Toy Business Going Eco-friendly as Kids Make Greener Choices

(3BL Media/Justmeans) – While globally toy sales are on the rise due to burgeoning demand from middle class consumers in China, India and other economies, American sales are expected to grow only marginally from $22.6 billion in 2014 to $23.9 billion in 2018, according to Forrester Research. In this scenario, U.S. toy manufacturers are looking to expand the market with a focus on the environmentally-conscious consumer segment.

Global toy companies such as Mattel, Hasbro and Lego control about 40 percent of the U.S. toy market, but there is a newly emerging niche of smaller companies that sell educational or environmentally friendly toys. These companies are attracting investments from private equity firms looking at their bright future prospects.

One such company is Propel Equity Partners of Greenwich, Connecticut, which has been building a toy empire off retro and “green” brands, buying at least 10 companies since 2012 and bringing them together under the name Alex Brands. Winona Capital, the Friend Group and Topspin Partners are other PE firms making active investments in this niche segment.

The portfolio of Propel’s Alex Brands includes toy categories that represent a trend among parents nostalgic for their own toys and keen on environmentally-conscious products. This trend is helping the new toy companies weaken the grip of mainstream manufacturers such as Mattel and Hasbro.

Alex Brands, which recently reached a licensing deal with Nickelodeon, has opened a new headquarters in Fairfield, New Jersey, and a new distribution center in Woodbridge. The goal for many such niche toy companies is to get large enough – around $200 million in sales – to be bought by the bigger brands or create their own publicly traded company.

To address demand for educational toys, recently launched a separate online sales department for STEM Toys & Games. These products are designed to encourage math and science skills and include many smaller private brands such as Milton Industries and Melissa & Doug. Melissa & Doug sold a majority share to private investment group Berkshire Partners in 2010.

Another innovative toy firm, Green Toys, makes a variety of toys out of recycled milk cartons. The company turned down shelf space at Walmart because that is not the most likely shopping venue for its customers, according to co-founder Robert von Goeben. The sales turnover of Green Toys grew about 30 percent in 2014, following its partnership with the private investment firm, The Friend Group. Green Toys sells online, at specialty toy stores as well as Pottery Barn and Whole Foods Market.

Source: Business Insider

Image Credit: Flickr via kaleid