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Jakks unveils blueprint for global expansion

Like the pugnacious WWF personalities upon which its action figures are based, U.S. toyco Jakks Pacific is talking about dominating the world. Buoyed by a 15% jump in revenue in the first nine months of 2001 over the same period in 2000 (at press time, Jakks had yet to report its Q4 results), the Malibu-based company is aiming to strengthen its presence outside North America.
February 1, 2002

Like the pugnacious WWF personalities upon which its action figures are based, U.S. toyco Jakks Pacific is talking about dominating the world. Buoyed by a 15% jump in revenue in the first nine months of 2001 over the same period in 2000 (at press time, Jakks had yet to report its Q4 results), the Malibu-based company is aiming to strengthen its presence outside North America.

‘The industry’s leaders [like Mattel and Hasbro] do more than 30% of their sales internationally, so we see this area as a tremendous growth opportunity for us,’ says Joel Bennett, executive VP and CFO at Jakks. He adds that the company’s goal is to increase international sales from between 8% and 9% of its overall business to between 20% and 25% in the next two to three years.

Six-year-old Jakks has strong brands besides the WWF, including arts and crafts lines Flying Colors and Pentech, acquired in 1999 and 2000 respectively. With these franchises in its corner, Bennett says the time is right for Jakks to forcefully push its products globally.

To that end, in November, the company announced a multi-year agreement to let Melbourne, Australia-based toyco Funtastic handle marketing and distribution of its products in Australia and New Zealand. Though Jakks previously used sales agents to manage its products internationally, the Funtastic deal–and all future distribution agreements–will include guaranteed minimums that its distribution partner will have to meet. Bennett says this stipulation gives Jakks greater control over how its products are marketed and merchandised abroad.

On the acquisitions front, Jakks purchased British toyco Kidz Biz for an undisclosed sum last month. Kidz Biz, which was already distributing Jakks’ WWF product in the U.K., posted revenues of US$20 million in 2001. And though KB had some of its own proprietary brands in the sporting goods and science kits categories, Bennett says Jakks bought the company primarily to leverage its distribution infrastructure for further expansion into Europe. ‘We think there’s still a lot to mine in Europe. It’s the next biggest toy market outside of the U.S., so we’ll focus our efforts there initially,’ he says.

As for future acquisitions beyond Europe, Bennett says the company is looking at territories in which WWF programming grabs high ratings–like Japan, where it airs for free (TV Tokyo) and on pay-TV (JSKY Sports TV).

Though Jakks certainly has the financial wherewithal to make several additional toyco pick-ups, Bennett says the company will likely strive to make fewer but larger acquisitions. In addition to cash from ongoing operations which totalled US$31 million in the first three quarters of 2001, Jakks has roughly US$110 million to play with–US$60 million raised from an IPO in ’99 and a US$50-million line of credit from a Bank of America-led consortium–as well as the option of raising more capital on the open market.

Jakks once primarily trolled for North American merchandising rights. But now that the company is extending its reach around the globe, Bennett says it will be able to compete more aggressively for worldwide rights to entertainment properties. ‘Because we’re making an investment in tooling and product development, we can leverage that investment across more markets, so we’ll have a lot more opportunities when it comes to licensing.’

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