Expanding Horizons: The Evolution of Calego from Handbags to Licensing Leader

Winning Edge

The company began its existence as the Canadian handbag company Capitol Leather Goods. Over the last 25 years, it has evolved into a Canadian licensing leader that specializes in children’s licensed and branded backpacks, bags and accessories.

Over time, the company moved away from manufacturing handbags to importing products. Its first licensed product was a backpack featuring The California Raisins, which led to a progression toward more bag lines and eventually into hard lines.

“We call ourselves a consumer products company because we are into so much more than just backpacks and bags now,” Rapps says. “Wherever we can find a niche, that is where we will go.”

Calego’s success is can be traced to its commitment to the development of innovative product lines that feature high-quality, leading-edge products. In addition, the company is focused on building a portfolio of licenses that includes only the best properties. Among the licenses and brands that Calego works with are Hello Kitty, Dora the Explorer, iFly, Swiss Athletics, Skylanders, Angry Birds, Barbie and Monster High.

“After many years of doing business, our reputation means that just about every licensor in North America knows us,” Rapps says. “They get in touch with us because they know we have a long track record and will do what we say. It can be hard to analyze what will be the winners, but we have a huge stable of licenses. We currently have about 30 because we believe in keeping many irons in the fire.”

Although backpacks continue to be Calego’s top item, its product portfolio has changed a great deal in the last few years. Hard luggage, dollhouses and blanket buddies are categories that the company wasn’t involved in three years ago. Today, however, these items represent about 35 percent of Calego’s sales, and that is growing rapidly.

“We put money into the development of those areas where we see a niche and an opportunity for growth,” Rapps says.

Improvement Efforts

To help the company reap the benefits of its opportunities, Calego continues to invest in its capabilities. One area of investment is Calego’s 10-person art department. This creative team is responsible for the ideas and concepts that eventually turn into the products, and they have to figure out how to devise products that will make emotional connections with consumers. For the art department to do its best work, it needs to have the latest tools.

“Technology is a No. 1 priority for us,” Rapps says. “Our art department is cutting-edge. As soon as we can upgrade to newer Mac products, we do.”

The company also has tight controls over manufacturing. Many years ago, Calego did its own manufacturing. Today, it outsources manufacturing to Asia. The company has a senior vice president of Asian operations who lives in China, understands manufacturing and is an expert in printing. The company works with a limited number of factories to maintain quality.

“We look for factories that understand our product lines and operate as a Western-based company,” Rapps says. “Most factories we work with have worked with us for anywhere from five to 20 years.”

Calego is well aware of the fact that the retail world has changed in recent years, and that it will continue to face challenges such as limited shelf space, the growth of Internet retailing and limits to consumer spending. About 70 percent of the company’s products are sold in Canada, with 15 percent heading to the United States and 15 percent to Europe. The company feels it has opportunities for growth in America, and it is striving to carve out a place for its products with major, minor and independent retailers across North America.

“We bring in goods as efficiently as we can and will have products brought directly to the Canadian or U.S. market as often as possible,” Rapps says. “We will do whatever is convenient for the retailer. We need to make it easier for retailers to put products on shelves and for consumers to buy the products, because innovative processes will mean higher retail sales.”

Unfortunately, the retail environment is likely to continue to be a tough fight for the foreseeable future. But Calego believes it has an advantage when it comes to value. Consumers want great value for their dollar, and retailers want products with value on their shelves. Calego feels that it has that value.

“We will always keep our eyes on Europe and North America to see what trends are coming, and to see what we can grow at retail internally in the company,” Rapps says. “We will do the right thing for retailer and consumer because we stress quality and value.”