Hasbro Tests Out China Toy Box 孩之宝牵手奥飞动漫
Just a year after leading global toy maker Mattel (NYSE: MAT) decided it didn’t want to play in China, the second largest US toy company Hasbro (Nasdaq: HAS) is taking a shot at the market with a new joint venture that could stand a better chance of success. Unlike Mattel, which shuttered its flashy House of Barbie in March last year, Hasbro is taking a more behind-the-scenes approach to the market by developing toys for the China market rather than making any major retail initiatives. While there’s certainly no guarantee of success in this tough market, this kind of back-end approach seems a bit more suitable for a less-developed market like China where consumer tastes and spending patterns are a bit different from those in more mature markets like the US and Europe.
But before I give any more of my own thoughts on this new initiative, let’s step back and have a look at the latest news coming from Hasbro and local partner Alpha Animation (Shenzhen: 002292) at the Shanghai Toy Fair taking place this week in the city I call home. Hasbro, the maker of Transformers toys and the Monopoly board game, says it will team with Alpha in a joint venture to co-develop toys and games for the China market. (company announcement)
Under the deal, the pair will work together to make toys based on Alpha Animation’s Blazing Teens brand, and will also later introduce another yet-to-be-determined brand from Hasbro for similar co-development. I wouldn’t be surprised to see the pair ultimately settle on the Transformers brand for local co-development, since the name is already quite popular after a very strong reception last summer for the third Transformers move, “Dark of the Moon” at the Chinese box office.
Alpha’s background as an animator could also provide an interesting springboard for development of Transformers and other Hasbro brands into children’s TV shows for the China market. Such a move would follow entries into the China animation market earlier this year by global leaders Disney (NYSE: DIS) and DreamWorks Animation (NYSE: DWA) through their own separate joint ventures, as China loosens tight restrictions on the domestic media market. (previous post)
But returning to my original point, I do think that Hasbro is taking a better approach to the market than Mattel by pursuing a back-end product-development strategy rather than a more front-end approach of trying to sell its existing products directly to Chinese consumers. While many of China’s growing middle class have money to spend on discretionary products, toys don’t seem to be a high priority for many, who would rather pamper their children with the latest iPad or other high-tech gadget than a cheap Monopoly board game or Barbie doll.
By pairing with a local company like Alpha, Hasbro should improve its chances of developing products that Chinese consumers might actually want to buy. If and when that happens, it can also use Alpha’s connections and expertise to find the right sales and promotional channels for those toys, most likely using third-party stores and other locally-run channels to sell its products. Obviously its much too early to say whether this venture will succeed, as the China toy and animation markets are still quite undeveloped and changes are taking place rapidly. But this initiative appears to have at least all the right ingredients for success, meaning we could soon see Hasbro rapidly expanding its presence in the market through its new joint venture.
Bottom line: Hasbro’s new China joint venture could have a good chance of success by correctly focusing on developing products rather than retail outlets for the market.
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