Valrus has valued the royalty rates of a package of trademarks of a well-known Russian vodka brand. This package of trademarks included 10 names of vodka products, including international brands in the top 30 of the "Millionaires Club" of Drinks International.
The task of our company's specialists was to estimate not only the percentage value of the royalty rate, but also the conversion of this rate into physical terms (rubles/dal).
The main difficulty in determining the size of the royalty rate is the confirmation of the calculated result obtained by the market conditions. Depending on the industry to which the products manufactured under the valued trademark belong, market information on the amount of the royalty rate and the practice of their application may be extremely limited. As practice has shown, the market for royalty rates in the vodka industry is almost completely closed, and the task of determining their market size is not trivial.
The largest vodka companies do not disclose information about the applied royalty rates. Valrus experts found only data on beer brands, so a direct comparison with the main competitors turned out to be impossible.
As part of the market analysis and collection of information for the work, our employees have made a request for information. Data on royalty rates for the use of vodka brands in consulting companies specializing in the intellectual property segment were requested. According to the results of this request, it turned out that their databases contain only 55 to 74 records of license agreements according to the criterion "alcoholic beverages and tobacco/non-alcoholic products". According to the results of the analysis of this sample, only 2 records were found that correspond to brands of strong alcoholic beverages – vodka under the brand name of Donald Trump and vodka of Italian production without specifying the brand name. The remaining positions according to these databases are wine and beer products, franchise licenses of chain restaurants, as well as non-alcoholic brands.
Another source on the market size of royalty rates is the statistical collections Licensing Royalty Rates (Wolters Kluwer Law & Business) and Intellectual property: valuation, exploitation, and infringement damages. Cumulative Supplement (Russell L. Parr, Gordon V. Smith). These collections allowed Valrus experts to determine the market range of royalty rates for the trademarks being valued and make a final calculation.
To fully confirm the results obtained, our specialists has also conducted an analysis of judicial practice in terms of disputes regarding royalty rates, which showed the correctness of the approach used to confirm the market level of royalty rates.
Converting the estimated royalty rates into natural indicators was also not a trivial task, since this required a comprehensive analysis of the activities of distilleries that produce products under the valuated trademarks. This work included an analysis of the revenue from the sale of each vodka brand, the volume of products produced and the specifics of its sale as part of the holding and retail chains.
Thus, Valrus experts conducted a comprehensive analysis of market information during such a difficult valuation, which allowed them to perform the work at the highest level.