On September 4, LEGO announced its revenue increased by 11% and net profits increased by 14% during the first six months of 2014, which means it surpassed the former leader, Mattel (the maker of Barbie).
How did a company that sells primarily one type of product—plastic bricks in a variety of colors, shapes, and sizes—topple Mattel? The short answer is the success of The LEGO Movie, which achieved box office sales over $469 million. Add the sales of The LEGO Movie merchandise, and you’ve got the making of a very good year for the company.
However, there is more to LEGO’s recent success than a single movie (although that movie’s role in the company’s success is huge).
A focused brand is a strong brand, and LEGO has never lost focus. It’s actually surprising that the company waited so long to expand the brand into movies and related merchandise at this scale. It’s also surprising that the company waited so long to develop toy lines for girls. Although its initial release of the LEGO Friends for Girls line wasn’t perfect, at least it gave options to girls whose parents dragged them into the LEGO Store so their brothers could buy something (my daughter was one of those girls).
LEGO’s focus enables it to operate with comfortable profit margins. According to Mark J. Miller at BrandChannel, “LEGO’s profit margin has been more than 20% in the last four years and 24% earlier this year, while Hasbro’s is down to 4% and Mattel’s is barely breaking even.”
At the same time, LEGO has been making very good licensing decisions. From Star Wars and Lord of the Rings to Marvel and DC Universe Super Heroes, there are LEGO sets that consumers of all ages enjoy. However, LEGO has finally struck gold with its LEGO Movie line. The popularity of the movie has attracted a broader audience than any of its previous attempts at home-grown characters and universes.
Of course, home grown means no licensing fees to be paid, so the success of The LEGO Movie has pumped new life into the LEGO brand. Already, a movie sequel and additional products are in the works. At the same time, LEGO may have found a niche to attract girls to the LEGO brand. The release of its LEGO Research Institute collection that promoted women in science, technology, engineering, and math (STEM) careers was another success. The limited edition sets sold out quickly and consumers wanted more.
Bottom-line, LEGO appears to be finding ways to meet consumer demand while creating new forms of demand at the same time. That is a recipe for long-term success. Now, we just have to wait and see if the company can maintain its momentum.
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