Eastern Europe: Current situation in Ukraine

Licensing in

“In the territory under Ukrainian control, far from the frontline, life looks like normal. People work, walk, go to cafes and cinemas. At the same time, there is always the danger of missile strikes.”

Eastern Europe

Current situation of the brand licensing market in Ukraine

By Tetiana Ruban, CEO of Ukraine`s Nerd agency (part of FILM.UA Group)

Long story short – we try to balance, we keep working, we have got new licensees, new properties in the market and companies are launching new products. At the same time, licensees have shrunk marketing budgets and customer purchasing power has decreased. But positive attitudes are especially valuable in Ukraine right now, so brand licensing is still demanded.

War – Work – Life balance

There are 640 damaged buildings in Kyiv alone as a result of bombardments. Air raid sirens can be heard several times a day. In addition to work, many are volunteering. In most cases, it`s fundraising and supplying the necessary goods for the Ukrainian Armed Forces. They have many needs starting from apparel to cars and drones. Ukrainians are donating every single day. Moreover, we understand the danger of this war and we spend weekends learning tactical first aid, tactics, and shooting. By the way, there are no holidays in Ukraine anymore, so all days except Saturday and Sunday are working days. Those who work do it much harder because this is our economic frontline – we must produce the GDP, pay taxes, and bring foreign currency in because we need to be able to supply our army and those who have lost their homes. There are many employees of Ukrainian companies, including licensees, who have moved abroad but keep working remotely, so in most cases, the teams are the same as before the war.

Consumers

Fast-growing inflation due to a significant devaluation of the Ukrainian hryvnia (the exchange rate before the war was 28 UAH/USD, in August it is 40 UAH/USD), fuel price increase (+43%), stock destruction, goods shortages, etc have made lives much more expensive. The Consumer Price Index by the end of 2022 is expected to be over 18% (in 2021 it was 10%). Furthermore, some people lost their jobs, and many have had their salaries cut. Customer purchasing power has decreased. At the same time, consumers are supporting Ukrainian producers and trying to choose their products. Local illustrators that make patriotic art have launched capsule licensed collaborations with small producers of souvenir products (mostly t-shirts, eco bags, cups etc). Usually, these are non-profit partnerships with donations for the Armed Forces. Many producers have added Ukrainian symbolic to their product design as well. In the meantime, customers have banned brands that come from Russia – there are even special apps, websites and chatbots to identify such brands easily. Now we are witnessing a lack of happiness in people’s ordinary lives. Hence, they buy goods that bring happiness and try to enjoy every moment of their life as much as it is possible now because people remember that life is finite. And as long as the licensed products bring joy, they are in demand.

Licensees

At first, many licensees cut their marketing budgets and froze most of their projects. Nevertheless, now many are renewing their activities. For example, our licensee Beletage Company launched an apparel collection with our licensed brand ‘Mavka.The Forest Song’ in June. We have many products in active development in different categories such as jewelry, stationery, toys, publishing, and others. We have new contracts and incoming inquiries

which is a good sign that brand licensing is in demand. Also, many Ukrainian producers started exporting to European countries and there is a vast opportunity to acquire brand licensing rights for new territories.

Retail

Food retailers, regardless of the fact that they have lost dozens of stores, are some of the most stable. They keep launching and developing loyalty programs including the licensed ones. Instead of normal discounts for pans and other practical goods, all the programs now are emotional with gamification, characters, and brands. There is strong competition between food retailers. Shopping Malls have some difficulties with traffic because of the range of shopping mall bombardments. 24 malls were targeted by the Russians. One of the worst was a missile strike into Vinnytsia Shopping Center in July with a huge number of victims. After this case, people try to avoid offline shopping in crowded places. Nevertheless, the malls are open. As a result, online sales have grown. The most popular and efficient way is by using the website. Many sell via Instagram and online ads play a major role in this. Big companies even use their apps for selling products and services. Even during wartime, Ukraine has a fast and convenient delivery system that helps a great deal. A customer receives product the next day after it had been shipped. Therefore, many companies have shifted their focus on online sales more than ever before.

‘Mavka.The Forest Song’, the most anticipated brand from Ukraine

You can read articles about Mavka in Animation Magazine, Variety, Kidscreen, AWN etc. ‘Mavka.The Forest Song’ is a 3D animated feature film for kids and families with a core target audience of girls 4-14 years old. The expected international release is set for 2023. ‘Mavka.The Forest Song’ is a 100% Ukrainian product created by the animation studio “Animagrad” (FILM.UA Group). Animagrad’s team returned to the movie’s development just days after the beginning of the war. The film will have theatrical premieres in most of the European countries, Canada, MENA and some other territories in 2023. There are many new contracts even during the war. For instance, this summer Universal Pictures Content Group acquired all Frenchspeaking territories distribution rights for this film. The Nerd agency team represents the‘ Mavka.The Forest Song’ licensed brand worldwide and now we are negotiating collaborations with companies in apparel, publishing, foods, beverages, and other categories internationally. In Ukraine, we have licensees that produce toys, publishing, stationery, apparel, jewelry, foods, and other products. In addition to that, there will be a new licensed food retail loyalty program with Mavka in Ukraine. The brand impresses with its unusual and beautiful visual environment and enjoys very good feedback. We expect ‘Mavka.The Forest Song’ to be the first Ukrainian entertainment brand with a strong international licensing program.

Charity brand to support Ukraine

Nerd agency team (Tetiana Ruban, Olena Kuraksa, Anton Karpeka) with volunteers (Ilona Kitaeva, Roman Kritskiy, Iryna Gromova, Olena Kuzmina and Nataliya Avramenko) has developed a new licensed brand ‘Call me Ukraine’. The creative concept was born around the key values that ordinary Ukrainians proved during the first months of the war. These stories and heroes narrate the new collective image of what the Ukrainian values are and what the spirit of Ukraine is. The brand is based on real but extraordinary events. For example, a man stopped a tank with his bare hands; a woman saved disabled dogs from occupied Irpin in a Kyiv suburb; a farmer pulled an enemy tank by his tractor; a lady disabled a surveillance drone with a jar of homemade preserved tomatoes and so on. All the characters and objects are illustrated especially for licensing. The main colors are blue and yellow as per the Ukrainian flag.

The licensees will transfer royalties directly to the charity funds that support Ukraine. This approach ensures transparency. Moreover, in some countries companies that donate to charity get tax discounts. As we understand that the social responsibility theme should be suitable for a company/brand, we picked a range of recommended funds that cover different areas. Licensees can donate to the army, medicine, women, kids, veterans, refugees etc. With the ‘Call me Ukraine’ brand we want to attract attention to Ukraine in a positive way and fundraise to get closer to our victory.

Foreign rightsholders

For foreign companies it is more difficult to evaluate the situation. Therefore, we do not see activity of rightsholders who work directly without local agents. Nevertheless, we feel great support from our partner rightsholders. This year we signed an agent contract with a South Korean company Roi Visual for the animated series Robocar Poli and became an exclusive licensing agent in Ukraine. Also, Nerd Agency now can represent Robocar Poli in CEE region for a number of categories, and we continue negotiating with some other brands that we want to get into our portfolio for Ukrainian and CEE markets. Not so long ago, many brands granted rights for Ukraine, Eastern European countries, and CIS countries to Russian agents. And, particularly in Ukraine, such brands were frozen for licensing – there were no deals and even if a licensee wanted to have such a brand, there were dozens of obstacles. We see the trend that many respected rightsholders are leaving Russia despite the market size (which is by the way shrinking thanks to sanctions). I hope that all international brands leave Russia and save their brand reputation. We see a great opportunity to work with new rightsholders that were blocked before and we have enough strength and resources to represent the brands not only in Ukraine but in CEE and some CIS countries.

Prospects and forecast

2022 is a difficult year for the Ukrainian licensing market. From 24th of February till May the economic activity of licensees was much lower. However, starting in May, companies renewed product development and launches, and later they got back to new deals and negotiations. People are coming back to Ukraine. Half of those who evacuated from Ukraine have come back. The back-to-school period is a new wave of returns by mothers with kids, who are the main consumers of licensed products. It should be said that business is not operating in the temporarily occupied territories, so the market size has decreased. Nevertheless, many citizens have moved from occupied territories to other parts of Ukraine, so the impact of this factor is not critical. The circumstances pushed Ukrainian producers, brands and agents to try to establish themselves abroad, especially in CEE region, and we have already seen the first positive results. Some Ukrainian companies have already started exporting products (including licensed products) to new markets. Another good sign is our closer overall partnership with European countries, the UK and US. In June, Ukraine was granted EU candidate status. 2023 is going to be a recovery year. People and companies have already adapted to the situation and are getting back on track. I would like to highlight that Ukrainian businesses and people have been through many crises before, which has made them very flexible and decisive with strong crisis management skills. So, we will see the results of counter-crisis actions of companies next year. The crucial thing is that 98% of Ukrainians believe in our victory and keep it in mind. All the plans and actions are being made with this assumption. After Ukraine`s victory, there will be a lot of private and public investment, which will fuel economic growth. Being one of the biggest countries in the region (with 42 million people and 603,7 square km), with investment, good partners, high spirits, and people’s will to reconstruct the country, Ukraine will become a very attractive market. Therefore, we should prepare the ground for this now. And we are very grateful to all who support Ukraine.