23 Dec 2014
2014 – A Year for Fun and Games in the European Toy Industry
After several years in the doldrums, 2014 proved a particularly upbeat 12 months for the European toy industry, thanks to Lego, Loom Bands, Frozen, and the World Cup, says John Baulch, Publisher of Toy World in his end-of-year review.
Overall, 2014 proved to be a highly successful year for many in the European toy community. It's the year when just about every one of the major European territories has seen above-inflation increases for the first time in five years. Even the lowest performing market – Spain – is flat rather than in decline.
Assuming December sales match up to expectations, the UK industry is heading for an increase of around 4%, bringing its annual sales to more than £3 billion for the first time. This positive performance is expected to be replicated in Germany, France and Italy. It is, indeed, most welcome after a prolonged period of stagnation for the trade.
So what is behind this upturn? In short, it's a perfect storm of improving economic conditions, coupled with some hot new products. Although Europe has by no means fully shaken off its burden of austerity, at least there have been some discernible improvements in consumer confidence. It is the products, though, that have essentially driven the rise in sales.
Although many toy sectors have performed well in 2014, there have been a number of truly standout performers:
Lego – Fuelled by the success of The Lego Movie, Lego has enjoyed a triumphant year. Movies based on toys have sometimes been criticised for being too trite and little more than advertisements for the products they are based on, but The Lego Movie was completely different. Smart, funny, knowing, not afraid to send itself up, it was a critical and commercial smash, appealing to both children and their parents. Stellar toy sales followed, and, in the UK at least, the construction toy category is now worth more than the action figure and vehicles categories combined.
Loom Bands – A successful craze is hugely valuable to the toy trade and, with Loom Bands, we saw the most popular craze the industry has enjoyed for some time. Spring and summer saw Loom Bands sweep the board at retail, generating levels of profit which were amazing for such a low-cost item. Somewhat inevitably, the craze burned out quickly, but during its six-month hot period, a truly immense volume of product was sold.
World Cup Merchandise – The football World Cup traditionally produces strong sales, but the 2014 event seemed to surpass expectations. In June, World Cup merchandise accounted for a quarter of all unit sales in the UK, with the surge driven mainly by Panini stickers.
Frozen – A strong licence is as – if not more – valuable than a successful craze for the toy market. Frozen is quite possibly the strongest licence the industry has ever seen, all the more remarkable when you consider that Disney had absolutely no idea how popular it would be prior to the release of the movie. Despite Disney being oblivious to the film's undoubted charms, consumers certainly weren't. It was classic Disney, with great characters, beautiful animation and a wonderful soundtrack. A year after the film's release, merchandise is still in short supply, which is almost unheard of in licensing circles. I have little doubt it will continue to be hugely successful for years to come.
Honorary mention should also go to Minecraft, which has enjoyed a fantastic year, and wearable technology (such as VTech's Kidizoom Smart Watch and LeapFrog's LeapBand), a category that illustrates just how well the toy trade appropriates the latest trends from the technology sector and turns them into hugely successful toys.
This also has been a year when acquisitions by major toy companies were back on the agenda. Mattel's acquisition of Mega Brands for a cool US$460m was a throwback to the heady days of the 1980s and 1990s, when the global giants of the toy world predominantly grew through takeovers and mergers with rival toy companies. Several months later, toys and games giant Vivid Imaginations finalised a merger deal with the UK's leading games company Drumond Park, continuing the trend of the big getting bigger.
Elsewhere, the usual toy market challenges remain. For suppliers, maintaining profitability against a backdrop of rising manufacturing costs and the reluctance of retailers to accept price rises is a continuing issue. Asia's production capacity issues and manufacturing lead times, meanwhile, exacerbate the situation.
For retailers, the battle between bricks-and-mortar stores and online shopping operations has been as fierce as ever. Discount retailers have continued to grow across Europe, a development that is having a significant impact on a number of retail channels – especially the grocery sector – and quite possibly forever changing consumer perceptions on pricing.
Looking ahead to 2015, falling oil prices offer brief respite, but the growth of the domestic Chinese market will almost certainly place further strain on Asia's manufacturing situation. Perhaps the largest single factor that will affect the European toy market, though, is the return of consumer confidence. The feeling of optimism may be fragile, but there is a genuine belief that it is slowly, but surely, returning. Intangible though it may be, it is crucial to the success of the toy market. The toy community is undoubtedly one which thrives on positivity.
John Baulch is the Publisher of 'Toy World',
the leading trade title for the UK and European toy trade