Funskool, the Indian toy company, has a new strategy in place. While many of us would remember its board-games and action-figures jostling for space in toy stores, it appears the company is unhappy about the lack of real estate accorded to its many brands, most of which have been licensed from global toy makers.
A young entrepreneur, K M Mammen Mappillai, had once opened a small toy balloon manufacturing unit in 1946 in a shed in Madras (now Chennai). That is how Madras Rubber Factory, now known as MRF, was founded. Moving up the ladder from toy balloons, it has become one of India's major tyre manufacturers with a turnover of over Rs 10,000 crore. But the outfit's connection with toys manufacturing was not severed.
In 1987, MRF, along with Hasbro, the US-based leader in children and family leisure-time products, started a new joint-venture and named it Funskool India. MRF holds a 60 per cent stake in it. Funskool now manufactures and distributes toys, licensed from some of the leading global brands. Funskool's licensed partners, such as the Danish Lego, Japanese Takara Tomy, German Ravensburger and the US-based Hasbro, comprise a branded mid-premium market. Its competition includes Mattel and FisherPrice. The overall toy market in India is around $400 million (Rs 2,525 crore).
Funskool and its partner brands lead in the mid to premium end of the toy market. These segments are also less susceptible to the influx of China-made toys that had rung the death toll for indigenous toy makers a while back. They also have brand-conscious buyers.
While small toy stores cater to the mass market, Funskool is eager to increase the footprint and visibility of its many brands in large formats. As a result, it has begun to open its own retail stores, as supermarkets search out private labels for better margins. Funskool boasts of a wide presence with as many as 16 warehouses to serve 4,000 retail outlets.
Funskool opened its first retail store in Chennai, for one of its major partners 'Lego', the building-blocks brand. To shore up its retail offering, it is even adding its own brands.
Arun Mammen, MRF's managing director and chairman of Funskool, says this will be the company's first venture in retail and based on the lessons in the next three months, it will look at launching Funskool stores in other areas. Unlike the standalone Lego store in Chennai, the new stores will also showcase its other international brands. Mammen mentions Delhi, Mumbai and Bangalore as being part of the next phase of expansion. It is already working with the premium toy-store, Hamley's in Mumbai, to open a Lego corner as well.
"What made us enter the retail foray was the limited space alloted by the stores for toys. With the space limitations, it is impossible to showcase all the width and range of our offerings," explains R Jeswant, vice-president (sales & marketing), Funskool.
Funskool also came up with its very own brands -Giggles (around two years back) and Handy Crafts last month. Mammen says future Funskool stores, which would extend to Tier-II and -III cities eventually, will build a range around these brands too. "Since the toy industry grew much faster in the last few years both in India and abroad, we spent the last one year or so in developing our own brands," says Jeswant.
Its first brand, Giggles, was launched to take on the flood of imported toys from countries such as China, Korea, Malaysia, the UK and the US.
Its Handy Crafts includes educational puzzles 'Play and Learn'. There are also plans to launch more brands. Jeswant says, "Our own brands will run parallel to Funskool's distribution of international brands."
Funskool will manufacture its brands at its two factories in Goa and Tamil Nadu that will see more utilisation with the company's exports plans. As 20 per cent higher labour costs in China make the country's manufacturing expensive, John Baby, CEO of Funskool says, "Manufacturing in India can be cost-effective. If we build our brands and showcase our products we can find buyers. There are clear signs that buyers are now looking at India seriously".
Funskool started exporting its own brands to the UK and tied up with ABGEE Corporation for distribution arrangement. Next up are African countries and distribution in Colombo, Bhutan, Nepal and Maldives. At present exports contribute around 8 per cent to Funskool's turnover. Lego contributed to 15 per cent of its Rs 100-crore revenue last year.