The US baby and infant population grew between 2000 and 2010 by about one per cent each year, but the pre-school market in the US, according to NPD, has declined since 2003 from $3.1bn to $3bn at retail in 2010 with highs of $3.3bn and $3.4bn in 2005 and 2006
This seeming contradiction between population growth and sales growth can be explained by an ongoing change in racial mix.
Between 2000 and 2009, racial and ethnic minorities in the US increased by 25 per cent—compared with a two per cent increase in the number of non-Hispanic whites. By 2042, the Census Bureau projects the US population will be less than half anglo-saxon, says Steve Murdock, a Rice University sociology professor (Source Star Telegram 6/10/2010).
More importantly, the Census Bureau reported on 8th July, 2010, that non-white minorities accounted for 48.6 per cent of the children born in the US between July 2008 and July 2009 (Source: Wall Street Journal 6/11/2010).
In contrast, the vast majority of pre-school toys of the Fisher-Price and Leapfrog ilk are being bought by whites as the demographic profile of the two brands demonstrates (Source: Quantcast), with 85 per cent of Fisher Price and 78 per cent of Leapfrog products sold to Caucasians, and only six per cent and nine per cent respectively sold to African-Americans.
I believe, on the basis of reports from my retailer panel, that the profiles of the smaller players – Playskool, VTech, Little Tikes and Learning Curve – are very similar in their dependence on Caucasian consumers.
The most probable reason why Caucasians constitute such an inordinately high percentage of the consumers is that these products are in fact custom-tailored for them. I checked with a few buyer friends of mine to find out whether this was in fact dictated by the retailers whose main clientele continue to be Caucasians.
One, a national buyer for pre-school at a very large retailer, made the following comment: "What we look at is the salability of the product and that means that it must be acceptable to white consumers. If it is also ok with non-whites, that is fine with us but we will not insist on data that proves this particular point".
Asked whether they knew of a brand that was equally acceptable to Caucasians as well as minorities, they pointed to Sesame Street. They were in fact right. Sesame’s profile, according to Quantcast, is 60 per cent Caucasian; 17 per cent African-American and six per cent Asian.
Sesame appears to be a clear exception to the Caucasian-bias of the leading pre-school brands and it demonstrates that the racial divide can be bridged.
However, unless the Fisher Prices and LeapFrogs of this world manage to nearly triple the percentage of their non-Caucasian US consumers they are likely to either just stagnate or, worse, become increasingly vulnerable to brands that resonate with the minorities as well as the Caucasian majority – such as Sesame Street.
Yet, if worst comes to worst, and assuming that the manufacturers of these pre-school brands find it impossible to modify the product to take into account the racial mix of the US population, is greater emphasis on international sales the answer? After all, North America accounts for a mere 30 per cent of the toy market versus the 70 per cent in the rest of the world.
If we look again at Fisher-Price and Leapfrog’s sales outside the US, neither company has performed particularly well internationally so far – Fisher Price had 39.5 per cent of its sales outside the US; LeapFrog 19.2 per cent. The majority of their international sales were made in Europe.
While it is not proven that a brand rejected by Hispanics in the US will equally fare badly in Latin America, or that a brand that misses with Afro-Americans will also fail in Africa, it appears logical that there will be underlying similarities that operate with both.
Hence, it is also logical to predict that a brand whose acceptance levels in the US are pretty much restricted to Caucasians will first focus on Europe and Australia/New Zealand as an alternative. If this is the case, it will not get very far.
There are two problems with a strategy that focuses on Europe. The first problem is that Europe is the only continent that is dramatically losing population. Even worse, the pre-school segment is expected to decline by 25 per cent between now and 2050.
The second problem is that Europe too, has racial minorities – for instance, non-European Muslims now account for about five per cent of the European population and this is expected to reach 10 per cent by 2050.
In short, pre-school toys do not now fit in with demographic realities. Unless the owners of the leading brands begin to adjust to these, they will sooner or later find themselves face to face with competitors who have no problem doing so.
At the same time, there is an exceptional competitive opportunity. Any pre-school brand that manages to straddle the racial divide in the way Sesame Street does is likely to take market share away from those brands that continue to back the Caucasian-only horse.