PERSPECTIVES: “Construction Craze” Emerges at the American International Toy Fair

Utku Tansel, head of toys and games research at Euromonitor International, writes about the global sales growth of the construction toy category and the popularity of building toys among value-conscious parents.

March 22, 2013 | Euromonitor International attended the American International Toy Fair held in New York City from 10-13 February 2013. As the show celebrates its 110th birthday, it is the largest toy event held in the Western Hemisphere bringing together more than 1,000 exhibitors to showcase an estimated 150,000 toy and entertainment products from countries around the globe.

Among others, one of the key trends noted at the fair was the phenomenal performance of the construction category. Construction toys achieved global value sales growth of 14% in 2011, making it the best performing category compared to overall traditional toys and games’ 4% value growth in the same year.  Though our 2012 numbers are still being finalized, double digit growth for the category would not be a surprise again in 2012. 

As a result, as highlighted by the TIA (Toy Industry Association) during its annual toy trends tea presentation, many manufacturers are increasingly diversifying and expanding their building sets product lines while other companies, who have not previously had any products in the category, are eager to get a foothold.

Construction toys benefits from a variety of factors

As cash-strapped parents increasingly seek play value alongside opting for products that can stimulate a child’s imagination and creativity, construction has emerged as the biggest beneficiary in toys in recent years. Continuing innovation and the strength of brands and licences both contributed to the category’s unmatched performance in recent years.

LEGO’s dominant position in the category is unquestionable, with the company accounting for more than 61% of global value sales in 2011. Its main global competitor is Mega Brands with its Mega Bloks range, which typically ranks second in the construction category in Western markets. At a global level, Mega Brands’ value share remained below 6%, way behind that of LEGO. Both Meccano and K’NEX are other well-established players in the category.

LEGO’s wide range of popular licences keeps appeal high across demographics and safeguards against age compression. By keeping such wide range, the company makes sure there is a new LEGO for each age bracket as the children mature and also safeguard against age compression. Star Wars, Marvel (Spider-Man, Thor, Hulk, Iron Man, Captain America, Wolverine), DC Universe (Batman, Superman), Disney Princess, Lord of the Rings, The Hobbit and Teenage Mutant Ninja Turtles are some of the key licenses the company holds. LEGO has also been very successful with its own properties. The new Ninjago line performed extremely well in 2012 and this was joined by Chima range beginning of 2013 with an extensive marketing and advertising support.

Mattel, Hasbro and Mega Brands to Challenge LEGO

In 2012, LEGO announced its Friends range targeting primarily girls and it quickly became one of the most successful product launches helping the firm to register 25% revenue growth in the same year.

The move brought LEGO in more direct competition with Mattel and MGA Entertainment in 2012. A large portion of Mattel’s product range is aimed at girls, with its Barbie and Monster High brands, and while LEGO’s new range is different from dolls, it is still likely to compete for spending on girls toys. LEGO Friends was even dubbed as “LEGO meets Barbie” by some critiques in the industry when it was launched.

However, as it was clearly showcased at the fair; Mattel and Mega Brands are now fighting back and are ready to take on LEGO in this demographic with their new partnership which brings Mega Bloks Barbie range into life. Although it is not even near LEGO Friends’ wide collection, the product line certainly has the potential to expand to challenge LEGO this year. Targeting boys primarily, Mega Brands also launched its new Mega Bloks Hot Wheels line at the American Toy Fair.   

Mega Brands’ brand new strategy to carry popular video games properties into traditional toys with its Mega Bloks World of Warcraft and Skylanders could also potentially earn the company substantial revenue taking share from LEGO or perhaps helping to expand the category in 2013. 

Previously, LEGO’s entry in games and puzzles had prompted Hasbro, which derives more than a quarter of its income from games and puzzles, to respond by launching the Kre-O line of construction toys in 2011. Hasbro did not pay particular attention to its Kre-O line in 2012 and just had a handful of products within the range. However, having seen the growth and the popularity of construction, the company invested heavily in the category and expanded its portfolio to include popular J.I. Joe property in 2013.   

Construction toys outperformed overall traditional toys and games by a large margin in the past a few years. The category is projected to continue to drive global toy sales, recording a 6.5% CAGR over 2011-2016, almost double the growth rate of overall traditional toys and games over the same period. Our recent trip to New York confirmed that having seen the potential, many players are keen to cash in and make sure that they have their piece from the bonanza. The competition will only get more fierce.