DENMARK: LEGO'S BILLION-DOLLAR BRICKWORKS.

DENMARK: LEGO'S BILLION-DOLLAR BRICKWORKS. - Wholesomeness in Toyland may have gone out with the Ovalteenies but it's still producing profits for the Danish toymaker. Changes are under way, though, driven by the need to widen both its age range appeal an

by Charles Darwent.
Last Updated: 31 Aug 2010

Wholesomeness in Toyland may have gone out with the Ovalteenies but it's still producing profits for the Danish toymaker. Changes are under way, though, driven by the need to widen both its age range appeal and its market spread.

As if the world of royalty were not sufficiently hallucinatory, HM The Queen will have a new mirage with which to contend come next spring. Her Majesty has presumably managed to come to terms over the past 30 years with the fact that her view north from Windsor Castle has sporadically included marauding warthogs and the odd herd of wildebeest picking its way glumly over the Berkshire greensward. By next April, however, these residents of what was until recently Windsor Safari Park will have been replaced by a spectacle altogether more bizarre.

Should our sovereign train her binoculars northward after this date, she will find Herself staring at a bit of downtown Paris, complete with the Eiffel Tower, flowing Seine and working bateaux mouches. Should the royal vision be particularly acute, HM will note the disturbing fact that this entire mise-en-scene is constructed from hundreds of thousands of teensy plastic bricks. If next year's Christmas address seems a little wild-eyed, we will know the reason why.

If it is any comfort, Her Majesty is not the only person who will have had problems dealing with Windsor Safari Park's departing fauna: 'There was a lot more to clean up after the hippos than we had thought,' remarks Christian Majgaard, in faintly awe-struck tones. Corporate vice president at Lego - the Danish toy company that has spent the last 63 years turning its product into one of the world's most successful generic commodities - Majgaard is in large part responsible for Legoland Windsor, home to the aberrant piece of Paris mentioned above.

Majgaard's job has involved a clean-up in more senses than one, however. When Legoland Windsor opens its plasticised portals to its target audience of two-to-thirteen-year olds next spring, it will be pointedly different from existing British theme parks such as Alton Towers. Indeed, Majgaard - based at Lego's headquarters in Billund, Jutland - prefers to describe his 150-acre empire as 'a family park rather than a theme park', its rides as 'pink knuckle rather than white knuckle'.

Typical of the entertainments on offer to Britain's moppets at Legoland Windsor will be a driving school in which pint-sized punters will be able to muse over the arcana of road safety and courteous motoring in minimobiles fashioned to look like (you guessed it) Lego bricks. 'We feel that the driving school communicates something about Lego's values in a way that we would want them to be communicated,' observes Bob Montgomery, Legoland Windsor's Canadian head. 'Legoland will not be about gratuitous fun, but about "fun learning". We think this ethos will appeal to the more conscientious parent.' Conscientious parents among you may be forgiven if you are by now struggling to suppress hysterical laughter. As anyone who has recently read a letter to Santa will know, the '90s child is not noted for its fascination with road safety. Wholesomeness in Toyland went out with the Ovalteenies. What any infant worth its salt wants these days is a hand-held video game in which steroidal mutants tear each other's arms off and then eat them.

If all this would appear to conjure up the soulful image of Messrs Majgaard and Montgomery standing alone and forlorn in Legoland come opening day next April, however, consider the following statistics. Although finding definitive figures for the Lego group's financial performance makes haystack-needle-hunting look positively elementary - Lego's equity is still wholly owned by the secretive descendants of the group's founder, Ole Kirk Kristiansen, and direct questions in Billund tend to be answered with a knowing Danish wink - compulsory accounts for the 22 Lego A/S group companies registered in Denmark show that gross sales in 1994 topped DKK5.7 billion (£600 million), up from DKK5.3 billion (£558 million) in the previous year.

If, thanks to heavy capital investment, post-tax profits fell from DKK518 million (£54.5 million) to DKK471 million (£50 million) over the same period, it can hardly be held to herald disaster: Legoland Windsor alone comes with an £80 million-plus price tag, a sum that has been entirely self-financed from within the group. Consider that these figures do not include the sales and profits of the 23 further Lego group companies registered in Switzerland and elsewhere, and you will see that we are talking an awful lot of little plastic bricks: well over 100 billion since the first trundled off the Billund conveyor belt back in 1949.

Given the apparently feral nature of the modern child, what makes this success the more remarkable is that it has so far been achieved - in Majgaard's words - 'without ever, ever letting down the original Lego ideal'. Philologists among you will thrill to note that the word 'Lego' (a catchier trademark replacement for Kirk Kristiansen's original 1949 suggestion of 'Automatic Binding Bricks') is an elision of the Danish words leg godt (play nicely).

This faintly worthy vision of a world in which children never use four-letter words and always have clean hands has been the guiding light for Lego's corporate strategy ever since.

Whether in spite of or because of this Reithean worthiness, Lego's ubiquitous little brick has thrived worldwide. In the words of Billund's corporate communications person, Hanna Boutrup, 'Lines such as Pirates or Aquazone do have goodies and baddies, but they are still very much on the safe side. There are no big muscles or advanced weapons, for example. Of course,' adds an honest Boutrup, 'children can use their own imagination to put these things into the product anyway. I once took a journalist into our playroom and the first thing we saw was two little boys going 'da-da-da' at each other with pump-action shotguns made out of Lego. He said, "How nice".' At the same time, Lego has had to compete with the attractions offered by an increasingly sophisticated toy market for the highly discretionary spend of an increasingly sophisticated child. 'Children do seem to grow up more quickly these days,' concedes Majgaard. 'Our mathematical definition of a child is someone aged nought to sixteen, but in reality for Lego it is nearer nought to fourteen.' Boutrup's version of events is even less sanguine: 'If you offer a European child of 12 ordinary Lego now, they would probably say "Yuck",' notes Lego's communications lady, felicitously.

Accordingly, one task recently taken on by Billund's hyperactive R&D folk has been to expand the steadily narrowing age-range for Lego's product. 'Originally, the Lego brick was sold as a raw material,' says Majgaard. 'You took one brick, and the story was that another one snapped on to it easily. Then we began to market themed sets, which turned the product into a toy and allowed people to think of it more as a gift. Now we concentrate more heavily on branded theme lines, aimed more rigidly at specific age groups.' Typical of these is the company's Technic line, a complex and faintly Meccanoesque number aimed at capturing the hitherto elusive junior teen market. Technic also demonstrates another departure in Lego's marketing philosophy, however, and one whose mention provokes a faint but palpable embarrassment in the ethically-minded corridors of Billund's futuristic HQ. Where part of the original product's worthy charm lay in its scrupulously Scandinavian unisexuality, Technic's tool-box packaging and sportif colours are clearly intended to appeal primarily to the male of the species. Equally, the curiously-named Belville - all domestic bliss and pastel shades - has obviously been created with some ideal of femininity in mind: an ideal whose vanity sets and nursery units might be expected to drive the more feminist-minded parent to acts of mini-arson.

'We have dared to assume in our '90s development strategies that certain things are right for girls and others are right for boys,' concedes a mildly exasperated Majgaard. 'We do not want to overemphasise it, however. Girls are just as good builders as boys, but they need to build themes they like. So we're faced with having to construct sets in a way that we know will please them: using pinky colours, for example. This is not some idea made up in our mind of what girls are like. We have to do it.' If Lego's grudging foray into the world of gender bifurcation has been driven by necessity, then changes in the dynamics of its traditional markets have also caused a certain furrowing of the brow in Billund. In 1994, for example, real growth in sales in the group's single biggest market - Germany - dropped to 2% against a predicted figure of 13%.

Majgaard's reasoning is that Lego's experience was only part of 'a generally very flat German retail market' and that 'when you have been in a market for many years, you do not look for wild growth anyway'. Nonetheless, a general stagnation in the company's European sales may well point to the timeless fact that the more mature your market, the harder you have to work to grow it. There are currently 1,700 separate Lego elements in active production, and a new one rolls off the Billund assembly line every 3.5 days on average: a frenetic pace demanded by the need for constant (and costly) product innovation. To add to this depressing picture, the group's US sales were down by 8% in real terms during 1994, the first actual fall in 17 years. That this was due at least in part to the ecstatic reception given to a new and competing construction product - K'nex, produced in partnership with the American toy giant, Hasbro, and soon to be manufactured in Europe - must have concentrated the minds of Billund's strategists wonderfully of late.

Not surprisingly given all of this, one answer has been to expand Lego's market horizontally rather than vertically. Curiously enough, the direction in which Jutlandish eyes have been turning in this respect is eastward. Sales in Japan grew by 14% last year, and those in Korea by a whopping 50%: now Billund's salesmen are hoping to replicate these figures in India and China. 'The point is that the growth in wealth in both countries is above the historical average,' reasons Majgaard. 'Times are rapidly coming when families in India and China will have the joy of doing more than merely surviving, and that's when they will start to think of buying quality toys for their children.' There are problems inherent in this geographical shift too, however. Perhaps the most irritating bugbear in Billund has long been the easy replicability of Lego's billion-dollar bricklet. Although the company's legal department has a reputation for being one of the world's most ferocious - it generally has around 30 lawsuits on its hands worldwide at any given time - the proliferation of Leggo/Ligo/Logo lookalikes has tended to be concentrated in those same Far Eastern markets that are now the object of Majgaard's attentions. 'There is less of a tendency in the Far East to follow intellectual copyright legislation,' notes Lego's faintly weary corporate VP.

A more immediate problem is, of course, that Peking and Delhi are noticeably further away from Billund than is, say, Dusseldorf. According to Hanna Boutrup, one of the great strengths of Lego's corporate structure heretofore has been that 'you have never needed to ask for a committee's opinion on anything. You just ask KKK' (the slightly unfortunate cognomen by which the group's current CEO Kjeld Kirk Kristiansen, is known to his employees). This will clearly be more difficult from deepest China, and the group has accordingly spent the last year engineering itself an entirely new compass-management structure, intended, says Majgaard, 'to give geographical divisions more authority, to allow the organisation to adapt more rapidly in a changing world'.

But it is an interesting thought that the success of this most familial of products may lie, at least in part, in the familial nature of Lego's management style. This extends beyond the paternalist influence of KKK. According to Majgaard, corporate sons and daughters who please are allowed an unparalleled degree of career flexibility moving, for example, from product development to market research to design with dizzying alacrity. Given that the key word for success at Lego in the '90s has been innovation, this indulgent paternalism has paid metaphorical (if not actual) dividends.

However, together with the recent death of Godtfred Kirk Kristiansen, KKK's septuagenarian father and predecessor as group CEO, the new nod towards global management seems potently emblematic of the changes taking place at Lego. Part of its product's multibillion-dollar charm has in the past been a certain folksiness, a quality that in turn has carried a distant scent of Jutland and of family. Lego has, in other words, been a very big company that has behaved like a very small one. How easily this quality can be replicated in a global world remains to be seen.

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