LEGO: Brand Profile

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LEGO wants us to think of its brand not so much as a toy, more as a way of life. In the 1990s, the company set itself a target of becoming the world's favourite family brand, using its building blocks to capture the hearts and minds of children and their parents everywhere. Inevitably that led to a certain relaxation of the company's original educational learning principles. Instead, LEGO learned to play the movie licensing game, scoring successes with Star Wars and Harry Potter tie-ins. But attempts to accommodate children's demands for ever more high-tech games proved rather more challenging, and the group struggled to find a viable path forward between 2000 and 2005. A shift by consumers towards traditional values as well as LEGO's growing sophistication over licensing has resulted in strong recovery since 2007. Over the following five years, revenues virtually tripled, allowing the company to overtake Hasbro during 2013 as the #2 toymaker worldwide behind Mattel. During 2017, it became the global #1, helped significantly by changes in exchange rates.

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 9th Aug 2018: Ads Of The Week "LEGO Safety Video". No airline worth its salt would dare to go without a comedy safety video nowadays, preferably a new one every year or so. Actually it makes plenty of sense. It's virtually impossible to get passengers to pay attention to the same demo they've already seen multiple times in a bunch of different carriers, so the best way to ramp up attention levels is with humour and variety. That strategy was first adopted by smaller carriers like New Zealand Airlines and Virgin Atlantic, but now everyone does it, and the stakes get higher - or rather more expensive - every year. The answer of course is cross-promotional marketing. Turkish Airlines kills two birds with one stone - cost-wise at least - by partnering with Warner Bros for a safety film that hypes the next LEGO Movie, due next year. It's impossible not to watch. Safety messages delivered! 

Adbrands Weekly Update 8th Mar 2018: Annual results from iconic toymaker LEGO were either good or bad, depending on your point of view. On one hand, currency fluctuations have officially elevated the company into the global #1 spot among toymakers, with sales in equivalent US dollars of $5.3bn, compared to $5.2bn for Hasbro and $4.8bn for Mattel. Net profits too were far above US rivals at $1.2bn in equivalent dollars. However, in LEGO's domestic currency of Danish Krona, the group suffered the first decline in sales for more than a decade, while net profit plunged by 17%. "This was a challenging year, and overall we are not satisfied with the financial results," said new CEO Niels Christiansen. "There is no quick fix and it will take some time to achieve longer-term growth." The biggest challenge, apart from exchange rates, is continuing weakness in North America and Europe, though this has to a large extent been offset by double digit percentage growth in Asia, especially China.

Adbrands Weekly Update 30th Nov 2017: Interpublic's Initiative media agency scored an important win with the capture of global media for LEGO, taking over from Carat in most international markets and from Starcom in the US. Despite its position at the bottom of the global media network rankings, Initiative has repeatedly shown its ability to nip in and take steal key assignments from its bigger competitors. The most notable example, was its capture of the global Carlsberg media account earlier this year from OMD.

Adbrands Weekly Update 21st Sep 2017: Iconic retailer Toys R Us became the latest victim of the ecommerce revolution. Following a slow but steady decline, the chain filed for bankruptcy protection. That collapse reflected the wider turmoil in the toy market. Financial results from LEGO Group revealed some of the reasoning behind its recent abrupt change in CEO. In a shock turnaround, the company reported the first decline in sales for 13 years, as revenues for the first half slumped by 5%, while net profit slipped 3%. A key factor was weaker than anticipated sales of products tied to the movies Star Wars: Force One and LEGO Batman Movie, neither of which proved as popular with audiences as their predecessors. In an unexpectedly bleak analogy, chairman Jorgen Vig Knudstorp said "The car has gone off the road and landed in a ditch and now we have to pull it out and get it back up to speed again." Yet despite the negatives, LEGO remains significantly stronger than its two main US competitors. Half-year revenues of around $2.4bn at current rates were well ahead of Hasbro's $1.8bn, while one-time leader Mattel trailed in third place at $1.7bn.

Adbrands Weekly Update 17th Aug 2017: Lego CEO Bali Padda is to step down in October after just eight months in that role, in favour of Niels Christiansen, who joins from Danish industrial group Danfoss. The company said the 61-year-old Padda's departure was related to his age not his performance. "He's definitely not disappointed us," said Lego chairman and former CEO Jorgen Vig Knudsdorp. "Bali knew that I would immediately look for a successor. Both Bali and I thought it would take a long time as it's not a trivial matter. I was just very fortunate that, relatively early, we found the right person. [Christiansen] is one of the strongest CEOs of his generation and has made a remarkable turnaround in Danfoss, taking it from industrial technology to digital technology." He is also ten years younger than Padda, who will remain with Lego as a special adviser.

Adbrands Weekly Update 16th Mar 2017: LEGO Group's new CEO Bali Padda was able to announce another set of record figures for 2016, but growth slowed significantly as a result of weakness in two key markets. Revenues for the year were up 6% to the equivalent of $5.6bn at average exchange rates, while net profit edged up by just 2% to around $1.4bn. That was significantly below 2015's performance, when revenues soared by 25% and profits by almost a third. The main factor was a decline in sales in the US in particular but also Japan, offset by continuing double-digit growth in China and in some European markets.


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Background

Free for all users | see full profile for current activities: Master carpenter Ole Kirk Christiansen established his business in the town of Billund, Denmark in 1932. Initially his product range consisted of stepladders and ironing boards as well as wooden toys. However Christiansen quickly found that his wooden building blocks were by far the little company's most popular product. In 1934, the business adopted the name LEGO, formed from the Danish words "Leg Godt" (or "play well"). In 1947, the company was the first in Denmark to acquire plastic injection-moulding equipment for the manufacture of plastic toys. Two years later this allowed the design and manufacture of a new form of interlocking plastic blocks which the company sold in Denmark as Automatic Binding Blocks.

By 1951, plastic toys accounted for just over half of the company's sales. The Automatic Binding Blocks were renamed LEGO Bricks two years later, and in 1955 the company introduced the LEGO System of Play, a range of 28 different sets of bricks. In 1956, LEGO established its first foreign sales office, in Germany. Ole Kirk Christiansen died in 1958, and he was succeeded by his son, Godtfred Kirk Christiansen, who had grown up in the business. The same year the company introduced a far more sturdy interlocking structure for its bricks, using the stud-and-tube design still current today.

In 1960 LEGO discontinued its line of wooden toys after the warehouse was destroyed by fire. Instead it devoted itself wholeheartedly to plastic bricks, doubling its range to 57 play sets by 1966, and introducing more than 25 vehicles, including motorised trains. For an even younger market, the company introduced a simpler form of brick under the Duplo name in 1967. A year later the company opened the first LEGOland park in its home town, initially as a way of satisfying the curiosity of Danes who wanted to see how and where the bricks were made. The 1970s saw a new range of innovations including the company's first role-play figures (LEGO Families, introduced 1974), more advanced LEGO Technic cog and wheel kits (1977), and the first fully themed play sets (LEGO Space, launched in 1979). Also that year, the company came under the control of the third generation of the family, when 30-year-old Kjeld Kirk Kristiansen was appointed president and CEO. (The K instead of a C in his surname was the result of a spelling error on his birth certificate).

The company formalised its serious approach to learning in 1980 with the launch of the Educational Products Department (later renamed LEGO Dacta). However a year later, its patent on its stud and tube bricks expired, and it was suddenly besieged by a horde of imitators, including Tyco, whose bricks were actually interchangeable with LEGO. Despite the challenge, LEGO thrived, and by 1990, the company had become one of the world's 10 largest toy manufacturers, and the European #1. The first international LEGOland opened in the UK in 1996, followed LEGOland USA in Southern California in 1999.

By this time the company was truly beginning to enter new areas. The first was the introduction of a new range of technology-based products. In 1998 the company introduced LEGO Mindstorm sets, which combined building sets with sophisticated programmable microchip technology. It also unveiled a range of software products on CD-ROM. However, like other toy companies, the massive investment required in this new area, and children's changing tastes in toys pushed the company into huge losses. The company launched a major restructuring program, laying off 1,500 workers, and beginning an overhaul of its product portfolio.

At the same time, KK handed over day-to-day control of the group's operations to newly appointed COO Poul Plougmann, recruited from Bang & Olufson. The company bolstered its high-tech toys business by acquiring US smart toy developer Zowie Entertainment in 2000. However the company's increasing reliance on brand licensing was punished in 2003. Despite the lessons learned by other toymakers who had thrown themselves into the licensed character market, LEGO was unprepared for a sudden decline in popularity of its Harry Potter figures over Christmas 2003. The company also said it had been a mistake to sideline its popular pre-school Duplo series, which was rebranded as LEGO Explore. See full profile for current activities


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