Hello and happy Sunday! After digging into Norway’s oil fund last week, we’re continuing to build on the Scandinavian theme… Today, we explore how Lego, the legendary Danish company, captured the imagination of millions of children globally and became, brick-by-brick, the biggest toy brand in the world.
Through brick and thin
Even with Lego’s modern legacy of movies, games, and theme parks, most of us think of Lego in its purest form: bright plastic bricks that can be built into whatever shape your creativity takes, from cars, to condos, to the Colosseum.
Despite the playful design and imaginative spirit that Lego is known for today, its roots actually trace back to the Great Depression. Ole Kirk Christiansen, a carpenter from Billund, Denmark, noticed that the demand for home construction and furniture was waning. To sustain his livelihood, Ole Kirk pivoted to making wooden toys in the early 1930s, which he initially traded for food for him and his family. Two years later, he christened his venture Lego, a name derived from the Danish phrase "leg godt", meaning "play well".
Plastic uptick
Lego's foray into plastic — the precursor to Lego we know today, dubbed by Christiansen as ‘automated binding bricks’ — didn’t start until 1947, when the material was still novel. However, sales stacked quickly, with plastic toys accounting for half of Lego's production by 1951. A devastating warehouse fire, which consumed the wooden toy inventory, forced the family to fully embrace their plastic future — a transition that marked the beginning of Lego’s meteoric rise. By the mid-1960s, Lego was sold in 40+ countries, and, by the 1990s, the company was one of the world’s largest toy manufacturers.
However, by the early noughties, Lego was struggling. Sales plummeted almost 30% in 2003, pushing the company close to bankruptcy. Seeking a revitalization, Lego appointed its first non-family member CEO, Jørgen Vig Knudstorp, who sold off non-essential parts of the business and went back to basics: halving the number of LEGO pieces produced, cutting jobs, and — perhaps most crucially of all — asking kids what they actually wanted to play with.
AFOLogy
While tracking playtime proved profitable for Lego — as they noticed that, rather than playing for mindless amusement, children enjoyed trying to master a skill with degrees of difficulty — more mature brick enthusiasts have also played a part in Lego’s present-day prosperity.
Indeed, Lego has an enormous legion of AFOLs (Adult Fans Of Lego). Whether driven by nostalgia, the need for stress relief, or just wanting to show people a self-completed 7,541-pieceMillenium Falcon, more adults are discovering, or rediscovering, the joy of Lego. In turn, the company has embraced the trend, designing retro-themed builds (like the $270 Pac-Man set released earlier this year) that tap into adults’ sentimental seeking of childhood favorites, with many AFOLs interested in the "displayability" of Lego sets, like Lego typewriters, Lego bonsai trees… or even a 9,090-piece Titanic model.
Beyond the brick
One of Lego’s smartest moves has been to branch out beyond the humble brick. In the last decade, Lego have released 4 theatrical movies — including 2014’s ‘The Lego Movie’, which grossed over $468 million worldwide, paving the way for many more direct-to-video films, series and shorts. Its success in video games — often leaning heavily on other franchises with collaborations like Lego Star Wars — have fueled a virtuous circle between physical Lego sales and its media and entertainment empires.
With how playful Lego’s entire brand is, it’s easy to forget that the company is a — very successful — marketing-driven money making machine. However, more staggering than its sheer size, are the company’s margins.
Lego routinely ekes out profit margins that are more reminiscent of Ferrari than Furby. Indeed, for every dollar spent at a Lego store last year, a generous $0.28 was pocketed by the company as operating profit, aided by the ever-shortening supply chain that Lego uses to deliver to its key markets. For perspective, Mattel — the business behind Barbie, Hot Wheels, and American Girl — managed to skim just $0.12 from every dollar spent, while Hasbro, the custodian of classics like Monopoly and Play-Doh, netted only $0.07.
Indeed, you have to dive into the world of luxury to find comparisons that come close to Lego’s margins. LVMH, the French luxury empire that boasts Louis Vuitton, Veuve Clicquot and Tiffany & Co. among its brands, managed “just” a 27% margin.
Build a following
Another brick in the wall of Lego’s success story is the brand’s presence on social media. Lego accounts on Instagram and YouTube have 9.5 million and 16.6 million followers, respectively, with Lego’s Facebook (14m likes) and Twitter (1m followers) also popular — no small feat when you consider that a children’s toy has this following on platforms that (in theory) don’t permit those below 13-years-old from making accounts.
Lego your own way
Lego produces unique content for all of its social channels tailored to the different platforms. The company’s YouTube channel features plenty of building, gaming, and how-its-made content, while its Instagram and Facebook pages mainly focus on personal stories, trends, and celebrity features.
Lego’s presence on Twitter and Facebook is also segmented into the most famous factions of the Lego-verse: Lego NinJago, Lego Marvel Game, and Lego Batman Movie are just some examples of accounts that Lego has whipped up to distribute specific content. The launch of Lego Ideas in 2008, where users can submit concepts for new Lego products, is a social media strategy that’s since been copied by numerous brands (including us… send us your chart ideas!).
Everything is awesome
Despite an increasing number of complaints about the rising cost of Lego and the lack of sustainability of the plastic toys, which aren't biodegradable, surveys and rankings show the Lego brand remains almost universally loved and trusted — a rare thing in the often-polarizing modern world.
Thanks for stopping by! Hope you enjoyed our Deep Dive on Lego!
