Hasbro: From Selling Pencils To The Largest Toy Brand In the World

[00:00:00] Speaker 1: It's Christmas. And for all of us, that means holidays, childhood, and happiness. Sure, thanks to Santa Claus, millions of parents, and to the toy makers. In fact, the toys industry peaks during this season, and Hasbro is certainly one of the greats. One of the leading brands in the world for over 60 years. Looking back, virtually all of us had a Hasbro toy at some point, right? But behind this Christmas golden veil of table games, video games, furry animals, dreams, and what have you, there's a ruthless, multi-billion dollar business populated by a restricted number of multinational companies that have been crushing each other for decades. I know, I know, forgive me, Santa. But it's a cold-blooded business that leaves no room for mistakes, as we've seen with Toys R Us filing for bankruptcy in 2017. I wonder, how can a toys brand fail? It's considered a rock-solid business model, because its demand never decreases. Because no kid in the world will ever stop wanting toys. Well, I decided to take a closer look at the strategy of Hasbro, one of the top-notch game brands. I wanted to find out what the real soul of the toys industry is, and ultimately, see what really lies behind the ghosts of Christmas past. Here's what I found, and Merry Christmas! First of all, let's take a look at Hasbro's secrets, and let's see what Christmas really means to them. Hasbro is worth around 13 billion dollars, making it one of the largest toy makers in the world in terms of market value, even more than its rivals Mattel and Lego. Why? Because Hasbro has firepower that no rival has, and it's not just about making toys. Let me explain. Hasbro alone makes an unbeatable collection of legendary action figures that include Transformers, Power Rangers, the floor game Twister, G.I. Joe, Play-Doh, and many others. Their strategy is simple: they either make toys, or they buy those who make them better. So, instead of fighting the competition, they pay the competition. Kind of what Facebook did with Instagram. And that's how they bought, for instance, Monopoly or Dungeons and Dragons. Sweet, right? But it's not only that. One of the main assets are their exclusive partnerships. In fact, Hasbro has a partner, a friend, called Disney, that gave them golden keys to both Star Wars and Marvel. So, Hasbro has the exclusive rights to produce all the toys and games related to all the Star Wars movies, and the whole Marvel Cinematic Universe, with spin-offs, characters, and TV series. All of them. Not a bad move. And that's just the beginning. That is how they managed to stay on top of their game, ending the third quarter of 2021 with over $1.13 billion cash in hand, despite the pandemic crisis. However, Christmas is what Hasbro is really waiting for. Their CEO promised that the reindeer season this year will be a blast. But the truth is, this Christmas might be the last for many toy makers. That's due to rising shipping and production costs caused by the pandemic. You see, because Christmas is different for toy makers. For a company like Amazon or Walmart, the sales for the festive season starts already with Black Friday and Cyber Monday. But for the toy industry, the real gold is in the week before Christmas. Their usual plan is to wait and keep their stocks until the very last minute. Because that's when their sales will skyrocket. And predictions say that holiday sales will reach over $33 billion this year. And that's when they either make it or break it. But this Christmas will be the toughest of all. So, as factories run day and night to produce toys, what's Hasbro's strategy to survive? Well, to answer that, we need to look past the window shops and into the history of Hasbro. Because the truth behind Hasbro's power is family. It was founded in 1923 in Rhode Island by the three Hassenfeld brothers, from which the abbreviation Hasbro derives. The three brothers, Herman, Hillel, and Henry, just migrated from Poland to the United States, with their heart full of ambitions and aspirations. Rapidly, they set up their first enterprise in the textile industry, where they were selling leftover cloth, called remnants, to other factories and providers. Soon after, they started using this leftover textile to make pencil case covers. And that's when, for the first time, the Hassenfeld brothers saw the hidden business potential kids and teenagers of the world offered. Quickly, in the mid-20s, and working solely with family members, Hasbro started making their own pencils. And that move provided the company with a fundamental source of revenue for the next 50 years. So much that during the Great Depression, things were booming for them. Because that's Hasbro's business secret. Evolving and seizing the opportunity that no one else sees. Christmas after Christmas. From pencils for school children, the jump to making toys was easy and simple. And by 1942, the company's core business was that of a toy maker. And that's when things really began to get interesting. They took the sector by storm and produced toys loved by millions of kids all over the world. Starting from early modeling clay, doctor sets, to G.I. Joe, and all the way up to Mr. Potato Head in the 50s. The first toy ever to be advertised on television. And yes, weirdly enough, you had to provide your own vegetable for the head. Mostly potatoes, but peppers were also well accepted. And in their way up, they signed the deal of the century with Disney, which allowed them to produce their toys. And then they expanded to television, producing a legendary children's show called The Romper Room. As with all things, there were downturns and huge blows too. Like the critics to G.I. Joe by the anti-Vietnam War protesters in the 60s. But Hasbro always managed to fall on their feet. As we saw, Hasbro always had an aggressive business strategy that's based on a simple Sun Tzu concept. Can't beat them? Buy them. This allowed them to grasp new, extremely profitable markets. Such as the video games or trading card segments. With popular brands like Magic the Gathering or Pokemon. And that's how, while others like Toys R Us went down, Hasbro went up. And an interesting fact that makes them different from all their rivals? From 1923 to 2003, for 80 years, there was always a Hassenfeld as CEO. And they're still owners today. Family. And now, Santa season. It's true that the real rise in spending for toys occurs the week before Christmas. Surpassing even the Black Friday week by more than half a billion. But this year there are two crucial problems that play against all toy makers. The first problem is that due to the pandemic, many toy makers already sold their toys through Amazon during Black Friday. But they did that at lower prices. This made their revenue shrink. And most importantly, emptied their warehouses right before Christmas. Now, despite the efforts of the Christmas elves, this will be a major obstacle for toy makers. The second problem is that most people don't buy in shops as much anymore. And there are thousands of containers full of toys all over the world that might end up being unsold. So, how's Hasbro going to stay afloat this Christmas? Well, all throughout their history, Hasbro's strength has been their philosophy and capacity to evolve. Sun Tzu wrote, "The greatest victory is that which requires no battle." So, if the situation in the toy market has become uncertain and hyper-competitive, if the shops are empty, then Hasbro will move elsewhere to seek new opportunities, just as they did with pencils during the Great Depression. And that's what they're doing. For this reason, in the latest years, Hasbro expanded into the future with its television and feature films division, which became one of the fastest-growing and most profitable departments. They're behind the multi-billionaire Transformers franchise, which counts seven action movies. But that's not it. As we speak, Hasbro currently has more than 30 feature films in development, including films based on brands like Dungeons & Dragons, Magic the Gathering, G.I. Joe, and My Little Pony. That's how Hasbro will cash in this Christmas, and why it will be here in the decades to come, through television, films, and digital products. And it's certainly not a coincidence that also the new Star Wars TV series will come out exactly during the holidays. Because the truth behind the greatest toy makers in the world is that this business is really not about making toys. It's about producing culture. Merry Christmas. [00:09:52] Speaker ?: Thank you.