It’s testimony to the strength of the Bratz brand that people still talk about Vivid in terms of its ‘post-Bratz’ status even though it has a been a full eighteen months since the firm relinquished control of the brand in the UK.
But while the firm might also now be glad it is not involved in a brand which has become better known as court case than a toy line, it is true to say that it is still making adjustments to its shape and business model.
This has been as much dictated to by market conditions as any need to fill the gap left by such a huge-selling product range. Even without the recession, the toy market has seen the price of manufacturing rise and dollar fluctuations put huge pressure on current business models.
For Vivid boss Nick Austin, the changes that the firm has to make to its business are as much about expanding beyond domestic boundaries as they are about looking for the next big thing.
Austin feels UK toy companies that want to be in a position to prosper when the economy starts to pick up need to invest in product innovation and look to expand their distribution further afield.
“Our bet is this is not going to last forever,” he says. “We’ll probably start to come out of it in autumn/winter 2010. So if we’re going to take a leadership role and grow, this is the time to put the burners on and really go for it.
“One of the biggest assets we’ve got is that we’re a profitable business with good access to capital. So it seems like the time to put the burners on and hope that by the end of 2010, when consumers are ready to start spending again, we’ve got products that they will want.”
Maybe retrenchment is simply not an option, maybe the only way to survive is to continue to invest and strive to move forward, which inherently involves some risk.
“I’ve noticed the industry turning in on itself. It’s so risk averse at the moment. The easiest way to trim a company is to cut R&D, which is quite scary for the industry.
“Everything that’s good about the industry is about newness and innovation in both existing brands and new brands. If you turn the tap off you’re writing your death warrant.
“The real danger for the industry is if we turn in on ourselves while the turnaround happens and then we’ve got nothing that floats the consumers’ boat to get them buying the toys again.
“The consumer is scared at the moment. They’re only spending, say, £20 when previously they would have spent £30. But let’s not over-react. We believe (and we might be wrong) that great toys at £40-£50 are going to be selling again.”
The level of investment required to achieve reasonable numbers is such that smaller companies find it difficult to engage in the kind of figures needed to kick-start a property. And licensors are increasingly unwilling to back anything but proven winners.
“Licensing companies only want to work with big players now,” believes Austin. “We persuaded CPLG to give us Captain Scarlet when we were a start-up company, but there’s no way that would happen now.
“The problem is also the money it costs to develop a product. I don’t think you can go into a new property seriously without an up-front investment of at least £500,000, which is such a barrier to entry.
“There are two ways to do it. You can make a conscious decision to invest or get into a joint venture to share the risk.
“The current economic conditions for suppliers are scary. A product that cost £1 to make a year ago is now £1.50. We’ve been spoiled brats for three years at $1.90. Retailers are still asking for those three for twos but it just can’t be done.
“You’ve got to believe you can do £4m-£5m in the first 12-18 months. The number of players who can spin that roulette wheel has reduced.”
And, given the return required on such an investment, sales from the UK market alone are not enough to recoup it. Which is why part of Vivid’s growth plan includes expansion into new territories.
The US market is the Holy Grail, but it’s very difficult for UK firms to make any significant impact across the Atlantic. You can count the number of recent UK success stories there on one hand. And even these have been backed by major licensing programmes and huge TV success.
Although, even limited success there is achievable and certainly nothing to be sniffed at.
“We’ve had some success in the US with Honey My Baby Pony. It’s such a big market, you don’t need home runs all the time. For the first time we’ve got US companies knocking at our door interested in what we’re doing.”
But Vivid’s growing European network is also a big part of its plan to expand beyond these borders.
“Last year we set up a French company which we acquired and we will also have a Spanish company as well and will also roll out into other territories. The fact that we’ve got a very strong Crayola business underpins that.
“You can’t go into every territory at once, the management strain is so significant you have to take it one market at a time. And some are very difficult to make money from.
“The strategy is to over-invest in R&D and build a network that can carry that and isn’t UK-centric.”
The firm’s overseas business currently accounts for around 25 per cent of its turnover and it is aiming to raise this number to 40 per cent. Indeed, Austin believes companies that do not evolve internationally will be struggling.
“It’s an important strategy and it’s not without risk. But I don’t think there’s a future for companies who want to do big-scale product development in the UK-only. So companies like Simba and Giochi Preziosi are the reality we’ve got to become.
“If we saw a licence that was UK-only five years ago we would have had a go, but now we would be very cautious.”
For now, a range of action figures and accessories from the just released Star Trek movie is its next major release, which Austin considers a fairly safe bet.
“It’s quite ‘toy-etic’. It’s fairly low-risk because you know the Trekkies are going to buy into it, but you can get a new generation of fans into it as well.”
WWE wrestling products are ticking along nicely for the firm too, Roary the Racing Car is another pre-school success story for Chapman Entertainment, Dinosaur King is doing well and Aardman’s Timmy Time (an off-shoot of Shaun the Sheep) looks like a good bet.
“We have big concepts on the burner – a new pre-school line, new girls and new boys. You will probably see more products in 2010 than ever before from us,” concludes Austin.
The willingness to invest and innovate is something that has always been a key part of the toy market. And right now, talk of risk and expansion may go against the pessimism prevalent in nearly all business sectors but, one thing’s for sure, standing still is the riskiest move of all.