The second US toy company deals with tariffs by reducing its manufacturing operations and leaning towards the biggest brand-starring movies.
“We used to be called toy makers,” Kreiz said at the UBS Global Consumer and Retail Conference in NYC. Now, we've become IP [intellectual property] company. “
This transition comes as Mattel (1 second Hasbro) is cutting back on manufacturing operations and collecting royalties, leaning towards licenses for hot properties such as Barbie, Hot Wheels and UNO.
The success of the 2023 blockbuster Barbie film has created a mini pink revolution that Mattel cashed in as more than 15 other companies created Barbie-inspired apparel, furniture, linen, jewelry and even toothbrushes.
At the same time, the El Segundo, California-based company has closed or consolidated five factories this year, including its sixth factory, the CEO said Thursday.
Mattel began blocking manufacturing operations six years ago before tariffs became a hot button issue, Kreis said.
Mattel's goal is to reduce dependence on China, which accounts for around 40% of its production, and develop relationships with other low-cost countries.
It is currently manufactured in seven countries, including Mexico, which faces potential 25% tariffs since April 2nd.
However, the 20% tariff on goods made in China represents an existential threat to the toy industry, which earns 80% of goods in China.
Mattel executives previously said that Tariffis is likely to raise the costs of toys this year. Other toy companies are also rushing to find an alternative to China.
“We don't think a single country will account for more than 25% of production,” Mattel's chief financial officer Anthony Dilvestro said at the meeting. He did not provide time frames for these manufacturing targets.
Meanwhile, Mattel has filmed two London films, Masters of the Universe and Matchbox in Morocco.
“We have 14 films and television products in development,” Kreis said. “There's no need for a Barbie movie success,” to have a positive impact on the company.
Last year, sales of hot wheel products overturned Barbie-related products, Mattel said.
