European toy makers benefit from homegrown production
By Mark Landler and Ivar Ekman
Tuesday, September 18, 2007
iht.com
FRANKFURT: Playmobil of Germany has long promoted its colorful plastic pirates, firefighters and farm animals as better-than-your-average plaything - toys to be handed down rather than chewed up. Now it can add another selling point: They are made in Europe, not China.
The same goes for Lego, the Danish maker of toy bricks, and for Ravensburger, a German puzzle and game manufacturer, though it does produce small quantities of nonpaper toys in Chinese factories.
With Mattel and the American toy industry reeling from recalls of millions of Chinese-made toys, most because of lead paint, some of Europe's best-known toy makers find themselves in the fortuitous position of having bucked an industrywide trend of moving production to China.
"Looking back, it feels like it was right to make that decision," said Andrea Schauer, managing director of Geobra Brandstätter, which makes Playmobil toys. "At the level of quality we need," she said, "we didn't have enough manpower to inspect factories in China."
With parents' concerns about the safety hazards of toy cars and trains and Barbie accessories, the not-made-in-China label could prove to be a boon to European toy makers, particularly in their domestic markets, where the corner toy store has not yet been elbowed out by retailing giants like Wal-Mart or Toys "R" Us.
Even in the United States, analysts say, there could be a modest bounce for toys not made in China if parents take the time to look at labels during the holiday shopping season. The drawback, some worry, is that consumers might spurn toys altogether.
"When parents say, 'My kid wants a car toy or Thomas the train,' are they going to look at where it was made?" asked Tim Conder, a toy analyst with A.G. Edwards & Sons. "Or are they just going to say, 'I'm not going to buy it?' "
Steering clear of China was not an easy choice for Playmobil or Lego. Other European manufacturers, like Brio of Sweden, which produces wooden toys, have moved the bulk of their production to China. About 80 percent of all toys sold in the United States are made there.
For those who remained in Europe, the decision to keep most manufacturing there was driven more by economics than safety concerns, though the difficulty of controlling quality in far-away factories was also a factor.
"We looked at various options," said Iqbal Padda, executive vice president in charge of the global supply chain at Lego, noting that at the start, it was widely accepted "that it has to be China."
Schauer said Playmobil, a family-owned company in Zirndorf, Germany, faced intense pressure to move production to China. Most of the industry was moving there, she said, and German banks did not want to lend money to companies to build toy factories at home.
What the companies discovered, though, was that while China's unit labor costs were a fraction of those in the West - the equivalent of $1.50 an hour compared with $30 an hour in western Germany - the distance between China and the companies' biggest markets eroded some of that cost advantage.
In addition, Lego and Playmobil need to respond quickly to fickle consumer demand. To speed up the production of a surprise hit - a Playmobil World Cup soccer player, for example - would be costly in China, where factories are set up to churn out vast volumes of toys with long lead times.
"Toys are not the fashion business, but they are like the fashion business," Padda said. "The need to be able to react to what is going on in the market made us choose" Europe.
Today, Lego makes 65 percent to 70 percent of its bricks at a high-technology factory near its headquarters in Billund, Denmark. To save money, the company, which has struggled in recent years, is shifting production to two plants in Hungary run by Flextronics, a Singapore-based electronics manufacturer. A new Flextronics plant will open in Juarez, Mexico, this fall.
Less than 3 percent of Lego's production comes from China, and it has no plans to set up a factory there.
Ravensburger said it produces 85 percent of its toys in its home factory in Germany and a company-owned plant in the Czech Republic.
"In-house production," it said, "provides the best possible quality control for us."
Playmobil, a third the size of Lego and a tenth that of Mattel, has also resisted outsourcing, except for a few electronic parts, like the flashing light atop its police car, which is made in China. In addition to a flagship factory near its Bavarian headquarters, it owns two plants in Malta and the Czech Republic.
Sales of Playmobil toys are growing at a double-digit rate, Schauer said. In a twist, it plans to export its European-made toys to Chinese cities like Shanghai and Beijing next year.
Still, Playmobil and its European rivals are not about to gloat over Mattel's misfortune.
"We don't want to throw stones, in case we're sitting in a glass house," said Schauer, whose company last had a recall in the United States in 1982, involving toys made by an American contractor.
Ivar Ekman reported from Stockholm. |
