THE IMPORTANCE OF AND ECONOMIC MOTIVATION FOR THE INTERNATIONAL LICENSING OF BRANDED FOOD AND RELATED PRODUCTS

Casual empiricism suggests that the international licensing of the production and marketing of branded food and related products may become an increasingly important aspect of the globalization of the food industry, particularly in sectors such as soft drinks, brewing and confectionery products. For example, Coca-Cola and Pepsi-Cola both license the canning and distribution of their final products in overseas markets, Anheuser-Busch and Miller license production of various of their beer brands whilst Nestle chocolate products are manufactured under license in the United States by Hershey. The purpose of this paper is twofold; first, in Section 1 empirical evidence on the extent of international licensing is presented and evaluated. In particular, due to recent developments, the specific focus of the analysis is on the case of brewing where the licensing of branded beers appears to be a fairly widespread international phenomenon and is often two-way in nature, i.e. U.S. brewers act as both licensor and licensees. Second, because much of the recent theoretical literature on licensing has dealt only with the licensing of process technologies rather than branded products, Section 2 considers the possible motives for such licensing using a simple game-theoretic structure. The results suggest that imperfect competition in overseas markets and imperfect information may be important determinants of international licensing. Finally, the research and strategic implications of international licensing are considered.