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Lego Announces Annual Results – Analysing What’s Going On With Lego

Lego Announces Annual Results – Analysing What’s Going On With Lego

As financial results season draws to close, there was one big player yet to report how 2020 panned out for them – Lego. Even though they don’t really have to report very much in terms of their annual results (because they are a privately owned company), there were a few big reveals in their 2020 full year results which merit some thought and consideration:

  1. Revenues were up double digits in 2020

This is perhaps the least surprising part of the announcement from Lego. We already knew that toys delivering parent approved play patterns were tending to be up considerably year on year. Lego reported revenues increased by 13%, with consumer sales up 21%.  So, Lego did well out of locked down families just like many other parentally approved toy brands.

 

  1. The Digital space is a major focus

Lego are firmly planted in both the physical and digital worlds these days. This announcement made clear just how important digital experiences are to Lego, both in terms of integration with Physical products (i.e. the best-selling new release was Super Mario Lego featuring an App integrated into the play experience) but also in terms of delivering entertaining, compelling and sales creating online shopping experiences. Lego are in the process of recruiting teams of new people to help them to expand and deliver their digital visions.

 

  1. Lego’s promise to produce bricks made from fully sustainable materials by 2020 is a strong and financially committed goal

Lego has committed $400m USD over 3 years to developing sustainability initiatives, including developing sustainable plastic alternatives which can be durable in the same way as plastic Lego can be, using paper bags for instructions and parts versus plastic and more. For this Lego should be applauded. Perhaps this is the benefit of being privately owned, because it would be hard for stock market listed companies to earmark such a large amount of money towards something offering no clear short term payback.

 

  1. Lego has a hefty product development churn each year, but this is less wasteful than it may appear to be

One of the most surprising parts of Lego’s announcement was that 55% of the product portfolio for 2020 was new! Typically, the toy business sees around 60-70% of toys on sale being new each year, so clearly Lego is ahead of the crowd in this regard, but at first glance it is perhaps surprising that they don’t manage to keep sets in the market for longer. The reality though is that Lego’s unique parts system means that while the theme, imagery on the box and instructions may be different on each ‘new’ set, the vast majority of the pieces inside are used in numerous other products.

 

  1. Lego is growing their retail portfolio, especially in China

Lego now has nearly 700 stores worldwide, with a whopping 250 of them in China. Because China’s consumer culture is relatively new, Lego clearly feel the need to find ways to engage with Chinese consumers to ensure the brand has just as prominent a position in the world’s 2nd biggest toy market going forward as it does in pretty much every other country in the world!

 

  1. Lego’s top selling themes in 2020 are unsurprising

If you had to guess which Lego themes would be most popular every year, most of the time we suspect the answers would be at least partly the same: Lego City, Lego Star Wars, Lego Friends, Lego Classic & Lego Technic are all well-established sub-brands based on a deep understanding of the target consumer base for each. This consumer segmentation is one of the most successful features of Lego’s brand strategy and is something many toy companies could learn from.

 

There are very few toy products or brands which manage to be loved by parents and loved by kids alike in the same way as Lego is. Lego is in the end just one brand, but within that brand and all the brand extensions and sub-brands, Lego has enough to be the biggest toy company in the world, and looks set for future growth.

 

We often use our analysis of the reasons for Lego’s success in our Consulting with toy companies. We have consulted with more than 100 toy & game companies and use our knowledge of Lego and many other successful toy brands and products to help up and coming toy companies raise their game. For more information on what we do and how we help: www.KidsBrandInsight.com/services

Have you listened to our Playing At Business podcast? We analyse key product categories in the toy busines, discuss key trends and interview amazing people from across the world of toys. To find out more: www.PlayingAtBusiness.com