Lego A/S’s latest attempt to introduce girls to a world dominated by boys has taken the Danish toymaker to Elvendale, where a magical bakery pumps out sweet treats with a lava-fired oven deep in a forest of purple trees.
Lego finally cracked the market for girls’ toys three years ago with Lego Friends, which quickly became one of its best-selling sets as girls embraced its pastel hues and doll-like figures. Lego followed that success up with a Disney Princess line last year, and this year it’s placed a big bet on elves.
Girl-focused toys “is a growth area for us going forward,” Chief Executive Officer Joergen Vig Knudstorp said in a Feb. 25 interview at Lego’s headquarters in Billund, Denmark, after the toymaker delivered its 10th straight year of sales growth. “It’s not just about adding something new, it’s also this process of reinventing what you’ve already got.”
The Elves’ arrival comes as Lego is under pressure to repeat the record-breaking sales it enjoyed last year, fueled by Friends and products related to “The Lego Movie.” Rival toymaker Hasbro Inc. is also ramping up its $1 billion girls business with brands such as My Little Pony and Nerf Rebelle, and the U.S. company will gain the license to make toys based on Disney’s “Frozen” movie next year.
While Lego Friends is about contemporary life, Lego Elves is a fantasy world, home of elf girls and boys with names like Aira Windwhistler, who help a human girl named Emily find her way home. The new line -- which includes six sets priced between $9.99 and $79.99 -- debuted worldwide this month.
“It’s a bit more adventurous,” said Lego designer Wes Talbott, who spent two years working on the project. Lego decided to go for elves after testing a half-dozen story ideas on girls around the world, he said while displaying two of his Elvendale creations at the Billund headquarters.
Elves is the latest addition to a new product pipeline that has helped the Danish toymaker -- whose bricks haven’t changed much since 1958 -- compete with electronic toys for children’s interest. Lego is taking to digital channels to boost demand for Elves, using YouTube videos and iPad apps to tell the story. The company derives about 60 percent of annual sales from products introduced over the past year.
“We believe that physical play, that joy of creation, is something that can’t be replaced with digital toys,” Chief Financial Officer John Goodwin said in an interview at his office.
Lego’s share of the construction toy market has grown to 70 percent in 2013 from 59 percent in 2008, according to data tracker Euromonitor. In Lego Friends, the company has created a “category of its own from scratch,” said Utku Tansel, a Euromonitor toy industry analyst. Last year, Friends sets accounted for four of Lego’s ten best-selling products.
If Lego can maintain the momentum established by Friends and last year’s Oscar-nominated movie, the company could surpass Mattel as the world’s biggest toymaker by revenue this year, said Needham & Co. analyst Sean McGowan. The gap in sales between the two competitors has been halved since 2011. To close that further, Aira Windwhistler and her elf pals need to become a must-have item.
Predicting whether a new toy will be a hit or a flop is “always very tricky,” said McGowan, but Elves is “well executed” so “there’s no reason to think it won’t work.”