Lego wants to build business with girls
By Kim McLaughlin
BILLUND, Denmark (Reuters) - Nine-year-old Ida Fraende, who likes to play with Lego bricks, is not so unusual in Scandinavia but globally speaking she is not typical: Jorgen V. Knudstorp hopes to change that.
The Chief Executive of Europe's largest toymaker, who has brought the once-troubled group back to profit and renewed its growth ambitions, has a keen eye on the market where Mattel and Hasbro of the United States are the mom and pop.
Girls are an area where "we'll never stop trying," Knudstorp, who joined the family-owned firm in 2001 from consultancy McKinsey & Company, told Reuters.
"I think there is something that genetically skews us towards boys, but we can do better."
To win girls over Lego -- whose iconic plastic bricks have entertained children and wounded unwary barefoot parents since the late 1940s -- is working to change its mindset, and taking its bid for their custom online.
The firm founded in 1932 by carpenter Ole Kirk Christiansen intends next year to launch an online Lego Universe, to tap into a booming market that has created successes such as Second Life and World of Warcraft.
The group which started out with wooden toys like ducks and trucks has recovered from a massive 1.9 billion Danish crowns ($388 million) loss in 2004 and managed to build market share in a stagnant global market.
But it still faces intense competition in a global market worth about $50 billion in annual sales, and the challenge of winning over children lured by electronic gadgets such as MP3 players, mobile phones and video games.
"It seems like for children over the age of six that's increasingly where they want to spend their time and less so playing with basic toys," Sterne Agee analyst Margaret Whitfield told Reuters by telephone. "That seems to be where many manufacturers are moving to."
If online worlds sound like a boy thing, Whitfield pointed out many of the new ones from toymakers are actually for girls, noting Hasbro's tests in the fourth quarter last year with Littlest Pet Shop's Virtual Interactive Pets, which it plans to take nationwide in the U.S. this year.
Nine-year old Fraende is unusual in actually preferring Lego to virtual games: "I think it's more fun than electronic games, because you can build all kind of stuff yourself," she said. "You can build horses and stables and play with it afterwards."
Knudstorp said Lego's Belville line, featuring horses and a royal family, does well with girls locally, but Lego has decided to discontinue Clikits, launched in 2003 with interlocking parts aimed at encouraging arts and crafts.
Knudstorp -- who offers a mini-figure of himself instead of a business card -- said Lego made a hospital kit a few years ago with an ambulance and a helicopter but no nurses, female characters or patients.
"For girls there was nothing that appealed to their way of playing. That's going to change. I think we can do a better job," he said.
With an already comfortable corner in the Star Wars game arena, where fans can "rebuild the saga brick by brick" on popular platforms like Sony PlayStation or Nintendo DS, Lego's planned online world will invite users to create characters and kits onscreen and then have them transformed into physical products by Lego.
It first introduced the concept several years ago with a computer-aided design programme Lego Factory. When the designs are done and uploaded, Lego manufactures the bricks necessary for the kit and ships them to users so they can assemble them.
Analyst Whitfield sees Lego's potential in an increasingly crowded market, but not yet the girl appeal: "Lego would have a different point of view and appeal to boys, unlike many of these other worlds which are focused on girls aged 10 and up," she said.
Now owned by Ole's grandchild Kjeld Kirk Kristiansen (the spelling changed down the years), Lego's name is a compound of the Danish words "leg" for play and "godt" for well. The group, which New York-based Reputation Institute said was the world's most respected in 2007, keeps a tight focus on quality.
"We look a lot at video games," said Knudstorp. "There is much talk about video games not being good for kids. We think there are some video games out there that are very, very good for kids, so we look to them and follow that."
Last year, classics such as Lego City, featuring fire fighters and police, provided growth and a 4 percent rise in operating profit to 1.5 billion crowns as did more modern lines such as Star Wars.
But Knudstorp expects the twin trends of what Lego calls "boys getting older younger" and ageing populations in key markets to knock out more traditional toy makers in the coming years.
"There will only be room for the really hard-core classics and we are among them. There will be room for other players obviously, but many traditional toys will simply stop being," Knudstorp said.
To keep in tune with the changing interests of children, Lego consults panels made up from an enormous community of fans, including some of the 2.4 million children who receive Lego magazine. It has cult status also among adults online.
Legomaniacs post movies called "brick flicks" and designs on sites like Youtube. Other fans gather at events like Brickworld or Brickfair to display creations and share ideas, or visit www.lugnet.com, a global community of enthusiasts.
When Lego itself was in trouble, analyst Whitfield said it would have been a dream acquisition for Mattel, the world's largest toy maker.
"Mattel likes brands that are going to survive and have growth prospects for years to come. Lego is certainly one of very few brands that would fit that bill," she said.
Regan McNamee, also 9, of Arlington, Virginia is at the top end of Lego's key market of boys aged five to nine. He likes Star Wars kits best and enjoys following the instructions because "it's just like the real thing if you get Legos from a movie or something."
McNamee, who admits he sometimes mashes up his creations, said he liked Lego a little better than his Xbox and Nintendo Wii because "you can build them and make them however you want, but on games you can't always make it how you want."
Knudstorp himself -- whose parents did not allow electronic toys in the house -- was a big Lego fan as a child and has no doubt there will always be a need for construction toys like Lego. If he can just crack the girls thing.
"There is something about the idea of constructing and deconstructing or destroying which frankly is an important part of Lego play that is a very boys-type of activity," he said.
(Additional reporting by Sarah Edmonds and Mette Fraende; Editing by Sara Ledwith)