly distance your brand from the other, for example if allegations emerge of serious discrimination, child or slave labour within the supply chain or a product recall. In addition to the standard rights to terminate a contract where the other party has committed a material breach of its terms or has become insolvent, both brands will want to ensure that they have the right to bring their association to an end if they believe that continuing it would have an adverse impact on their brand.

In most agreements this would be considered too subjective to form the basis of a termination trigger, but when the enhancement of brand reputation is one of the primary goals (if not the whole purpose) of the agreement, it is a must.

As well as the termination triggers, the agreement should set out the consequences of termination. For example, if the collaboration is content-focused, what should happen to that content – should it be deleted, and if not, to what extent can it be used again by either party?

By outlining these consequences, the parties will have clarity as to what their post-termination obligations are, which will help to provide stability and guidance when the collaboration ends.

In conclusion

There are risks associated with any commercial arrangement, and brand collaborations are no different. However, when managed properly with sensible drafting at the outset, a collaboration with a well-aligned or complementary brand can be a brilliant way to reinvigorate your brand's identity, expand its reach using new platforms or generate revenue in new markets.

At Foot Anstey we play an active role in the retail marketplace, flexibly supporting a range of high-profile clients with advice on brand and other intellectual property licensing arrangements, including collaborations. If you would like to any further information, please get in touch.

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