If you have children – or indeed if your memory goes back as far as your own childhood – you are probably aware of the symbiotic relationship between the entertainment industry and the toy manufacturing sector.
Pick any major movie, TV series or game that appeals to children or young adults and chances are the branded toys will be available in retail outlets around the world.
It’s a lucrative field for the world’s big toy brands – such as Lego, Hasbro and Mattel – and also bodes well for entertainment producers. Estimates vary but according to Grandview Research, the global toy market was pegged at $291 billion in 2021, growing to $308 billion the following year. Branded toys are an important component of the overall total.
These are figures that whet the appetite of entrepreneurs and investors alike. After all, there is nothing more attractive than a large market. But there is another question to consider. Is the branded toys market open to disruption in any way? Is there room for entrepreneurs to step up, do things differently and eventually carve out their niche?
Darren Garnham is the CEO of Toikido, a two-year-old British company that makes toys for entertainment industry brands. As of now, it is selling in 100 markets around the world through 70,000 or more points of sale.
When I spoke with Garnham, I was eager to ask him about the realities of being a young business competing with well-established toy makers, while trying to transform his two-dimensional assets into three-dimensional ones with entertainment companies. There was also talk about introducing the products.
a track record
As Garnham acknowledges, it’s much easier to break into the branded toys space if you already have an industry track record. “Before starting the company, I worked in retail, entertainment and toys. I ran the Universal Studios brand team,” he says.
So why give up a high-profile and possibly well-paid job?
Well, as is the case with many modern entrepreneurial stories, the pandemic was the catalyst. This was partly because Garnham began to re-evaluate his priorities, asking himself whether he wanted to be in a job that required a lot of travel away from home and family. But there was another practical reason. “Large companies were responding to the crisis through furlough schemes and job restructuring. It was a great time to assemble a team,” he says.
All well and good, but how does a nascent business begin to break into a long-established market? Gurnham says his approach was to offer something different to potential partners.
In practice, it usually takes about 18 months to take a toy concept from design to retail outlet, he says. Given the number of balls it is perhaps not surprising that you have to juggle. The studios that own the intellectual property have to plan their own campaigns. On top of that, toy deals have to be negotiated and design and manufacturing times have to be taken into account.
“We set out to streamline that process,” Garnum says. “And we run Toikido like a tech company.”
Hence a lot of internal processes have been sped up, meeting time has been kept to a minimum and decisions have been taken faster. But that leaves out the other side of the equation. IP owners will also have to move faster to reduce the time to market by 6-8 months. Maybe faster than usual. Is this the problem?
Gurnham says entertainment companies themselves are looking for more speed. He cites a project for Netflix based on the show called Back to the Outback. “They chose us because we were the only one who could deliver in four months,” he says.
To date, Toikida’s list of media partners includes the aforementioned Netflix, Apple, Roblox, and Skydance Animation.
In addition to developing toys with partners, the company will be marketing assets based on its own IP in the shape of Pinata Smashings, in partnership with PMI and Character Options.
So how is all this funded? Garnham says he initially sold shares in Callum, a company he invested in. Since then, the business has attracted investment from Gary Vaynerchuk, CEO of US-based media agency VaynerMedia. The relationship was about much more than investment. “We did a project with Gary that saw us putting products using his brand in every Macy’s store in America,” Garnum says.
All of this sounds ambitious for a business with a small team. The key to getting things done has been relationships with three manufacturing partners and a network of distributors. Again, a background in industry helped Garnham and his team establish those relationships. Last year there were sales of £60 million, making a profit of £4 million.
And Garnham sees room to grow. “We want to be a $200-300 million business by 2025,” he says.
The toy industry is huge, but also – at least in terms of entrepreneurial activity – under the radar. But, it seems, there are opportunities to quickly set up profitable businesses. That said, for branded toy producers, a background in the field probably doesn’t hurt.