As part of its marketing effort Mattel has announced what entertainment strategy for its Toys

Dive Brief:

• Mattel's first quarter sales were up 19% year over year, ahead of analyst expectations and the highest Q1 results on record, despite ongoing supply chain struggles.
• While the toy giant's gross margin shrunk by 70 basis points, operating income rose 136% to $80 million for the quarter, according to a release.
• "Having completed our turnaround in 2021, we are firmly in growth mode and operating as an IP-driven, high-performing toy company," Mattel CEO Ynon Kreiz said in a statement, adding that the company expects to grow market share.

Dive Insight:

While Mattel faces plenty of operational challenges, it has risen during the pandemic and the boost it gave to the toy category.

Kreiz pointed to the company's supply chain as a source of strength. "All of our factories are fully operational," the chief told analysts in prepared remarks. "And we are working with our retail partners to ensure product is available on shelves to meet consumer demand. While we're monitoring macro level factors affecting supply chain and the broader economy, we are confident in our growth trajectory."

Among other moves to bolster its supply chain, Mattel has consolidated its manufacturing in Mexico with a "state-of-the-art facility [that] will help to diversify [Mattel's] supply chain footprint and optimize nearshoring of production," Kreiz said.

D.A. Davidson's Linda Bolton Weiser, a senior research analyst and managing director, called Mattel's Q1 performance "very strong" and "impressive" in a research note, while analysts at UBS called it a "blowout quarter."

Bolton Weiser noted that, while Mattel's gross margin shrunk in Q1 due to cost inflation, it came in larger than analyst estimates, boosted in part by price hikes.

The UBS team pointed out in a note that Mattel is leaving its guidance on sales this year in place, despite the impact from the Russian war in Ukraine, which means the company is "effectively raising guidance" given the analysts' estimates that the situation could mean up to a 3% hit to Mattel's top line.

While the company is working to monetize its intellectual property from entertainment — Mattel, for example, recently signed with J.J. Abrams' Bad Robot production company to make a Hot Wheels movie — it is also making money from old-fashioned toy sales.

Action figure sales were up 75%, driven by Jurassic World, Lightyear and Masters of the Universe lines, Kreiz told analysts. Mattel's toy vehicles category was up 36%, while dolls —  led by Barbie and Polly Pocket — were up 8%. Among other licensing moves, Mattel won the rights this year to make Disney Princess and Frozen toys, a role previously filled by rival Hasbro.

As Mattel puts behind it prior years of struggles — which include the death of the old Toys R Us — the company has held talks with potential private equity suitors, according to reports in the financial media.

The company would not comment on the reports during the earnings call, saying only that Mattel is "focused on executing our strategy to grow Mattel's IP-driven toy business and expand our entertainment offering."

Bolton Weiser said of a possible buyout that "we think [it] is possible" given that Kreiz has sold companies in the past. Bolton Weiser added that "we think [Kreiz] is frustrated with the stock's relatively low valuation despite nearly flawless execution, a robust growth outlook, and ownership of some of the biggest brands in consumer products."

Lokesh Kataria from Mattel India sheds light on the Toy market especially during the pandemic, marketing strategy in the category, and the way forward for the brand in India.

With evolving paradigms in the A & M Industry, the Toy market might have been impacted during the initial days of the pandemic but Mattel India strived to engage its consumers and be a part of the ecosystem, attempting to go beyond a buyer-seller relationship. Lokesh Kataria, Head of Marketing and Franchise, Mattel India explains and sheds light on the category and the brand’s strategy along with the way forward for 2021.

Edited Excerpts:

In terms of advertising & marketing, how was 2020 for the toy and games sector? Top 3 trends in the category that stood out for you?

The Indian toy market is ever-evolving, and the increasing spending power coupled with the convenience of e-commerce has worked in our favour and has also fueled our decision to scale up our capabilities on platforms across. We believe that each toy comes with an intrinsic value that adds to the overall development of a child and our goal is to provide the best nurturing experience for kids.

The growing domestic demand for toys in India is also being catalyzed by the country’s strong economic growth and rising disposable incomes; few trends we are seeing in the market are factors such as increasing engagement in leisure activities, the trend of taking a break from digital screens, and emphasis on face-to-face interaction are increasing.

With the closure of non-essential goods including traditional games and toy stores, how did you cope with such a period? Any specific impact (spike or decrease in sales) on brands from your portfolio? According to you, how would 2021 fare in terms of revenue, for the brand?

Even though non-essential goods were closed for distribution during the initial lockdown period, we continued to engage with our audiences. We observed how parents and caregivers were struggling with both, working and playing from home, and the need for resources to help, which led us to create Mattel Playroom. We went ahead with the idea of “Play is never cancelled” and provided resources for parents and caregivers to engage with their kids indoors.

Once the restrictions were eased for our category, we saw a tremendous spike in board games and card games category to start with, which then went on to infant, pre-school toys, and playsets across ages.

With a strong portfolio and mission, we believe that 2021 will be another year of new benchmarks and heights our franchises will achieve.

There was a significant impact on Toys and Games Stores with the rise of online gaming during the pandemic. What were the initiatives undertaken by Mattel to handle the situation?

One of the important insights we tracked during these times was that parents (and caregivers equally) were looking to engage kids in a lot more meaningful ways including spending some quality time while juggling with the new norms on many fronts.

Mattel Playroom was one of the initiatives that parents appreciated a lot. We aimed to ensure that there are articles available for parents and kids that deal with various challenges at the societal level. And then along with our partners, we also hosted online interactive engagement programs like Scrabble quiz and Uno parties.

The urge to connect with friends and families for a fun and learning session, while being safe at home at the same time, was truly not only addressed but embraced in these sessions.

Mattel Toys announced the launch of a limited-edition deck of UNO called Thank You Heroes, as a tribute to frontline workers. What was the idea behind this?

With the COVID-19 pandemic, we observed how parents and caregivers were struggling with both working and playing from home, and the need for resources to help, which led us to create our Playroom.

Further to this launch, in May 2020, Mattel Toys announced the launch of a new company platform called Play it Forward, the philanthropic arm of the Mattel Playroom. Play it Forward focuses on leveraging Mattel brands to give back to communities in times of need. 

When we recognized that, through our toys, we have an opportunity to create something special that will thank, immortalize, and give back to the individuals on the front lines, we designed and created the Thank you Heroes collection, which included the Uno Thank you Heroes special edition deck. This edition of Uno includes 112 cards and features all iconic Mattel brands and characters as frontline and everyday heroes.

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Where will social media stand in the scheme of things in the new budget? How much percent of your total budget will be allocated to the medium? Will you be delving into tactics such as influencer marketing or content marketing? If no, why? If yes, how?

While social media has always been an important part of our spending, we have realized that there is no fixed formula to crack it. The idea is not just to stay relevant but go beyond that and become a part of the circle (friends and/or family) is core to our strategies.

We have seen some great results coming in from our efforts on influencers engagement and we will continue to extend our focus on it. The age of running a 30 seconds spot is long over. Consumers are now looking for peer and practicalreviews and not just endorsements. With a strong heritage of brands and spotless equity across quality, we believe in this more than probably anyone else.    

In 2020, we saw the core fundamentals of consumer behavior changing. As the need & want of the consumers change, should the measurement parameters of marketing campaigns change too? What kind of measurement metrics do you have in place to understand RoI on your marketing initiatives?

Our measurement metrics have always been based on the objectives of a particular brand or campaign. Even though consumer behaviour is constantly evolving (more so, in current times), we are still not at the juncture to re-evaluate the metrics and measurements.

At the core, we believe in continuous positive engagements across all our portfolios and developing a deep emotional connection in whatever we do.

What would be the distribution strategy for the brand in the new year? With the rise ecommerce platforms, what would be Mattel’s plan and strategy on that front?

Mattel’s focus in India is to expand and reinforce its retail presence including creating multiple solutions with e-commerce partners; where the industry projects aggressive growth.

The expansion of e-commerce is in line with Mattel’s strategy to enhance the accessibility of Mattel’s products and provide a world-class experience to consumers.

With this move combined with ring-fencing traditional trade, Mattel expects to expand its market reach considerably within Metro, Tier I, and Tier II towns

Mattel is one of the market leaders in the toy and games category. What would be the competitive strategy at this time? Barbie happens to occupy a major share in the doll’s category. Would Mattel focus on giving a push to specific brands?

2021 is going to be one of the pivotal years for the industry and we intend to provide our consumers and shoppers with some great experience of heritage as well as the future.

This year, apart from our continued focus on Barbie, Hot Wheels, and Fisher-Price, we intend to introduce the legendary Masters of The Universe (He-Man) franchise to the fans in India. More coming on that very soon.

As a marketer – pre-COVID-19 & post-COVID-19 how has the consumer changed? What are the major changes that marketers need to bring about to evolve with the consumer? 3 Marketing trends you foresee for 2021.

In my opinion, 3 trends that will evolve in coming times will be:

• Health and Safety: This will be on priority for consumers, rather than just ‘good to have’. Health concerns have been amplified during the crisis and unlikely to ebb after it is over. Priorities are being reconsidered and consumers will be more likely to focus on product safety, buy certified products and adapt to a healthier way of living.
• Eco-Friendly: a recent (McKinsey) study revealed that 64% agree or agree strongly that they will consider products that are more environmentally friendly. The social pressure to act and live responsibly will grow significantly In addition, over the months that the pandemic dominates, we are developing new habits and tools that are already allowing us to conduct work and life in more environmentally sustainable ways In many areas of life, people will be reluctant to go back to the old ways.
• Evolution of experience: The WFH and limited movement routine has presented a great opportunity for brands and retailers both, to evolve the way they engage with their consumers.

If anyone is yet not ready for a digitized virtual experience, they are already too late to the party.

• There have already been many breakthroughs in the field of delivering an elevated shopping experience by introducing technology interventions.

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