Is It Time for International Toy Manufacturers to Get More Aggressive in India?

With world’s largest 0-14 year old population alongside increasing incomes and purchasing power, India continues to be an attractive country for toys and games sales. It is projected to be the most dynamic toys and games market globally recording 25% CAGR value growth between 2010-2015. In actual terms, this high growth over the forecast period translates into US$2.9 billion which is the equivalent of total toys and games sales in whole Eastern Europe in 2010.

In the second article of the India series, Euromonitor International looks into the country’s big potential and possible scenarios for coming years.

Competition intensifies as international players enter 

Many international players such as Mattel, Inc, Hamleys Toys, Hasbro International Ltd and brands such as Disney, Simba, Leapfrog, Spinmaster Moose, Vivid and Lego have entered the Indian market in recent times and continue to report strong sales. The Indian market is witnessing higher growth of these international toys due to the absence of larger domestic manufacturers. Competition has also increased among smaller domestic toy suppliers who are mostly regional in their geographic reach, and rely heavily on their price advantage. Even though the share of unbranded toys has been in decline in India, branded toy manufacturers still account for only around one third of total sales indicating a huge potential for international manufacturers to tap into.

India Traditional Toys and Games Company

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Source: Euromonitor International

The competition is likely to increase in coming years, with many foreign brands (both American as well as European toy brands) entering the Indian market due to its high untapped potential. Adoption of local, country-specific content and characters and games is likely to accelerate further as marketers look to push their toys beyond metro cities, to areas where international games are not popular.

Not only for toy sales itself, but in terms of production and manufacturing, India could also present an appealing destination in the future. In the past two years, Chinese factory worker wages have increased 20% per annum and a similar increase is expected for 2012. In the light of rising costs in China, toys and games manufacturers may consider India as a production hub benefiting from low-cost labour. In 2010, India’s wage per hour in the manufacturing sector stood at just Rs40.0 (US$0.9), compared to US$2.4 in China.

India’s rural population is forecast to rise to 877 million people by 2020, although its share to total population would decline further to 65.7% due to continuing urbanisation. As rural incomes continue to grow, the importance of India’s rural market will continue rising to become a significant driver of India’s economic growth. Consequently, Indian rural consumers could offer a huge potential, especially for low-cost, simple products, such as pocket money toys in coming years.

India Traditional Toys and Games by Price Point

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Source: Euromonitor International 

The focus is on providing value-for-money toys that cater to many segments of society. In 2010, even though branded toys were growing, the most preferred price point remained under Rs200 and constituted more than two-thirds of sales. Currently, the pocket money concept for children is limited to the middle/upper-middle class segments in urban areas, with rural areas largely not having pocket money for children. However, this could change in line with the positive developments and improvements in the latter.