Indian Toy Manufacturing: 2017 Update

INDIAN TOY MANUFACTURING: 2017 UPDATE

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