Leading industry journal covering the global toy industry including practical 'how to' articles, research, industry reports and insights.

24 July 2017 ~ 0 Comments

Are Toys Still Relevant For Today’s Kids? Erm Yes, Rather!

ARE TOYS STILL RELEVANT FOR TODAY’S KIDS? ERM YES, RATHER!

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Those outside the toy industry often seem to ask whether toys are still relevant to ‘Generation ipad’. Today’s children have so many more media to consumer and engage with than previous generations, that they don’t seem to spend as long with their toys.

Yet they tend to have many more than previous generations. Each item is played with for less time on average, but consumption/purchase/accumulation of toys has definitely increased over time. So how do we explain this? Kids are playing with toys less but we seem to be selling more toys to them – how is that?

Well, there are two compelling reasons for this:

TOY STOCKPILING – I’ve written previously that retail pricepoints for toys have often not changed since the ’80s. if you go back & look at old TV ads, you’ll often find that the same product selling 30 years ago is still selling at the same prciepoint today – despite 30 years of inflation. As a result, traditional toys i.e. action figures, fashion dolls, board games etc., have become (over time) more or less throwaway items. $20 is not nothing, but it certainly is not worth what it was 30 years ago. $10 is a lunch or a few coffees in Starbucks. So it has become easier to buy toys as throwaway gifts, therefore whether kids are using toys or not, toys are now an obvious gift for kids of a certain age. When going to another child’s party, a toy is a typical gift now, so if 10 or 20 kids attend, that’s 10 or 20 toys sold. Most of these may end up at the bottom of the toy chest, but the accessibility of toy pricepoints today makes purchase much easier/likely versus the past.

THE PURCHASE DYNAMIC – people buy stuff for all kinds of reasons. Their motivations are not always the same as our anticipated selling points. I’ve always felt that’s something to embrace as toy company, not to worry about – the point is to sell appealing saleable products & to achieve commercial success while delivering worthwhile products to people. If they buy them but don’t use them, for sure that’s kind of wasteful and not going to win many friends with environmentalists/anti-consumptionists, but the reality is we all do that! How many people reading this have bought clothes they never really wore, or DVDs they only watched once, or books they didn’t read etc? The clear answer is going to be ‘many’.

The toy purchase dynamic is usually about a parent (or grand parent) and the child. Aside from party gifting or other purchase dynamics, the biggest volume and $amount of toys are bought by parents for their own kids. Now being a modern parent is challenging in several ways, not least of which is trying to leverage/crowbar your child away from tablet devices! Kids will sit and play on/passively watch content on tablets for hours if left to their own devices, which we all know is unlikely to be very good for them. So toys today are hugely relevant and important to parents who want their kids to get off screens. Today parents use toys as much as a screen time antidote as they do to provide a primary play pattern. For sure you will get those kids who are obsessed with Lego, or the latest hot collectible toy brand, but we in the toy industry are selling more and more to parents due to the compulsion to get kids off screens.

There have always been some toy categories which were more parentally appealing – board games, construction, creative play etc., but today toys of all kinds are becoming increasingly popular with parents.

Children by the way don’t necessarily want toys any less – if you watch kids watching kids TV channels, you will still see that TV advertising for toys makes them really want the toys featured – just that they are more addicted to/find screen time more compelling (in general/overall), and therefore spend more time on screens if given the choice.

This is indirectly a good thing for the toy industry overall, as we are ever more the parents preferred activity, while still being desired by kids.

So toys are ever more relevant, even if overall kids play with them less.

 

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading toy expert consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry, find the right toy & game factories and to consumer research test their products with kids and parents. Steve is an acknowledged toy expert, and regularly advises investment firms on Hasbro, Mattel & other major toy companies via leading expert networks including Gerson Lehman & others.

18 July 2017 ~ 0 Comments

Transformers 5 Disappoints: What Next For Hasbro?

TRANSFORMERS 5 DISAPPOINTS (?)…WHAT NEXT FOR HASBRO?

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It has been widely reported that Hasbro & their movie studio partners have a 10 year map for the Transformers franchise. This includes numerous additional Transformers films, plus an array of spin off movies. This should not be surprising, as this is increasingly the way blockbuster movies are going – extended franchises going ever deeper into each character’s story/background. X Men would be the most obvious example – with 10 (big box office earning) movies in the franchise since 2000, total box office gross of over $5bn, with a per movie average of over $500m.

According to media reports, Transformers 5 has been a major disappointment at the box office & in terms of critical reception. Yet the movie is still set to gross well in excess of $500m against a production budget of around $220m, and could even reach $600m at the global box office, putting it on a par with the franchise average of the X Men series. Admittedly this looks like being the lowest box office gross for the Transformers franchise since the 2007 movie, but $500-600m is hardly a disaster. It may be significantly less than expectations, and significantly less than the 2 previous movies which grossed over $2.2bn between them, but likely to be about on a par with X-Men Apocalypse, the last full ensemble X-Men movie which grossed c. $540m in 2016.

The question for Hasbro & their movie partners is whether Transformers 5 failing to live up to expectations is a reason to question the strategy/volume of movies & spinoffs planned going forward or not. As an acknowledged Hasbro expert (I worked for Hasbro for 6 years in the noughties & regularly advise investment companies on Hasbro’s prospects & outlook), I just can’t see how that would be the case for several reasons:

Hasbro & the movie people can’t afford for Transformers to fade from the movie scene, so you can be sure many of the top minds in the movie business will be on it to ensure future success.

While much has been made of Transformers 5 suffering from bad review/poor critical reception, the reality is that aside from the 1st in the modern franchise series in 2007, none of the Transformers movies have reviewed that well.

Spin offs allow franchises to have more frequent movies with less ‘franchise fatigue’ effect, as the story while being linked to the main narrative is different, the action is different, setting etc – for instance The Wolverine (2013) is a great example of a spin off which is unlikely to cause franchise fatigue – the setting in modern day Japan, the Yakuza, the particular ‘baddies’ etc. all significantly differentiate the movie from the main franchise, despite the lead character being one of the lead characters in the broader ensemble. So I would not expect the disappointment of Transformers 5 to have any impact on the forthcoming Bumblebee spin off (aside from much scrutiny from those at the top) to ensure the movie is a hit.

Licensing & merchandising is the big profit driver with this kind of franchise – the reality is that the movie has as much space on shelf as any other brand around the launch date. While this is outside Q4 peak season for toy sales, that means the licensed products almost sell themselves due to the noise around the release & the very prominent in store presence. Maybe this will wane more quickly in the run up to peak season than it might have done if Transformers 5 had been a $1bn grossing movie, but nevetheless, a disappointing movie doesn’t stop kids loving the concept, the characters and the past movies (these past installments of a franchise have never been more accessible with Netflix & other content platforms prevalent today). For sure, there’s likely to be a few less kids recruited into the franchise from Transformers 5, which has to be a concern, as kids are generally in the toy space for this kind of franchise for around 3-4 years max before moving on…yet there is the Bumblebee spin off movie in 2018, which is likely to do at least $300-500m at the box office, meaning the cumulative audience for both Transformers 5 & Bumblebee should be not far off the past smash hit sequels in the franchise. Therefore I see any financial impact as being short term – the franchise will keep going strong.

So, in conclusion, Transformers 5 may have disappointed based on sky high expectations, but $500m-600m is hardly a disaster, and still puts this movie on a par with the X Men series average box office.

N.B. All box office numbers quoted in this article are taken from: www.the-numbers.com

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading toy expert consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry, find the right toy & game factories and to consumer research test their products with kids and parents. Steve is an acknowledged Hasbro expert, and regularly advises investment firms on Hasbro’s strategy & outlook via leading expert networks including Gerson Lehman & others.

 

29 June 2017 ~ 0 Comments

MID 2018 – TOY INDUSTRY OUTLOOK

MID 2018 – TOY INDUSTRY OUTLOOK

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Around about this time of year toy companies begin to have a fairly clear idea (+/-10%) of how 2018 is going to pan out financially. Some will be right now readying the red pen next to their org charts as 2018 pans out tougher than anticipated. Some will be fighting desperately to avoid getting carried away with a runaway success of a year (batten down the hatches – can next year possibly be as good?). Most will be somewhere in between the two extremes of success and lack of success.

So what is the outlook from this mid year vantage point for the toy industry as a whole? Well, there are numerous trends & activities to identify:

Global toy industry set to grow a few percentage points in 2018 – our analysis suggests a single figure growth position for the global toy market in 2018.

Licensed toys are set for yet another successful year – as Hollywood continues to churn out multiple (dare I say countless!) blockbuster toyetic movies, this year seems set to continue the trend. The fact that the toy industry has seen significant growth in the last few years appears to be primarily due to fantastically consistent and frequent franchise management on behalf of Hollywood. 2018 is (at the time of writing) slated to be another strong year, and 2019 is if anything looking even better with Toy Story 4 & a Minecraft movie joining the plethora of super heroes of all shapes, types & genders.

These are interesting times among the major global toy companies – I can’t remember a more interesting time in terms of the competitive position & status of our major leading toy companies. Lego has moved from being just a toy company to also being a kids entertainment company – with 2 Lego movies hitting global box offices in 2017 and with much more to come. Hasbro is in an interesting position having been hugely successful with the content ownership strategy of the last ten years or so, the question now though perhaps is what happens next…how do they keep that massive momentum going? Mattel has not had a great few years truth be told, with pressure to modernise corporate strategy, pressures on traditional cash cows like Barbie and a significant depreciation in stock market value – the (comparatively) new CEO Margaret Georgiadis (ex-Google) seems like the right person to help Mattel embrace the 21st century media & online worlds, but we’re yet to see concrete steps in that direction from Mattel. And finally, with regard to Spin Master, what an amazing last few years they have had – and I struggle to see how they won’t continue to grow for the next few years at least – I see their key growwth advantage being acquisitions in the coming years, because Hasbro & Mattel need deals to the value of at least several hundreds of millions of $USD to make a deal substantial. Spin Master can scoop up the next level down of acquisitions at the rate of a few per year with little bid competition and thus continue to grow.

Fidget Spinners likely to fade away (?) – most industry veterans I have spoken to anticipate finger spinners will burn bright and quickly before fading away. Typically such fads die when the major western markets hit school summer vacation season, and the viral/word of mouth effect of the school playground fades away for a few months. We seem to get one of these super fads every couple of years, and for 2017, this was certainly it. I’ve seen various estimates as to the likely total sales value of fidget spinners globally…I’m not going to comment here, as numerous financial companies read these articles & lose speculation is not helpful to such institutions…bit nevertheless bearing in mind the total annual value of the toy market varies (from data source to data source) between around $80-100 billion, the reality is that fidget spinners are unlikely to make that significant an impact on total 2017 toy market value.

Manufacturing diversification = work in progress – as price inflation has been an ongoing issue in China, the heartland of toy manufacturing, the toy industry as a whole has been assessing the various alternatives to China’s huge capacity. Based on my experience in helping toy companies with alternative sourcing, the reality still remains that China dominates global toy production capacity still, and will do for years to come. However, we have seen some of our clients shift a proportion of their toy manufacturing to countries such as India, Vietnam, Thailand etc., and so far we’ve seen our customers save around $4m USD p.a. Peanuts in the grand scheme of things, but not chump change either!

Emerging/non-traditional markets still the focus – for as long as I’ve been in the toy business (since the late ’90s), toy companies have chased the glitzy exotic upside offered by ’emerging’ or non-traditional markets. The reality historically has tended to be that focus on the major western markets has yielded the best results. However, in terms of market growth potential, China, India and other such non-traditional markets are growing at a pace beyond what is likely or even possible in very mature toy markets like the USA, UK & Western Europe.

I’ll be back in a few months time to take a first look at how 2019 is likely to pan out for the global toy market.

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry, find the right toy & game factories and to consumer research test their products with kids and parents.

28 June 2017 ~ 0 Comments

Product Launch Timings – When Is The Best Time?

PRODUCT LAUNCH TIMINGS – WHEN IS THE BEST TIME?

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We recently wrote an article for Spielwarenmesse.de – the official blog of the Spielwarenmesse/Nuremberg International Toy Fair looking at when is the right time of year to launch new products. Clearly the industry has the ‘standard’ timings of 1st half & 2nd half of the year, but this article discusses other options in more detail:

http://www.spielwarenmesse.de/magazine/article-detail/strategy-for-launching-new-toys/?L=1&cHash=3c5dbb839f2a28fcfa3af4e9cc7f19a4

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy companies around the world, which helps people & companies to get ahead in the toy industry, find the right toy & game factories and to consumer research test their products with kids and parents.

06 June 2017 ~ 0 Comments

Toy Market USA: An Inside Look…

TOY MARKET USA: AN INSIDE LOOK

We recently supplied on the American toy market to Spielwarenmesse.de, the official blog of the Spielwarenmesse-Nuremberg International Toy Fair.

The article looks at the largest toy market in the world & how best to approach it:

http://www.spielwarenmesse.de/magazine/article-detail/advice-for-the-us-toy-market/?L=1&cHash=9fc1d0d2bc5adcff49c50702ee7b7540

06 June 2017 ~ 0 Comments

Indian Toy Manufacturing – Do You Believe The Hype?

INDIAN TOY MANUFACTURING – DO YOU BELIEVE THE HYPE?

There has been much talk & speculation of late that India could be the ‘new China’ for toy manufacturing.

We recently posted this article looking at the truth behind the hype:

https://www.toyteamindia.com/single-post/2017/06/02/Indian-Toy-Manufacturing—Believe-The-Hype

06 June 2017 ~ 0 Comments

Toy Clearance: The Art Of!

TOY CLEARANCE: THE ART OF!

We thought you mind the following article on toy clearance interesting.

There’s no doubt that toy companies who fail to closeout stock in a timely fashion are more likely to suffer cashflow issues. Read more in this article:

http://www.kidsbrandinsight.com/?p=404

06 March 2017 ~ 0 Comments

Indian Toy Manufacturing: 2017 Update

INDIAN TOY MANUFACTURING: 2017 UPDATE

Steven Reece

It has been a little while since I last wrote on Indian toy manufacturing. In the meantime I have travelled to/in India numerous times viewing major toy factories, speaking to indian toy factory owners/management teams & touring toy companies around some of these facilities.

This increasingly important toy manufacturing hub has only grown in importance, stature & scope of activity since my last article on this. I now also have personal experience to reflect on. While not every product will be cheaper from Indian factories, I would say that around 60% of products I have seen costed have been cheaper than existing vendors in other countries. Moreover, I have seen first hand on these products toy companies saving anywhere from a few percent up to as much as 15% on some products.

I previously outlined why I believe only India can offer a true long term alternative to China in terms of being a major global toy manufacturing hub. As China looks to evolve it’s economy over the next decade, and as it’s increasingly affluent population move further away from low end production line jobs, India appears to be the only country set to take up the slack. With a near identical population to China, India is the only other country with anything like the scale/population to fill capacity for the toy industry (& other consumer product industries).

India also has a vast wealth of highly educated, experienced engineers, product designers and process managers, with expertise in injection moulded plastic & other core toy manufacturing competencies due to the strength of India’s automotive manufacturing sector.

Back around 2015, Hasbro hit the headlines via a Wall Street Journal article announcing they had shifted a significant amount of plastic toy production to India. But clearly that was just the beginning of the current trend towards Indian toy manufacturing. It was also the beginning of my own exploratory adventure.

Two years on, and there are some clear learning and updates which you may find interesting:

  1. There are a limited number of very high end toy factories in India – at the time of writing this (Feb 2017) there are around half a dozen or so toy factories in India at the top end. These factories are supplying the major corporate toy companies and their retail customers. Needless to say, these companies are in the perhaps envious position of having more demand than they can immediately supply. If we compare China where there are an estimated 5,000-10,000 toy factories, we can see that India still has a long way to go to even secure a fraction of market share versus China toy production. However, a success story will always attract others, and I would be surprised if the number of high end toy factories in India doesn’t start to grow from 2017 onwards.
  2. Indian toy factories can more easily pass ethical audits etc – due to local labour laws which favour/protect the employee more than in some countries, Indian toy factories tend to pass ethical/retailer/licensor audits without too much trouble.
  3. The standard/level of engineering & lean manufacturing processes is very high – you may be surprised to hear that India is a MAJOR automotive manufacturing/engineering hub. India was recently estimated to manufacture c. 24m vehicles per year. This puts India in the world’s Top 5 biggest automotive manufacturing countries by units produced. Moreover, these cars are not all being made for the Indian domestic market – they are also being exported – with $1.2bn dollars of car exports to the USA for instance, Indian manufactured cars have over 8% market share in the USA. Brands with manufacturing plants in India include: JCB, Isuzu, Honda, Harley Davidson, John Deere, Honda, Toyota, Volvo, Ford, Mitsubishi, Mercedes, BMW etc. These major global companies employ cutting edge engineering in order to profitably & safely engineer & produce vehicles – which may have over ten thousand individual components per model. With c. 25m people employed in the automotive sector in India, there is a plethora of highly trained engineering & production people. Cars feature injection moulded plastic parts, simple & complex electronics, lights, sounds, switches etc. – all competencies important to the toy industry. India already has the capability to manufacture toys, the only question is how many of those currently producing cars/car parts will turn to toy manufacturing in the next few years.
  4. India is the only toy manufacturing country in the world with enough trained people to compare with China – India & China have a similar total population i.e. c. 1.3-1.4bn people. Whereas the toy industry has looked to countries such as Vietnam & Thailand for cheaper labour, these markets have nowhere near the scale of workforce as India does.
  5. Other consumer product categories are already manufacturing at large scale in India – other product categories such as textiles & pharmaceuticals already manufacture & ship on a large scale from India. Walmart for instance have surprisingly established infrastructure already in India, and so it is not such a leap for them to also purchase toys from India. In fact I know of several toy companies shipping large quantities of toys direct to Walmart, Target, Carrefour, Argos etc from Indian toy factories.
  6. Other toy companies have been through the learning curve already – undoubtedly there is a learning curve when factories start working with new product categories/standards/customer types. However, at this point, 2 years after Hasbro’s big move to India was made public knowledge, pretty much anything that needs to be learned/problem solved has been resolved. For sure, there are always problems/challenges to resolve in manufacturing, but at this stage these are no more in India then they would be anywhere else based on my experience.
  7. The infrastructure in India is more effective than might be thought – there is no doubt that India has a long way to go to create infrastructure to rival other major economies. In fact while talking to toy companies about India I have heard all kinds of horror stories, most of whichthough could not be traced back to an individual or company who had actually experienced the mishap in question. One of the ICTI audited factories I have worked with in India has shipped thousands of containers of toy products without any significant issue/hold up. The reality is that the automotive, textile & pharmaceutical sectors all have their own commercial deadlines and operations that would not work if things never arrived from India. In fact, for that matter, Hasbro who manufacture large quantities of Nerf products in India, have the same promotional/retail windows as any other toy companies, and due to their global distribution base/media planning have even less tolerance for delays/slippages than other toy companies. So based on my own experience I believe the concerns about the infrastructure in India to be hugely exaggerated. There are numerous bureaucratic hoops to jump through in India, Indian officials tend to be sticklers for documentation/ticking all the boxes, but this is not that different to many other countries out there. A further point to understand is that India is not a single homogenous entity – as recently as partition in the 1940’s there were dozens of separate states/regions/’principalities’. So you don’t get the same standards/infrastructure everywhere. However, if you find a toy factory near major manufacturing hubs used by global companies in other industries & near major ports, my experience to date would suggest you won’t encounter any more issues in India vs anywhere else. That being said if you find a factory 5oo miles into the middle of nowhere with no roads & a 20 hour drive to the port, don’t be surprised if that one has less reliable delivery!
  8. You can find top level packaging for toys in India – I have toured round several packaging factories in India (in different states/regions of the country), and have been very pleasantly surprised by the high quality of production, machinery & personnel – leading to really good quality packaging. Two plants in particular I visited are as good as any print/packaging factory I have been to – these plants, aside from supplying the toy industry also supply major FMCG brands such as Nestle, Cadbury, liquor brands, Procter & Gamble etc.
  9. India is nearer/takes less shipping time to Europe & the East Coast of the USA – sourcing from India saves shipping time for companies who ship to Europe and/or the East coast of the USA, although it does take a little longer to West coast USA.
  10. Indian business people/engineers are routinely fluent in English – English is the international language of business, and due to the British history in India, English language is taught to a high level in India. Most professional Indian people will speak fairly good English…albeit with a strong Indian accent sometimes! Generally though, communication with Indian toy factories is good because nearly everyone you would encounter on the customer facing side will have good English.

Before ending this article, I must declare a couple of points which don’t exactly make me impartial on this topic: 1. I have introduced over 40 toy companies to Indian toy factories & in some way my company has been compensated for this work, so you could say I have a vested interest 2. I love India…! What I haven’t captured above is the vibrancy of India, it is an exciting & exotic place to visit.

Hopefully you find this relook at Indian toy manufacturers interesting & useful, if you would like to find out more about the toy factories we work with in India, please just drop us a line via the website address below…

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy companies around the world, which helps companies with product reviews & awards, find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world

29 November 2016 ~ 0 Comments

A To Z Of The Toy Industry – G Is For Games!

A TO Z OF THE TOY INDUSTRY – G IS FOR GAMES

Steven Reece

The board games category is a longstanding pillar of the toy industry. In fact, board games go back millennia – ancient civilisations were found to have played table based games.

This category delivers a disproportionate amount of longevity & stability to toy aisles across retail. While you might find most toys on shelf are new in any particular year, board game shelves usually feature more carry forward products than new launches. So while retailers every so often feel the need to cut shelf space for board games, it typically returns over time as it is such a solid, stable component of a toy department.

From a consumer view, if you ask consumers what they think of board games (which I have done – at least 60 or 70 focus groups with kids, families and adults asking them about board games), you tend to get an overwhelmingly positive response. Adults remember the board games they played when they were kids with a rosy glow of nostalgia. Kids tend to relish the opportunity to show off, compete and hook some of mum and dads attention and precious time.

Business wise, board games have a couple of major advantages versus some other toy categories. Firstly, as the major component tends to be cardboard based components, which derive from trees/wood which are comparatively cheap, board games tend to offer healthy margins to publishers, retailers and factories alike. Secondly, there is usually less tooling investment overall for a board games company versus a toy company which significantly reduces product launch risk. Thirdly, because good board games tend to grow year on year due to word of mouth & recommendation, they require less marketing expenditure (overall as a category) and tend to carry forward year on year if they are any good meaning they tend to be higher profit than many toy categories.

In recent times, the board games category has become somewhat trendy again, due in part to the effect of crowd funding platforms like Kickstarter which encourage more original and risque games versus the traditional route to market.

One prediction I can make with very little risk of being wrong is that regardless of what new technology lies round the corner, the board games category will be here forever!

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading Consultancy to toy companies around the world, which helps companies with product reviews & awards, find the right toy & game factories, consumer research test their products with kids and parents and secure export distribution/market entry around the world.

23 November 2016 ~ 0 Comments

A To Z Of The Toy Industry – F Is For Fun!

A TO Z OF THE TOY INDUSTRY – F IS FOR FUN!

There are probably more lucrative industries out there.

There are probably quicker moving, more exciting, ever changing industries out there.

But there aren’t many other industries which are as much fun as the toy business!

This is a product driven industry – it’s all about the next new product launches or those classic carry forward products. And these products are great fun! While we might no longer be children ourselves, many people in the toy industry retain a strong ‘inner child’ which makes the industry continuously enjoyable to be a part of.

Of course we have our fair share of grind – retailer terms negotiations, financing, factory visits etc. But spare a thought for those poor souls in more mundane industries – imagine being the product development manager or marketing manager on tea bags, plastic tupperware or matchsticks!

The reality is that fun is a major driver of the toy industry. We piggy back the natural instinct of children to play – that is right at the heart of stimulating demand for our products.