Lego recently became the second largest toy company in the world in
terms of revenue (see “Lego Challenges for the World's
Biggest Toy Company”) and number one based upon net income. They accomplished this feat by posting an
astounding eight consecutive years of double digit increases in sales.
Soren Torp Laursen, President of
Lego Brands, has overseen Lego’s growth over these explosive eight years. We asked Soren to help us better understand
how they accomplished this feat and, more importantly, what happens next. He
kindly complied and here is the result:
Eight years in a row of double digit increases is an
incredible feat and the people at Lego, from management on down, should be extremely
proud. Can you tell us some of the key factors in how you got
the ball rolling (which is one thing) and kept it rolling (which is entirely
you go back to 2003, we had our worst year ever as a company. Recovering from
that moment, we squarely focused on being the best at delivering great
construction toy play experiences, and we set aside all of the distractions
that prevented us from being able to do so (running our own software publishing
division, publishing our own books, developing our own branded non-toy
merchandise, managing theme parks). We learned the hard way that we are best
suited to stay focused on being a great construction brand, and all of the rest
of what it takes to engage children is best left to the experts in those areas.
We did not plan for growth while we undertook a right-setting of the business,
in fact we hoped for break-even results, but ironically, getting back to a
construction focus drove immediate growth. By focusing on being the best
construction experience we can be, we were able to reignite our fans, recruit
new users to building, generate real value for our retail partners and drive
growth in the category and overall industry that makes building sets a true
beacon. What it takes to sustain growth is a tremendous amount of
organizational and personal discipline. Every year children have increasing
options, their expectations grow and the temptations multiply to try things to
grab their attention. The toughest thing to do is to stick to your knitting,
but we have been relentless in our commitment to our core idea, and to driving
innovation that reinforces building and doesn’t distract us from our
What impact did reaching out to girls with Lego Friends
have on last year’s numbers?
set out to dramatically increase the number of girls who build with LEGO
bricks, and the launch of LEGO Friends helped us to triple the number of girls
in the U.S. alone who build the LEGO way. We sold twice as much Friends product
as we had anticipated at launch, and the line ranked in our top 5 themes
globally in its launch year, contributing to roughly 50% of the growth we
experienced in 2012. In fact, the #1 overall best-selling LEGO set of 2012 was
LEGO Friends Olivia’s House. Not only have we provided a means for more
children to engage in the positive development benefits of construction play,
we have also significantly increased our active consumer base. It is our hope
and strong belief that many of those girls will also explore other themes in
the LEGO system, and we are therefore very excited about the growth opportunity
that this has opened up for us.
Congratulations for successfully reopening the
construction door to girls. Ironically, your reward for doing so is
competition like Mega Bloks Barbie Build & Style? What do you see as
the future for girls and construction and how will Lego move forward? Are
there some licenses on the horizon?
are thrilled to have a formula in LEGO Friends that has invited a new audience
to build and to truly engage in collecting and playing deeply with the LEGO
system. Given that we focus only on building, we don’t see girls and
construction as a trend or something that we will try for a few months to see
what short-term gain we can grab. Construction is perhaps one of the most
complex and complicated businesses to establish and maintain, yet it is our
only focus, so we know what it takes to create and supply for sustainable
engagement. We very much see girls as part of our core business moving forward.
We are adding to the Friends collection this year and we have plans to further
expand the opportunities through a variety of new themes and properties in the
years to come.
Construction, whether it is virtual or three
dimensional, has become a major growth industry. Is that because of
Lego’s leadership or do people just crave to build?
a great question and one we ask ourselves all the time. Our research indicates
that no matter how tech savvy, virtually geared or plugged in children are,
they will always have an inherent need to tinker, to create, and to build.
Because we focus only on the construction play pattern and have successfully
expanded our business, much of the growth in Building Sets is attributable to
the LEGO brand. The more children are exposed to the possibilities, the fun and
the personal reward of building, be it physically or virtually, the
will seek those brands that provide the best opportunities to explore those
needs. Where we may take more of the credit for the surge in building
sets interest revolves around the ways in which we have made the LEGO brand
more than just a toy or play experience through seamless integration with
content, gaming, events, etc.
Now that you have accomplished an “Eight-Peat” is a
commonly noted that most companies cannot grow as we have for more than 3 years
consecutively without experiencing a decline. Every year we say that it will be
increasingly more difficult to deliver the growth trajectory we have seen in
the last 8 years, especially considering that we’ve quadrupled our share of the
U.S. toy market in just 5 years. Every year we are sincere in acknowledging the
challenges ahead of us, and yet we continue to drive growth. We know that our
brand has scope for a lot more here in the U.S. and as long as our offer stays
compelling and irresistible to children and their families, we will continue to
grow. Our goal is to be the best, not the biggest, so our measure of success is
not necessarily the same of our competitors. If we can be the best and most
loved toy company while driving even more modest yet sustainable growth, we
will be very satisfied.
Thank you, Soren, for a great interview.