MONTREAL - As the toy industry struggles through the recession, privately owned Spin Master continues to demonstrate it's golden touch in developing a lineup of must-have toys.
Rather than rely on associations with blockbuster movie licences, the Toronto-based giant has consistently come up with new ideas that have transformed it into North America's third-largest toy firm and a growing children's entertainment company.
"At the end of the day, those who create the content get rewarded the most," says Anton Rabie, who founded the company which was first called Seiger Marketing with fellow University of Western Ontario students Ben Varadi and Ronnen Harary in 1994.
Renamed Spin Master, its annual sales are said to exceed US$750 million a year with 750 employees around the world.
Spin Master's latest creation, the Liv doll, has just hopped on store shelves and is already arguably second only to Barbie in the chase for the affection of young girls.
Developed after years of studying the perilous doll market, Liv can strike many movements and has exchangeable wigs.
Harary said parents were tired of their daughters playing with dolls that don't represent reality and that have a sexual association.
"They wanted a cleaner message so we tapped into that with Liv's and I think it's resonating with a lot of parents," he said.
The new doll hits shelves as U.S. toy industry reported sales fell by two per cent in the first eight months of 2009 to US$10.28 billion, according to NPD Group.
Companies have responded by reducing the price of their offerings. But they will be rewarded even in tough times with a breakthrough and truly innovative product, 38-year-old Rabie said, citing a top toy retailer executive.
Spin Master has employed some of the same strategies with Liv that have made Bakugan, Tech Deck, Air Hogs, Yo Gabba Gabba and Moon Sand favourites among toy buyers and children.
Liv has a strong online component, aided by the company's decision three years ago to establish online studios for marketing.
"This year we have the highest batting average than we've had in 15 years," Rabie said in an interview, before the company was set to unveil its new creations to eager retailers.
Although tight-lipped on specifics, Spin Master expects to launch 15 new products next year, the most in its history.
It is also working on several television shows at its Toronto studios and its own movie with Universal Studios based its Bakugan card game and action figures is set for theatres in 2011.
"It's not just about making PVC toys, " Rabie added, noting the company's reputation has allowed it to attract top inventors and industry experts.
Toy analyst Gerrick Johnson of BMO Capital Markets called Spin Master one of the best performing toy companies.
"Right now I'd say they have the magic touch out there," he said from New York.
"Retailers are eager to get product that they put out because they do an excellent job of identifying good product, developing and marketing it."
Its product line is more stable than others because it is mostly internally developed and not dependent on the success of the next big movie, he added.
"When you rely on movies, sometimes licences can be toy heroin. You rely on a quick fix of licences but then when it's over you have to replace it."
Among toy buyers, Spin Master and Denmark's Lego are two companies that are viewed as doing no wrong these days, added Lutz Muller of Klosters Trading Corp.
"It does everything well. It doesn't miss aspects of the overall marketing mix which a number of other companies do."
Spin Master's reputation was enhanced through misfortune. It was forced to recall its Aqua Dots product two years ago after learning the liquid inside the pens released a hallucinogenic drug when swallowed that landed two children in hospital.
"The buyers were really impressed with the discipline and the decisiveness by which Spin Master handled this," Muller said in an interview.
Johnson added Spin Master's masterful handling of the issue and its successful rebranding as Pixos will be studied by business students.
Spin Master's success in developing toys has given it the financial means to complete acquisitions to complement its core brands. However, it has no plans to go public either to monetize the three founders' wealth or finance a giant takeover.
Rabie declined to comment on reports that Spin Master has considered purchasing troubled Canadian toymaker Mega Brands (TSX:MB) to round out its portfolio with preschool, arts and construction offerings.
Laden down with nearly $400 million of debt, questionable cash flow and other challenges, Montreal-based Mega Brands is viewed by industry observers as no longer the catch it was even a year ago.
"Unless you have to make an acquisition for an overall strategic reason, you'd better to stay away from them and I think that's their philosophy," said Muller.
