Penetration of licensed toys in overall traditional toys and games registered an increase in almost all markets over 2008-2014. This is because licensed toys have a character narrative and multimedia marketing strategies, including film releases, which help drive sales of these products. However, licensed toys tend to be more expensive than their non-licensed equivalents.
By looking at the top markets globally for licensed toys and comparing these with forecast disposable income per capita, it is possible to determine which markets offer the best opportunities for toy manufacturers.
Top Markets by Value and % Split for Licensed Traditional Toys and Games 2014 vs Annual Disposable 2014-2030 CAGR Growth
Source: Euromonitor International
China, Brazil, Mexico and Russia are anticipated to see the strongest growth in per capita annual disposable income over 2014-2030, suggesting that emerging markets could offer strong growth opportunities for licensed toys. China offers the greatest opportunity, as it has the lowest percentage of licensed traditional toys and games, at barely around 15%, while it is also predicted to see the strongest growth in per capita annual disposable income over the forecast period. Despite this low percentage, China is still the fourth largest market for licensed toys globally (behind the US, Japan and the UK), reaffirming its position as a strong future market for licensed toys, which is still far from reaching saturation.
Among the largest traditional toys and games markets globally, as emerging markets, Brazil and Mexico stand out, with licensed toys penetration sitting at around the 30% mark in value terms. Brazil is Latin America’s largest licensed traditional toys and games market in absolute terms, with actual sales exceeding US$1 billion mark for the first time in 2014, up from US$617 million in 2008. With 47.7 million, Brazil also boasts the region’s largest 0-14 year old population, where traditional toys and spend per child stood at US$77 in 2014.
In 2014, the US was the largest market for licensed products in traditional toys and games, with sales of just shy of US$5.9 billion. Licensed toys accounted for only a 27% share of total traditional toys and games sales, so there is still plenty of room for growth before the US market reaches saturation. However, growth in per capita annual disposable income in the US over 2014-2030 is forecast to be slow, although it is already very high. Even if there is no increase in average disposable income in developed markets such as the US, licensed toys should still flourish, due to the already high levels achieved. Other developed markets, such as Japan, the UK, France and Germany, display similar patterns.
Emerging markets’ per capita disposable incomes are forecast to rise, meaning that gaining a foothold in the licensing market in these countries should also pay off in the future. Therefore, toy manufacturers need to focus on spreading investment in licensed traditional toys and games, and continue to invest in developed markets whilst looking to grow in emerging markets, as both offer strong opportunities for growth.
Developed markets already have the per capita disposable income to afford the more expensive licensed toys. However, it might well prove a challenge for toy manufacturers to offer licensed products that are culturally relevant to each country, as not all demographics will necessarily appreciate the same licensed characters. In this regard, pre-school could well be an ideal category, since franchises targeting pre-school travel well, as there is no language barrier. Frozen and Peppa Pig could be good examples in this regard. After this age, a child’s culture becomes more pronounced, making the cross-cultural or cross-country engagement more difficult and more costly to execute.