How One Hong Kong Toy Maker Turned to Licensing to Reinvent his Business

The Maggiology merchandise collection.

Since 1962, the Yeung’s Group has been engaged in the OEM production of gift and premium merchandise for, among others, Disney, the NBA and the English Premier League. In 2007, with European and American orders faltering, together with increasingly high production costs on the Chinese mainland, its OEM profit margins dwindled. This forced the company to reevaluate its business model and even look at developing its own brands.

At the time, Yeung became aware of the popularity of Maggiology, an MSN character favoured by many of his friends. This made him think that partnering with existing well-known creative people would be a better option than developing characters from scratch. Back then, Maggiology’s creator has restricted his activities to just publishing two comic books, with no thought of spin-off merchandise. Yeung seized the opportunity and partnered with the cartoonist for the launch of a number of licensed products.

Maggiology featured in Mandatory Provident Fund publicity materials.

In 2013, the total global retail sales of licensed products amounted to US$155.8 billion, with products relating to cartoon characters accounting for 16.5%[1]. According to Yeung, Japanese cartoon characters have been particularly popular among Hong Kong consumers. Over recent years, demand has also grown for locally-created characters. The work of a number of Hong Kong cartoonists and illustrators have caught the attention of the local market as their subject market is likely to particularly resonate with consumers. In order to ensure these works stand out, it has been necessary for companies to carefully promote such brands and their associated products.

Maggiology, for example, other than appearing in comic books, has been featured in the marketing campaigns of a number of different companies and branded products, including the Wellcome supermarket chain, PCCW, Wing Hang Bank and Wacom. As different consumer groups have become familiar with Maggiology, it has enhanced its overall brand awareness. When choosing partners, however, the nature of the company and its brand image is a matter of primary concern. As a rule of thumb, though, cooperation with government bodies or the public sector often benefits the brand.

Star Ferry postcard featuring Maggiology characters.

While the mainland consumer market has immense potential, Yeung says his company is in no hurry to push Maggiology into China just yet. As the Maggiology characters embody many typically Hong Kong traits, while also featuring many of the city’s tourist attractions (such as the Avenue of Stars, The Peak and the Star Ferry) this underlines Maggiology’s positioning as a locally-based property. The products are also said to have been well received by mainland tourists, a key route to building awareness in other territories.

Brand Licensing Agent: Long Term Business Model

Yeung says his company’s long-term business model is to identify animation characters that have the potential to be successfully licensed. Most artistic people focus on creation, with production and marketing being outside their expertise. The company can collaborate with such individuals to their mutual benefit. In general, ownership of the brand remains with the creator, who may then grant a license for agents to develop brand-licensing business. Depending on the format of cooperation and the exact terms of any contract, licensing agents may then sub-license the production and distribution rights of their licensed products.

Stanley Yeung and Maggiology.

Currently, Yeung’s Group acts as licensing agents for more than 10 brands, with its target customers including children, young adults, people-at-work and even housewives. As most animated characters are developed via the medium of graphic design, the company works with the creators to bring these characters to life. Producing a three-dimensional version from such graphics requires detailed specifications and, in the product design and production stage, brand-licensing agents require creators and manufacturers to work closely together in order to produce quality products.

For their own part, after identifying suitable, animation characters, brand-licensing agencies then have to start promoting the brand image of the characters they represent, devising sales channels strategies as well as developing marketing plans in order to boost the overall brand value. The ultimate aim is to create a win-win situation for both creators and manufacturers.