A global fashion icon and megabrand, Hello Kitty is one of the most bizarre stories in modern-day marketing. After all, we are talking about a minimalist graphic rendering of a cat, one with a moon-shaped head and no mouth.
Yet this simplistic image brings in a half-billion dollars annually in franchise fees for Tokyo-based corporate parent Sanrio. Licensees in Japan, the U.S., and Europe have plastered the cutesy image on 20,000-plus products worldwide—everything from waffle makers to diamond-studded luxury watches.
The business mind behind this commercial cat is Shintaro Tsuji, the founder, president, and CEO of Sanrio. In Japan, Tsuji is considered the closest thing the country has to a Walt Disney. He turned Sanrio, founded in 1960 as a small trinket maker, into a nearly $1 billion character-goods purveyor and theme park operator. Hello Kitty came on the scene in 1974 and appealed primarily to Japanese girls age 5 to 15.
HALL OF FAMER. Today, the fabulous feline is embraced by Parisian fashion houses, U.S. pop divas such as Mariah Carey and Christina Aguilera, and legions of fashion-conscious women in rich world markets. The Hello Kitty franchise kicks in about half of Sanrio's total revenues.
Tsuji is without a doubt one of the savviest marketing minds to emerge from Japan and a respected figure in the global $60 billion entertainment and character-goods licensing business. Now well into his 70s, he was inducted into Licensing International's Hall of Fame on June 22 at the trade industry group's annual confab in New York.
Yet there may be trouble in Kitty-land. Sanrio has experienced a sales stall in recent years, thanks to disturbing signs the Queen of Cute is losing some of her cachet with Japanese consumers. Horror of horrors, since 2002 the moon-faced one has been eclipsed as the most popular character in Japan by the Disney (DIS) -owned property Winnie the Pooh, according to data compiled by Tokyo-based Character Databank, which tracks the $14 billion Japanese character-goods market.
AGING KITTEN. While Sanrio still controls other profitable '70s-era classics like My Melody and the Little Twin Stars—and has also rolled out promising new characters such as the funky monkey Chi Chai Monchan and the ultra-cute Cinnamoroll creation— the company's financial performance is dangerously reliant on Hello Kitty. "It's needless to say that Kitty is Sanrio's most powerful product, their fortune," says Kazuo Rikukawa, president of Character Databank.
Right now at least, Hello Kitty's financial star power is dimming some. Sanrio's sales fell 2%, to about $852 million, in the fiscal year that ended in March, 2006, and its share price in Tokyo has sunk 41%, to $12.70 since its recent 52-week high back in early February. The company's Hello Kitty theme parks in Japan are struggling to pull in visitors, and Tsuji and his team are counting on growth in foreign-generated Kitty royalties and licensing fees, especially in the U.S., to turn things around this year and in 2007.
To get there, the company last year recruited Disney executive Mas Imai to serve as president and COO of the company's San Francisco-based U.S. subsidiary, Sanrio Inc. Imai, who spent 25 years focusing primarily on resort-business development for Disney's Japan operations, thinks Hello Kitty and other Sanrio characters could be leveraged far more to expand into a broader range of consumer products and services.
THE PUSSYCATS. He is thinking along the lines of co-branding Hello Kitty with music and entertainment content and educational products. The ultimate goal is to turn the feline into a "lifestyle brand" for girls and women. He isn't much worried about Hello Kitty consumer fatigue, at least in the U.S. Aside from a steady flow of young potential female consumers coming downstream each year, Imai points out that "earlier generations of loyal consumers are now in the age group of 20-40." They tend to be big-spenders and could be enticed by the right mix of Hello Kitty-branded luxury goods.
So, Sanrio has been in dealmaking overdrive in the U.S. in recent months. Bank of America (BAC) has just introduced a Hello Kitty credit card, and last year Sanrio teamed up with Fender Musical Instruments to create a line of Hello Kitty guitars and accessories. The duo has also launched an online music appreciation and education Web site where girls can learn to play the guitar.
Hello Kitty has also gone luxe. A high-end Hello Kitty offerings such as a fine jewelry collection by Kimora Lee Simmons and evening accessories by Judith Leiber are distributed at such upscale retailers as Neiman Marcus and Bergdorf Goodman. Later this year, Sanrio is planning to introduce a line of cashmere apparel together with collections of fashion denim and accessories designed in Paris by Victoria Casal.
OUT OF THE BAG. Sanrio is also targeting new Hello Kitty consumers in the U.S. among females of all ages and all ethnic and cultural groups, points out Bruce Giuliano, Sanrio's senior vice-president of licensing based in San Francisco. "Hello Kitty is finding increasing acceptance as symbolic icon of feminine style and taste," he says.
So does this cat still have some legs? While Hello Kitty has been mercilessly lampooned on the Internet for its simplistic design, cloying cuteness, and for encouraging mindless consumerism, the brand still triggers a heat blast of desire among a sizable segment of female consumers. (However, the feline seems to set off a gag reflex in most men.)
And stellar earnings performance by the Hello Kitty brand did bail out Sanrio several years ago when company investments in the Japanese stock markets went disastrously awry. But this much is clear: Sanrio either needs another big global character hit fast—or the Hello Kitty brand had better have nine lives.
Bremner is BusinessWeek's Asia regional editor based in Hong Kong and co-author of Hello Kitty: The Remarkable Story of Sanrio and the Billion Dollar Feline Phenomenon published by John Wiley & Sons, 2004.
Brian Bremner is BusinessWeek's Asia Regional Editor based in Hong Kong
With Hiroko Tashiro in Tokyo
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