Euromonitor’s Robert Porter explores the potential ramifications of Mattel’s acquisition of Mega Brands across the world’s largest regions for traditional toys and games.

Mattel’s big build for market share

LEGO and Mattel both held a similar share in traditional toys and games in Asia Pacific in 2012, and with this region forecast to achieve the strongest growth over 2012 to 2017, competition between these two companies is expected to intensify in construction toys thanks to a much more level playing field.

The competitive landscape in Asia Pacific, especially China, is highly fragmented. International Western companies have been trying to gain share here for years, but continue to face strong opposition from regional and domestic players.

In the region overall, Takara Tomy and Namco Bandai accounted for eight per cent and seven per cent of traditional toys and games value sales in 2012, respectively, compared to Mattel, LEGO and Hasbro’s combined share of eight per cent.

This, coupled with the threat of piracy, is expected to be the main challenge for Western companies seeking to capitalise on the region’s strong growth potential.

North America is Mattel’s home market, with the company commanding more than a 23 per cent share of traditional toys and games sales.

The Mega Brands acquisition should have a significant impact on the region as the firm will benefit from the full force of Mattel’s marketing, logistics and operational infrastructure there. This could well mean that in the coming years the gap closes in construction toys between Mattel and LEGO in North America.

LEGO will not take this lying down. It has been suggested that a significant amount of its 2013 profit will be reinvested into the business, propelling innovation and new product development. The recent launch of The LEGO Movie will also complement and encourage the performance of LEGO’s portfolio.

Mattel’s acquisition of Mega Brands means it will now have in its portfolio licensed brands such as Halo, Skylanders and SpongeBob SquarePants. However, LEGO still has some of the most powerful licences on the planet, such as Marvel and Star Wars, as well as being a well-trusted brand with over 60 years of expertise in construction toys.

Regardless of the battle in the licensing realm, it could be argued that the success of construction toys globally has been underpinned by the success of LEGO, making the company the main driver and beneficiary of most of the growth in the category.

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