Has Authentic Brands Group created a new brand-building model?
In the initial public offering prospectus for Authentic Brands Group (ABG), Jamie Salter, founder and CEO, describes how he came up with his company’s licensing platform that “deconstructs and reconstructs” the traditional brand building model.
“I came to realize that most brands were structured for a different era — before the speed of digital and the complexity of global; antiquated, and ultimately difficult to retool as the market and the consumer evolves,” wrote Mr. Salter in a letter to shareholders. “Being best-in-class in every competency at every step of the value chain is an impossible task for most teams, but that’s what defines success in the traditional model.”
Mr. Salter, who previously spearheaded the formation of Hilco Consumer Capital, describes his company as “brand owners, curators and guardians.” The platform combines the operational and financial benefits of a traditional brand licensor with the brand development, marketing and long-term value approach employed by successful brand owners.
Under the model, ABG retains brand ownership and approval rights over marketing strategies, product development and use of data. Licensee partners bear the capital, manufacturing, inventory, markdowns and distribution responsibilities.
“We are a licensing business and are purely focused on brand identity and marketing,” Mr. Salter said. “This unique approach allows us to:
- Unleash brand performance through reimagined storytelling and staying ahead of the distribution curve.
- Create a sustainable, strong royalty model with recurring, asset-light growth.
- Drive a flywheel of successful revenue and brand growth that fuels free cash flow to invest in additional brands.
- Focus most of our time, efforts and resources on building incredible brands.”
One area of investment has been digital, where ABG’s marketing capabilities serve as the basis for brand development.
ABG has completed over 30 acquisitions since being founded in 2010 including partnering with Simon Property Group and others to acquire stakes in Forever 21, Aéropostale, Lucky Brand, Barneys, Brooks Brothers and Eddie Bauer. It has a 17 percent stake in J.C. Penney.
The company said it signs a core licensee partner agreement before an acquisition is executed, in most cases, “significantly de-risking the successful execution of the intended strategy and providing upfront visibility into the future revenue, profit and growth potential of acquired brands.”
- Authentic Brands Group Inc. – Form S-1 – Securities & Exchange Commission
- ABG to Acquire Heritage Brands Portfolio from PVH Corp. – Authentic Brands Group
- ABG and SPARC Group Finalize the Acquisition of Eddie Bauer – Authentic Brands Group
- ABG and SPARC Group Finalize the Acquisition of Brooks Brothers – Authentic Brands Group
- ABG and SPARC Group Acquire Lucky Brand – Authentic Brands Group
- ABG Finalizes the Acquisition of Forever 21 – Authentic Brands Group
- ABG Finalizes the Acquisition of Barneys New York – Authentic Brands Group
- BlackRock LTPC Makes Strategic Investment in ABG – Authentic Brands Group
DISCUSSION QUESTIONS: Does Authentic Brands Group’s licensing model better set up brands to pursue digital and global growth than traditional models? How would you rate the model’s pros and cons for acquired brands and retailers?