Surprising reason Lego wanted people to stop buying its toys

By Abha Bhattarai

Lego have been struggling to keep up with demand for its popular products. Photo / File
Lego have been struggling to keep up with demand for its popular products. Photo / File

Business has been so brisk at the world's most profitable toymaker that Lego last year did something unusual: It began looking for ways to discourage customers from buying its products.

The Danish company scaled back its advertising efforts amid a 25 per cent rise in annual sales, according to Reuters. It simply couldn't make enough toys to satiate demand in North America, and needed a break while it boosted capacity at its factories and increased its workforce by nearly 25 per cent.

"We feel we need to invest, to build some breathing space," John Goodwin, Lego's chief financial officer, told Reuters.

Lego, a family-owned company founded in 1932, has enjoyed booming growth for decades.

The company has released thousands of sets of its eponymous blocks, forging licensing deals with popular brands including Star Wars, Angry Birds and Disney Princesses.

It has also taken on iconic architecture: A model of the US Capitol building is for sale on Lego's site for US$99.99, while a White House set sells for US$49.99. A replica of the Ghostbusters firehouse, meanwhile, is listed for US$349.99.

The company's dominance has also extended into the company's six Legoland theme parks, 125 retail stores and dozens of video games. The Lego Movie, a full-length movie released in 2014, brought in US$468.1 million at the box office.

The company's revenue has increased by an average of 15 per cent a year in the past 12 years, according to Reuters.

The efforts to quell demand seem to have worked - at least temporarily.

Sales in the Americas remained flat during the first half of 2016, according to Reuters. (Revenue in Asia and Europe, meanwhile, continued to grow by double digits.) Overall, Lego's revenue rose 11 per cent to roughly US$2.35 billion in the first half of the year, ahead of the US$1.83 billion reported by Mattel, the maker of Barbie.

But executives at Lego are hoping to ramp up production in time for this year's holiday season, Goodwin said:

"We are working very closely with our retail partners to ensure that as we go into the important holiday season, the back half of 2016, that we've got all of the levers pulled to get back on the growth trajectory."

The company is buildings its first factory in China, and is expanding existing plants in Mexico, Hungary and Denmark. Lego also hired 3500 employees in the first half of the year, increasingly its workforce to 18,500, according to the Wall Street Journal.

"In the past decade we have seen Lego sales growth in the double digits year after year," Goodwin said in a statement in October. "We are of course very excited about this development. [But] the high demand also puts a strain on our factories around the world."

- Washington Post

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