Earlier this week, PFCB announced that it has entered into an exclusive licensing agreement with Unilever to develop a line of frozen Asian entrées for the U.S. under the P.F. Chang’s brand. The terms of the agreement were not disclosed and the launch date of the new products has not yet been set.
This new agreement sounds familiar to the trademark licensing agreement California Pizza Kitchen has with Kraft. CPKI partnered with Kraft in 1997 to distribute a line of CPK premium frozen pizzas in the U.S. and Canada. Kraft distributes CPKI’s frozen products, which now include flatbread melts, in about 20,000 select grocers in the U.S. CPKI collects royalties from Kraft, based on a percentage of Kraft’s net sales of the frozen products. This licensing agreement has provided CPKI with a high growth and highly profitable royalty stream, contributing $6.6 million to the company’s 2008 sales, up nearly 40% from 2007. Most importantly, Kraft is required to spend a percentage of net sales on advertising and promotion of California Pizza Kitchen’s licensed products, which acts an extremely effective marketing platform for CPKI.
We don’t know yet how PFCB's agreement is set up. We don’t know what percentage of sales PFCB will earn, the price point of the new frozen entrees or whether Unilever will provide the marketing dollars for the new products. I would suspect that PFCB has watched CPKI’s success with Kraft and is working to create its own high-return royalty stream.