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Tough times in Toytown force LEGO® to rebuild
By Stephen Brown
BILLUND, Denmark (Reuters) Aug.27, 2004 - After a day in LEGO® Danish heartland
it seems so natural for the bellboy, pianist and maitre d’ at LEGOLAND Hotel to
be made of plastic bricks that real cows grazing near the LEGO factory come as a
shock.
The Danish company, whose toys will entertain an estimated 400 million children
and adults this year, has had a reality check of its own with the worst loss in
its 72-year history in 2003 and a struggle to break even this year.
Times are so tough in Toyland now that the U.S. retailer Toys R Us has mooted
getting out of toys altogether, blaming discount pressure from huge retailers
like Wal-Mart.
LEGO, which started out selling wooden ducks during the Great Depression, is
heeding the old adage that the safest investment is bricks and mortar, or bricks
and plastic in LEGO case.
By last year it had made 320 billion pieces, explaining why there is always one
down the back of the sofa. Four theme parks in Europe and California draw 5
million visitors a year.
LEGO fanaticism on the Internet ranges from the nerdy to the bizarre, with
unofficial fan sites like www.lugnet.com featuring movies like “Lego Chainsaw
Massacre” and “Spiderman” and a LEGO Bible with a gruesome circumcision scene
from the Old Testament.
But the family-owned firm, still run from the rural Danish town of Billund where
Ole Kirk Kristiansen began making wooden toys in 1932, has had to rebuild its
strategy brick by brick.
PICKING UP THE PIECES
In a rare media interview, Ole Kirk’s grandson Kjeld, who is now chairman and
chief executive, said LEGO had grown to depend too much on non-traditional
products like clothes, video games and licensing deals with Disney, Harry Potter
and Star Wars.
“We must realise we have gone too far from what built this company -- a
universal product idea that is as contemporary as ever,” he said. The new focus
is on physical toys with hi-tech and “virtual” accessories like robot software
and web storylines that “combine creating physically with creating on the
screen”.
LEGO pins hopes on the “grandparent effect” -- falling birth rates and richer
older people meaning that increasingly spoilt kids will be bought “real” toys
rather than computer games.
Kevin Blocksidge, a 17-year-old collector from Ohio, feels LEGO had become
confused by “computers and shortened attention spans. Now they’re getting back
to their roots and I like it.”
Lenny Hoffman, a 24-year-old Florida librarian with about 50,000 pieces who
raves over the “mix of wild creativity and practical engineering” in LEGO, said:
“There was a time when every LEGO set I opened, I was amazed by the new building
techniques it used. It feels like that time has returned.”
Fans say lower prices “don’t hurt”. LEGO is slashing costs by 700 million Danish
crowns (63 million pounds), including 500 jobs, to break even this year after
losing 1 billion crowns in 2003.
While labour-intensive decoration and assembly are done in the Czech Republic
and electronics outsourced to China, LEGO has kept manufacturing in high-wage
Denmark and Switzerland.
“We could do it in China but it wouldn’t be the same quality and it’s so
automated it couldn’t be done any cheaper,” said Thomas Thomsen, a company guide
at the Billund plant which makes 70 percent of LEGO plastic pieces.
Production of 1.6 million pieces an hour from plastic heated to the consistency
of toothpaste is run by robots. The time taken to mould each brick -- 10 seconds
-- has not changed since the 1950s, when workers measured it with two puffs of a
cigar.
BOY’S TOYS
LEGO boxes back then featured 4-year-old Kjeld in a bow tie with his sisters
Hanne and Gunhild, all dutifully building. But it is tough to keep girls like
them interested in LEGO once they grow into dolls like Barbie, made by Mattel.
It is now concentrating on girls’ lines that focus on creative play like its new
arts and crafts line Clikits.
“I’d love to have more stuff for girls,” said marketing chief Mads Nipper. “But
right now we cannot let ourselves lose out on our core market of boys from 3- to
7-years-old.”
While some of its boys’ toys look scary, such as the top-selling sci-fi Bionicle
figures, LEGO does not make realistic weapons.
“Part of growing up, particularly for boys, is the fight between good and evil.
But if it is not fundamentally good for children we won’t do it,” said Nipper.
“We would never fall for that temptation despite the serious financial trouble
we’re in.”
Such concerns may spring from the Kristiansen family’s Lutheran roots, evident
in a pile of old hymn books with “LEGO” on the cover laying on a desk in the
firm’s private museum.
While LEGO seldom promotes itself as a Danish product, the country sees it as a
national treasure and its bricks in primary colours epitomise Scandinavian
design. Its name, a compound of the Danish words “leg” (play) and “godt” (well),
arose from a staff contest back in 1934 -- which was won by the owner.
The family relishes such control. Asked if LEGO would ever go public,
Kristiansen said: “That’s definitely not in the plans. It’s important for the
company to stay family owned.”
the link:
http://www.reuters.co.uknewsPackageArticle.jhtml?type=worldNews&storyID=572637§ion=news
-end of report-
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Message has 3 Replies:
 | | Re: Tough times in Toytown force LEGO® to rebuild
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| (...) That's one of the big things, but there's a much bigger variety of organized sports and other outdoor activities for kids these days. Computers/internet probably accounts for another big chunk of time, and just buying a basic computer costs (...) (20 years ago, 5-Sep-04, to lugnet.market.theory)
| | | Re: Tough times in Toytown force LEGO® to rebuild
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| (...) (Snippage throughout) (...) Sorry for being a bit late in replying, but hey, this is cool! The guy emailed me a while back asking questions, but he never showed me the completed article. I feel so special right now ;-D ~Kevin (20 years ago, 13-Sep-04, to lugnet.mediawatch, FTX)
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