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The LEGO® Movie (2014). (Courtesy of Warner Bros. Picture/Courtesy of Warner Bros. Picture)
The LEGO® Movie (2014). (Courtesy of Warner Bros. Picture/Courtesy of Warner Bros. Picture)

Lego’s blueprint for success, one brick at a time Add to ...

When Chris Magno rediscovered his love for Lego as a grown up, he didn’t have to look far for other Canadian fans of the toy to share his passion.

Four years ago he co-founded Brickfête, a weekend-long fan festival in Toronto where adult Lego enthusiasts gather and display their unique creations to hundreds of curious observers. Some build trains or spaceships – Mr. Magno is keen on Lego Technic sets and robotics.

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“We thought, all these people keep their stuff in their basements, wouldn’t it be cool if we rented a ballroom somewhere and had a safe place to get together and talk about Lego?” Mr. Magno said. The event grows each year, with artistic mosaics, a Batman-themed section and a tribute to “Canadians at war” among this year’s displays.

Lego Group, the private Danish company whose name is inspired by the words for “play well,” has been making the interlocking bricks for 65 years. Having moved far past its self-described “financial crisis” years ago, Lego must now strike a balance between staying true to the classic building toys fans love, and adapting to the modern-day technology challenges all toy makers face.

In 2003, Lego was facing fiscal losses and declining sales as some of its product changes failed to resonate with young builders. Lego’s losses ballooned to 1.9-billion Danish krone, ($377-million) in 2004 amid a decline in the broader toy market. Lego appointed Jorgen Vig Knudstorp president and commenced a restructuring that led to 1,000 layoffs, a 20-per-cent reduction in production and operating costs and the sale of Legoland theme parks.

In his decade at the helm, Mr. Knudstorp has turned the toy maker around, with profit soaring to $1.2-billion last year amid double-digit sales growth. The company is also building new factories in China, Mexico, Czech Republic and Hungary to produce toys for local markets, and last year they hired more than 1,300 full-time employees.

The growth comes as the toy industry has seen flat growth globally, or in some cases, slight declines. “Consumers and kids in particular have so many different options to satisfy their need for play that don’t necessarily manifest themselves in toys,” said Michael McNally, senior director of brand relations at Lego.

Competition struck the construction toy category this year after Mattel Inc. bought Montreal’s Mega Brands Inc., makers of Mega Bloks toys. Aligned with popular brands such as Barbie, Hot Wheels and Thomas the Tank Engine, Mattel gives Mega Bloks the scale, marketing and clout to expand faster, said Lutz Muller, a toy industry consultant.

“This is probably going to be a major change-maker in this category. Lego is probably going to have somewhat of a fight on their hands,” said Mr. Muller of Klosters Trading Corp. He estimates Lego has a 75-per-cent market share of construction toys.

Lego is focusing on its “core” brand products, and the strategy seems to be working. While the Star Wars line continues to be very popular, the Lego City, Lego Duplo, and Lego Friends lines were other top sellers last year.

Mr. Muller said the licensing agreements with franchises such as Marvel and DC Comics have been good for Lego, but says balance is important. “Every large toy company is aware of the fact that licences can be dangerous,” he said. “You’re relying on someone else’s goodwill, they’re time-limited and also they tend to be expensive.”

This year’s blockbuster The Lego Movie brought in more than $467-million (U.S.) worldwide. “We’ve been blown away and humbled by the success of the movie,” Mr. McNally said. “It’s the first time we’ve stepped out and done a major entertainment piece that’s really about the brand, and not a particular theme or character.”

While the film did feature some franchised characters, the branding was distinctly Lego, and the company is planning to release a second film in 2017.

Lego-branded video games have also become popular. August will test launch Lego Fusion in the U.S., a hybrid toy that combines brick building with virtual gameplay on the iPad, which the company describes as the “future of play.”

Mr. Muller thinks Lego Fusion will be a success and that other competitors – such as Activision’s Skylanders and Disney’s Infinity toy games – will have to “scramble like hell to catch up again.”

As Lego evolves for a new screen-focused generation the company said it will seek to keep its timeless appeal.

“People are getting more and more comfortable with the idea that Lego is not just a toy for children,” Mr. McNally said.

Mr. Magno thinks that’s one of the best things about the company. “The little plastic bricks you played with as a child are the same size, shape and click-ability as today,“ he said. That means he can pass his childhood Lego to his son. “He gets to play with it and add it to his own collection, which is awesome.”

Follow on Twitter: @j2nelson

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