Toy giant aims to march in step with fickle kids

Hasbro chairman Alan Hassenfeld is making greater use of technology, writes Dominic Coyle

Kids can be demanding customers - just ask Alan Hassenfeld. The chairman of US toy giant Hasbro is digesting a set of results this week that showed the group nursing losses of $3.7 million in the first three months of the year.

The figure surprised markets, which had been expecting a profit, and continues a trend of weak performance by leading groups in the highly competitive toy market.

Still, Hassenfeld looks the part of the toymaster - relaxed and smiling - as he completes another meeting on his whistlestop tour of Ireland.

Perhaps it comes of being the fifth family member and the third generation to lead a company that began in 1923 by selling textile remnants before moving into school supplies and then toys.

More likely, it is because he retains his passion for the industry and for the customers despite 25 years in the company.

"Kids are great," he says. "They are our greatest ally and our greatest danger. If you put out a product that kids don't like, you've never seen word of mouth operate more quickly or effectively - and the same works on the other side. You saw it with Beyblades."

Beyblades became a blockbuster product for the company in 2003 from a standing start - delivering sales of $300 million. One year later, sales fell to $100 million, putting a hole in the entire company's figures. "When it begins to spin, it spins out of control but it can stop on a dime," says Hassenfeld.

Hasbro's major challenge is one that faces the industry as a whole: how to keep in step with a fickle and increasingly sophisticated customer base.

"Kids are getting older younger and they are multi-tasking," Hassenfeld says. "They are spending more time on computer, playing video games and watching television but, while they are doing these things, they are also talking on the cellphones and listening to their iPods."

It's a very different market from the one Alan Hassenfeld first encountered when he joined the family business back in 1970. He built up the company's international business to a position where it now accounts for close to 40 per cent of all sales.

The company's Waterford plant, open since 1977, is the manufacturing centre for the European market.

Games and jigsaws account for between 75 and 80 per cent of production at the plant which employs an average of 500 people. Last year, it shipped 26 million units of 260 Hasbro products across Europe.

While Hasbro's gilt-edged stable of core game products - including Monopoly, which this year marks its 70th anniversary; Trivial Pursuit; Mr Potato Head, the first toy to be advertised on television; and Action Man/GI Joe, the game that brought Hasbro into the big league in the 1960s - still performs well, the company is looking at how they need to be updated to remain contemporary.

This has largely involved greater use of technology. Last year, the company introduced a DVD version of Trivial Pursuit. It has also invested resources in "plug-and-play" offerings that it sees as creating a new game sector without hurting existing products.

On the toy side, Hassenfeld says the industry is evolving in line with the changing tastes of its young market.

In the next five or 10 years, the toy department will become the lifestyle department, he argues, noting that Hasbro needs to be looking at producing innovations like the iPod.

"We have to go where the kids are going," says Hassenfeld. "We cannot create things we like but things that are where kids are going."

However, that does not mean the pursuit of sales at all costs. Hassenfeld sees one of his key roles, now that he has moved from chief executive to chairman, as passing down what the family's tradition and culture means to the next generation of leaders.

"We want to be the best we can and look under every stone to be creative," he says. "But, at the same time, this company will stand for being a family and children's - call it a lifestyle and entertainment - company that makes wholesome products.

"We couldn't do some of the video games that are made today, including some that are probably among the hottest sellers. I am not going to be a family company and have gratuitous violence all over the place. That's not Hasbro.

"Our challenge is how do we put our minds where the kids want to be and yet have it with parental approval," he says, pointing to the success of the company's Video Now product, essentially a portable DVD player.

Hassenfeld was in Ireland to hand over almost €84,000 to the Dyslexia Association of Ireland. The money was raised by schoolchildren and office workers playing board games across the State in a Hasbro-organised event late last year.

It is one of a series of charity initiatives the company undertakes, an area with which Hassenfeld has been closely identified during his tenure.

"Our view is that it is not simply a case of building a facility somewhere; we also have an obligation to put something back into the communities where we live and breathe."

He is upfront in admitting that the company's commitment to philanthropy and corporate social responsibility is partly driven by self-interest.

"As a company, we cannot attract the best people without having good roads, good schools and decent hospitals, so it is important to invest in the community," he says.

Creating a better life for children is an investment in the company's future, he argues, as well as a morale-booster for staff.

Also there is a realisation that reputation counts, maybe more so when your customers are children.

While Hasbro, in common with other toymakers, is shifting more production to the Far East, Hassenfeld is upbeat about the prospects for the Waterford operation which he described as "not that labour-intensive".

"The team in Waterford is passionate about being at the cutting edge and we have a very sophisticated operation down there," he said. "I think there is a really good future for Waterford and, right now, we are willing to reinvest there."

That means continuing to face down the growing challenge from the Far East, whose generic products, Hassenfeld says, now account for about 40 per cent of toy retailers' mix.

Six years of declining sales and a paltry 5 per cent average return on equity over the past five years have increased pressure on Hassenfeld and his company but he remains bullish about the future.

"It all about passion," he says. "If you lose that, you lose the kids."