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Sanrio Eyes Expansion of Licensing Business to Boost Global Brand Recognition

Company Aims for Record Operating Profit by Enhancing Digital and In-Person Presence
s 8136.TSE Mid and Small Cap 2000
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Sanrio, the iconic Japanese company known for Hello Kitty, is set to expand its licensing business through both digital and in-person channels, according to senior executive Seiichiro Matsumoto in a recent interview with Nikkei. This strategic move aims to enhance brand recognition and drive record group operating profits for the fiscal year ending March 2025.

Sanrio’s success has traditionally been anchored in merchandise sales and theme parks domestically, while licensing operations have flourished abroad. Matsumoto, managing executive officer overseeing the corporate management division, highlighted the company’s focus on the high-margin licensing business, which boasts a gross margin of around 90%, compared to approximately 50% in the merchandise sector.

The past three years have seen a doubling of revenue in Sanrio’s licensing business, not through an increase in licensees but through higher sales per licensee. The growing popularity of Sanrio characters has significantly boosted sales, with some licensees seeing their revenue double or triple. The practice of “character mixing” — combining multiple popular characters — has also contributed to this growth, rising from just 2% of the gross margin in 2014 to 19% in 2024.

Sanrio’s medium-term business plan through March 2027 emphasizes licensing in North America, where licensing remains the primary revenue driver. To keep Hello Kitty consistently popular overseas, Sanrio has allocated ¥10 billion ($62 million) for marketing over three years, leveraging platforms like YouTube and Roblox to enhance character recognition among young audiences. The company also plans to establish more real-world connections overseas, such as Hello Kitty Cafes and parades.

Despite Hello Kitty’s dominant presence, which accounted for 50% of overseas sales in the fiscal year ended March 2024 (down from over 90% a decade ago), Sanrio aims to diversify its character portfolio. With over 450 characters, the company seeks to build relationships with major retailers like Walmart to capture more market share.

In China, Sanrio focuses on developing characters that resonate with short-term trends, reflecting the rapid virality on chat apps, while also fighting against infringing goods. The company’s strategy includes a ¥50 billion investment budget for mergers and acquisitions, not to acquire other IPs, but to extend the reach of Sanrio’s own intellectual property.

Through these initiatives, Sanrio aims to cement its global footprint, ensuring its beloved characters continue to charm audiences worldwide.

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