Lego takeover

Piece by Piece

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The building blocks of success.
  • Why it matters

    Why it matters

    Almost a fifth of earnings at German toy retailers come from Lego sales.

  • Facts

    Facts

    • In 2013, Lego had a 17 percent share of the German toy market, with sales up 4 percent.
    • Toy spending per child in Germany has increased by 30 percent since 2008 to €269 ($333).
    • “The Lego Movie” earned $250 million at the U.S. box office.
  • Audio

    Audio

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Tiny, colored Lego pieces are piling up in playrooms across Germany, thrusting aside teddy bears, dolls and even model trains.

For years, the family-owned firm has enjoyed solid sales in the country. Net revenue is up 4 percent this year, compared to a year ago, and the crucial Christmas season is still going strong. “We are more than satisfied,” said Michael Kehlet, managing director of Lego’s German operations.

Many of his competitors, including Playmobil, Carrera and Mattel, are less content, as they struggle for sales in a low-growth sector. The German Association of Toy Retailers expects sales in the country to increase by only 1 percent this year.

But the good news for German toy retailers is that Lego, based in Billund, Denmark, continues to be right on the mark in keeping up with young tastes year after year – nearly one in every five euros they earn comes from Lego products. In 2013, the company had about 17 percent of the German toy market and expects to grow more this year.

Lego’s key to success is not only selling toys, but also bringing them to life. Since last spring, more than 1.3 million people in Germany alone flocked to theaters to see its first animated film, “The Lego Movie.” In the United States, the film made $250 million at the box office, ranking third among this year’s most successful. The toy collection designed to go along with the movie is selling well.

Lego’s key to success is not only selling toys, but also bringing them to life.

Lego toys continue to be popular not only in Germany, but worldwide. Total sales rose by 11 percent to about €1.5 billion ($1.9 billion) in the first half of 2014, compared with the same period last year. Profits were 14 percent higher than in 2013, at €365 million. More and more Asian customers, in particular, are buying Lego toys.

A comparison with the German toy company Ravensburger, famous for its jigsaw puzzles, shows how deep Lego’s share of the world market is. Lego generates more revenue in six months than rival Ravensburger does in an entire year.

Lego has meanwhile replaced Mattel as the world’s largest toymaker. Unlike the publicly-listed U.S. firm, Lego is family-owned. The main shareholder is Kjeld Kirk Kristiansen, a grandson of the firm’s founder.

Despite its success, Lego hasn’t forgotten the years of crisis when PCs and video games made their way into children’s playrooms. The company rushed into computer games, which proved to be shelf-warmers.

Since then, Lego has chosen to focus on its core expertise – plastic building blocks – and film tie-ins. The company has long made models of characters and space craft from the “Star Wars” science-fiction series, for example, and Mr. Kehlet, has high hopes for the new “Star Wars” epic due to hit movie theaters shortly before the 2015 Christmas holiday season.

As the largest license holder for plastic figures of Luke Skywalker and his fellow space adventurers, Lego plans to bring many new building-block figures to market.


Video: An unofficial Lego remake of the trailer for Star Wars: Episode VII – The Force Awakens.

 

Joachim Hofer covers the high-tech industry and the IT sector as well as the outdoor and recreational industry for Handelsblatt. To contact the author: hofer@handelsblatt.com

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