The crude conundrum

Daniel Grossman
February 1, 2005

Daniel Grossman

CEO and president, Wild Planet Toys

‘Oil prices rise and fall historically. But even though we take a long-term view on our pricing decisions, we are facing these compounded pressures now and are working to avoid raising prices wherever possible. This means working very closely with our manufacturing partners to keep pricing as consistent as we can.’

George Irwin

Chairman and CEO, itoys

‘With 2004 products, we couldn’t increase our selling prices, which required us to further reduce costs by looking for alternative manufacturing sources deeper in China or for alternative manufacturing materials. We tried to maintain the retail price-point at all costs, and we were successful in every instance. Our product lineup for 2005 required us to be very careful in our pricing strategy, so as to not over-price the new product relative to existing items and make them look uncompetitive out of the gate. Again, we are succeeding by working closely with our suppliers and sharing in the cost increase. In the end, we all hope that oil prices will come back down to 2003 levels in the coming months.’

Isaac Larian

CEO, MGA Entertainment

‘MGA prides itself on coming up with innovative product, year after year. We believe that if an innovative product is offered to the consumers, they will buy it. The increased oil and gas prices have had a major impact on the cost of products, and retailers are pushing hard to keep prices in check. Thus, it has been important to diversify our retail placement in today’s marketplace. We have been able to sell into not only the toy departments of mass merchants, but also into their sporting goods, stationery, home décor, furniture and impulse-buy sections. Outside of mass, we also have strong sales nationwide at supermarkets, drugstores, electronics retailers and clothing & accessories stores.’

Lou Novak

President, Playmates Toys

‘Although recent oil price spikes have resulted in an increase in plastic resin prices and transportation costs, these increases are not the only challenge facing the worldwide toy industry. Labor shortages and infrastructure difficulties in China during the past year have also resulted in elevated costs across all manufacturing sectors. As a U.S.-based promotional toy marketing company with deep roots in the Hong Kong/China OEM industry and long-term relationships with Chinese manufacturers, Playmates was able to partner with these vendors to mitigate the negative impact that raw material pricing and other market forces had upon the price paid by consumers for its products in 2004. Playmates has selectively increased prices for 2005 on high-resin content products. Should historically high oil prices prevail, this pricing strategy will be extended to a broader range of products.’

Patti Saitow

VP of global marketing services, Radica Games

‘The rise in oil prices has certainly affected our business since all of our products are made from plastic. The impact of fuel increases on transportation costs has also contributed. This upward price pressure has caused us to increase prices for our fall 2005 products. Additional marketing dollars would help move product, but would also further erode our margins, so we’re not changing our advertising strategy in light of the raw material increases. As for our Chinese manufacturing facility, we are more aggressive in how and when we purchase raw toy materials to ensure we’re buying at the best possible prices available.’

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