2009 is banner year for Lego

Marketing its way out of any demand problems has seen Lego have a banner year, with UK sales exceeding its expectations. Demand continues to outstrip supply in certain quarters and next year?s range points to more success. Ronnie Dungan spoke to UK MD Marko Ilincic about how 2009 fitted together?
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UK retailers do like to get upset with Lego. It seems to be their favourite topic. But it’s only because they love it so much. Truth is they, literally, can’t get enough of it.
And no wonder. This year has been a vintage year for the firm’s UK operation and has far exceeded its own modest growth expectations. Everyone wants Lego, customers and retailers alike.

You can blame the shortage on James May if you like, but the fact is, Lego sells too quickly.

“Since the fall of Woolies,” explains UK boss Marko Ilincic, “the prospect of any significant growth in 2009 looked severely hampered. We did anticipate modest single digit growth, but the reality is about 24 per cent up. So we’ve compensated for Woolies and then some.

“We’ve grown market share and sales. We had five per cent of the total UK market in August and 4.1 per cent of the market for the year-to-date. We’re firmly established as the third largest toy manufacturer.”

Like many who have experienced an uplift in this difficult year, its success has also been linked to its marketing spend.

“I can’t really comment on how other companies are doing but we have significantly increased our marketing spend this year,” says Ilincic. “Having been through this sort of economic cycle a few times, as a long-established company we knew that’s what we had to do.”

So Lego is going great guns this year, enjoying success with its core products such as City and the Power Miners range and even its foray into the games has yielded good results.

It is much in demand, as always. And therein lies the problem for retailers, particularly from the independent sector who constantly berate the toy supplier for not ever having enough stock. Ilincic says the company is always trying to achieve the best balance with product distribution.

“The key is better control of supply to fulfil demand. If you were to take our turnover from 2005-2009, we have doubled the business in the UK. There’s probably not many companies that can say that. By any judgement that’s a significant increase. So we have to supply a heck of a lot more product to the UK market. Is it enough? No.

“Every single independent you speak to will have increased their sales on Lego. Many have grown their Lego business by 30 per cent. Are we supplying more? Yes. More in volume? Yes. Is it enough? No. But we have doubled our investment in manufacturing machine utilisation and next year it will increase again.

“Most of the indies are up with double digit growth. The frustration for them is that they can’t get enough product.”

A victim of its own success, which has included its first foray into the board games market with its buildable games line.

“The new games range is simply flying. We have the top-selling children’s game at the moment, which is phenomenal.

“I was involved with the games project early on, so I was an advocate from the start, which is why we launched it in the UK first.

“We’ve already planned to roll it out globally next year and there’s nothing yet to suggest we should alter those plans.”

Eight SKUs have already been launched and new games will be arriving next year.

Among its core products, Power Miners has been a success story.

“That has been phenomenal since its launch in January and it’s one of the ranges which has contributed to that frustration at retail I think.

“City has also done well. It’s a classic evergreen and goes from strength to strength and the Star Wars range still has a lot to offer.

“All our core themes are up, even Duplo and Technic.”
Next year is also looking strong for the firm as it will include its first Disney-licensed products based on new film releases – Toy Story 3 and Prince of Persia.

“The whole industry is holding its breath,” adds Ilincic. “I’m confident 2010 will be a strong growth year. It’s not built on a house of cards. It’s built on strong retail relationships.

“We’ve got a Disney range coming and there’s a heavy focus on Toy Story 3. Prince of Persia is going to be big too and we’ve got an Atlantis theme launching in January, which we think is an even stronger proposition than Power Miners.

“We’re forecasting growth again for City and Star Wars. We’ll have a full year of games sales too.”

He also hinted at a new product line which could be unveiled at Toy Fair, and would take Lego into another new area.

“It’s not directly because of the success of games, but it is part of our strategy to grow and to do that we need to look at extensions to our core areas.”

Growth has been driven by Lego’s increased marketing commitment throughout this year, and the bankable Toy Story 3 range is sure to bring home the bacon next year, too.

The challenge, as ever, will be for the firm to keep up with the demand it creates.



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