Mattel has unveiled a five-pillar strategic plan that will see the largest toymaker in the US make major strides in creating digital content, internet-connected toys and products that promote learning. The strategic focus was presented by CEO Margo Georgiadis, whose six years of experience at Google has undoubtedly shaped the company’s focus since the top job became hers in January.
The strategy will see the company right-size its dividend by more than half to free up resources for reinvestment. According to Mattel, the investment to execute its new strategies in both capital and operating expenditures will total up to US$350 million.
Moving forward, Mattel will focus on building its Power Brands—including American Girl, Barbie, Thomas & Friends, Fisher-Price and Hot Wheels—into 360-degree connected systems of play and experience. A brand development framework will extend these IPs into digital systems, while further growth will be driven by consumer products, gaming, content and live experiences. Mattel also plans to bring new scaled, digitally connected toy offerings into the fold by next fall. In terms of digital content, Mattel spent 2016 fostering digital influencer relationships and capitalizing on the changing nature of marketing in order to grow its credibility and sales. The efforts led to two million new subscribers across its channels, while surpassing 67 million views for its 300-plus toy reviews and unboxing videos—all with a marketing budget of less than US$1 million.
The strategy will also focus on accelerating growth in emerging markets. The toymaker will take a digital-first approach to localize products and will focus on territories including China, India and Indonesia. Mattel predicts its business in China will grow to three or four times larger by 2020, and the company has already made strides in the region, announcing in April that it would expand its partnership with global e-commerce powerhouse Alibaba Group to develop, market and sell playthings specifically designed for Chinese consumers. (The deal allows Mattel to tap into an e-commerce platform that boasts 440 million active buyers as the country’s multi-billion-dollar toy category remains fragmented.) Earlier this week, Mattel and Shanghai-based investment company Fosun Group formed a new joint venture to introduce learning and play clubs for children and families across China in early 2018.
Additionally, Mattel will work to transform its innovation pipeline, shifting to a company-wide approach to manage its portfolio and eliminate obstacles across brands, categories and partners. These changes are designed to encourage more aligned risk-taking across initiatives and speed up its production time, targeting six- to nine-month cycles to develop new products (versus 18 months today).
Plans are also underway to further differentiate Mattel offerings for licensing partners, pursue more co-productions with companies that have shared interests and launch new brands that leverage the company’s expertise in girls, vehicle play, games and STEAM.
The final pillar of the strategy is to reignite Mattel’s culture with the launch of a new purpose, promise and values.
The plan for a new course of action comes as Mattel missed its Q1 sales expectations and reported a 15% drop in global sales for the fiscal first quarter. This followed a difficult 2016 marked by the loss of its Disney Princess license to Hasbro as well as weaker-than-expected sales during the holiday period. And while 2017 is currently trending below expectations, the digital-first focus will see the company make adjustments in effort to deliver sustainable, long-term growth and profitability.