Mexico is both the world’s haven and battleground for toy makers

Mexican toy makers try to rely less on Santa and more on nostalgia.

“If someone told me they were starting a toy company now, I’d tell them not to do it,” Ángel Manuel Algara told The Mexico Political Economist. He’d know. Algara is both a representative of the Mexican Toy Industry Association (AMIJU) and the Chief Marketing Officer (CMO) of Juguetes Mi Alegría, a Mexican toy company.

It really is a thankless industry. According to AMIJU, about 65% of toy sales are made between December 10 and January 10. This unexpectedly turns the sector into a “just-in-time delivery” industry alongside the perishables or high tech sectors.

But toys aren’t commodities nor do they expire, they are instead subject to some of the choosiest customers in the world: children and their parents. Their demand for only the trendiest products make planning extremely difficult, and because of the intense seasonality, companies only really have one shot.

“The industry must reinvent itself every year,” said Algara, reacting to each film, trend, or meme that captures kids’ imagination.

“We have to be very aggressive and swift when it comes to planning.” For instance, the characters for the Lilo and Stitch movie might have flopped while Shrek took off, so the industry must fight to ditch all its blue plastic and tussle with competitors for green. There is an actual ongoing battle between Zuru and MGA—two global toy manufacturers—over ownership of the term “mini”, because that’s what kids want now.

And it’s not like most toys nowadays are just the simple plastic or felt products of yesteryear. They are increasingly complex, requiring global supply chains and economies of scale.

“But, over the years, we’ve made all the mistakes, we’ve been on the verge of closing down many times, and we’ve compounded our knowledge,” said Algara. So, though he wouldn’t suggest a new company go into toys, he believes that it is worth fighting on for the current contenders.

The ruthlessness of the business provides that famous “moat” companies often refer to when asking what prevents competitors from entering a sector. The toy industry may be under siege, but many manufacturers have leveraged their advantages in Mexico to build global empires.

A game of Risk