Lego CEO Jorgen Vig Knudstorp has told CNBC that China offers "a unique opportunity for growth," claiming that his firm is well-positioned to become the country's number one toy brand. His comments come as the Danish toymaker prepares to step up its operations in China. Lego will open its largest retail store in the world near Shanghai later this year and is due to complete work on its first Chinese factory in 2017. The toymaker faces a myriad of challenges as it tries to grow sales in the world's second-largest economy. Lego sparked controversy back in 2015 when it refused to sell in bulk to dissident Chinese artist Ai Weiwei, with critics accusing the company of not wanting to wrong-foot the Chinese government. Rebuffing those claims, the Lego CEO gave his explanation for why Ai Weiwei's original sales request was denied, saying: "We've seen people building concentration camps out of Lego and pictures of the Prophet Muhammad." "We noticed a huge sensitivity to so-called 'political topics' and in this case one of our staff members in Australia found the purpose suggested by Ai Weiwei was too sensitive and so the order was refused," he added.
Lego has since changed its policy and no longer requires customers buying in bulk to specify how they're going to use their bricks. Political sensitivities aside, Lego is aware it needs to bridge cultural divides to gain market share in China. A key part of Lego's appeal for western parents is its educational value. However, the concept of "learning through play" isn't so well-established in China. In a bid to change attitudes, the Lego Foundation is pouring millions of Danish krone into research focusing on the cognitive benefits of play. The foundation funds "Lego professors" and is partnering with a leading Chinese university "to support creativity and play in Chinese schools," according to a press release in January. As part of Lego's plans to grow sales in China and Japan, it's also updated its play kits to include more Asian characters and settings. Its revamped it "Ninjago" range - featuring dragons, ninjas and a tea-drinking sage. Lego is aware, however, that small-scale product updates won't be enough to assure its success in China, one of the world's most advanced markets for online gaming.
When asked if Lego would consider launching a virtual reality product, the company's CEO replied "absolutely". While stressing that Lego's plastic bricks remain the company's core product, Jorgen Vig Knudstorp said he saw huge opportunities in developing the group's range of apps and mobile games. Lego's multifaceted approach to expanding into China helped it notch up double-digit sales growth in the country last year. Follow CNBC International on Twitter and Facebook.Lego A/S, pressured by stagnant toy demand in mature markets, is sharpening its focus on emerging economies, where hundreds of millions of potential customers have yet to buy the company's interlocking bricks. The Danish toy maker has recorded breakneck growth in recent years, becoming the world's No. 2 toy maker by revenue, behind U.S.-based Mattel Inc. but ahead of Hasbro Inc. Lego's relatively narrow product lineup has remained... Uber CEO Caught on Video Berating Company Driver Why Is Saudi King Salman Touring Asia?
Hong Kong Remakes Beer Pong: Is That So Wrong? Attorney General Jeff Sessions Hit by Russia Claims Dramatic Eruptions From Mount Etna, Europe's Largest VolcanoLego A/S, Europe’s biggest toymaker, plans to expand its sales in China as rising income boosts demand for its building-blocks in the world’s most-populous nation. Lego is building manufacturing facilities in China to serve both the country and across Asia, Chief Executive Officer Joergen Vig Knudstorp said yesterday. The region contributes about 10 percent of revenue, he said. “Asia is not a supply base, it’s a market and a growing market,” Knudstorp said in a Bloomberg television interview with Haslinda Amin in Singapore. “The urbanization where 500 million people are going to become members of a middle class that will look to great schools, great infrastructure but also play as an important part of childhood.” The closely held company is seeking to boost sales as the world’s second-largest economy is expected to expand 7.6 percent this year, according to the Asian Development Bank’s forecast yesterday.
By 2022, more than 75 percent of the country’s urban consumers will earn 60,000 yuan ($9,800) to 229,000 yuan a year, Mckinsey & Co. said in June. Billund, Denmark-based Lego plans to increase its business in parts of Asia, as well as in Africa and Latin America, which will offer “huge growth potential” in the future, Knudstorp said. The company wants the Europe, Africa, and Middle East region, Asia and the Americas to contribute equally to sales over time, he said, without being more specific. Lego said last month its first-half sales jumped 13 percent with the strongest growth in Asia amid a slower start to 2013 in the toy markets of North America and Europe. Revenue rose to 10.4 billion kroner ($1.9 billion) from 9.13 billion kroner in the same period a year earlier. Lego, which is closely held, said it boosted its global market share to 8.8 percent in the first half from 8.6 percent at the end of last year. The company is controlled by Denmark’s richest man Kjeld Kirk Kristiansen, the grandson of Lego founder Ole Kirk Kristiansen, who has a net worth of $6.8 billion, according to the Bloomberg Billionaires Index.
“We are on a journey of major expansion where over the next 5 to 10 years, the major growth driver is going to be the Asia region,” Knudstorp said. Global LEGO® sales up 15 percent in first half of 2014 Double-digit growth across all regions delivered a turnover of 11,504m DKK in the first half of 2014 fueled by the success of The LEGO® Movie products. Key financial figures from the interim result:• Revenue in first half of 2014 increased 15 percent compared with the same period last year measured in local currency (i.e., excluding the impact of foreign exchange rate changes).• Revenue for the first half of 2014 increased by 11 percent in DKK to DKK 11,504m compared with DKK 10,408m for the same period last year. • menting on the financial result, LEGO Group President and CEO Jørgen Vig Knudstorp says: “Our revenue in the first half of 2014 has more than tripled compared to first half year revenue six years ago, in 2008. It is a very satisfactory result that shows our significant growth in recent years in a tough economic environment.
The result for the first half of 2014 is an outcome of our ability to develop, launch and distribute LEGO products, which children all over the world put at the top of their wish lists. We are particularly pleased that classics such as LEGO City, LEGO Creator, LEGO Technic, and LEGO Star Wars™ continue to deliver very strong growth globally.” LEGO Movie product line exceeded expectationsA significant contributor to sales growth in the first half of 2014 was The LEGO Movie product line which launched in conjunction with the release of The LEGO Movie feature film in early 2014.“We are thrilled by the reception of The LEGO Movie products that provided a significant boost to our sales during the first half of 2014,” says Executive Vice President and CFO John Goodwin, adding:“The LEGO Movie celebrated the creative potential in us all, which is also the foundation of any LEGO product we develop. Every LEGO set must offer a versatile play experience that fosters creative building, and this is what we continually strive to deliver to children all over the world.”
Strong growth in all regionsIn the first half of 2014 the LEGO Group experienced broad-based sales momentum in the regions where it operates. “Consumer sales growth in Europe, the Americas, and Asia was in the double digits, which is very satisfactory in the light of the global toy market which experienced a slow start in 2014,” says John Goodwin, adding:“It is too early to say if the strong performance will be reflected in the full year results as the majority of LEGO sales to consumers happen in the second half of the calendar year in a short time span of a few weeks leading up to the holiday season. The strong performance of The LEGO Movie products had a positive effect during the first half of 2014, and it remains to be seen how the line will continue to develop behind the highly anticipated launch of The LEGO Movie on DVD in the second half of 2014.” Global presence a successful strategyIn the Asian region, growth in LEGO sales varied from market to market. China saw the most significant growth in consumer sales in the region by more than 50%.
This supports the LEGO Group’s ambitions to further globalize the company and make Asia a significant contributor to future growth.During April 2014 two significant celebrations marked this intent; the official ground breaking of the first LEGO factory in China, located in Jiaxing; and the inauguration of a new office in Shanghai, which is one of five main offices globally for the LEGO Group.“There is a huge potential in Asia, and we are still learning and in the process of building our capabilities in the region. The factory and the office represent a significant expansion of our physical presence in the region. Alongside our other main office in Singapore, the Shanghai office and the new factory enable strategically important functions to be located close to our customers as well as children and parents in China and Asia,” says Bali Padda, executive vice president and COO.The decision to place a LEGO Factory in China is a direct consequence of the LEGO Group’s ambition to have production placed close to core markets.
“This enables us to deliver LEGO products to retailers and ultimately to children all over the world very fast, offering a world class service to our customers and consumers. This has proven to be a successful strategy for us, and by further globalizing the LEGO Group, we hope to reach even more children around the world with a creative play experience,” says Bali Padda.In the first half of 2014 other significant milestones on the LEGO Group’s journey towards that ambition were achieved.In Europe, expansions of the LEGO factory in the Czech Republic continued, while a brand new factory was inaugurated in Nyiregyhaza, Hungary in March. Alongside the LEGO factory in Denmark, these mainly supply LEGO products to children in the European markets. In Mexico, expansion of the LEGO factory in Monterrey was completed and inaugurated in June. The Mexican factory mainly supplies the American markets, and the expansion is expected to create more than 1,000 new jobs.“We have been investing and we will continue to invest significant resources in further globalizing the company, which is a precondition for our future ability to not only create great LEGO experiences for children all over the world, but also our ability to build a culturally diverse organization where we can attract and develop global talent.