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Toy manufacturers and retailers are considering stepping up local production to combat the sliding rupee. While most have no option but to increase prices, the rising cost of imports is forcing them to source toys within the country and make them more affordable for the coming festival season.
John Baby, Chief Executive Officer, Funskool, said, “As the rupee continues to depreciate, we are looking at ways to increase domestic production and intend taking it up to 75 per cent of our turnover. We have tried to stagger the price hike last quarter and not pass on the entire hike in import costs. But we may not have an option but to raise prices by 30 per cent in the next quarter.”
The Chennai-based manufacturer and distributor of toys is also considering manufacturing more private labels in the pre-school section. “We did launch our own infant brand under Giggles last year and now intend extending the range in the pre-school segment by developing more products under our private labels,” added Baby.
Global brands
Today, more than 50 per cent of Funskool’s turnover comes from global brands which it imports such as Lego, Tomy Takara of Japan and Ravensburger of Germany. With manufacturing units in Goa and Tamil Nadu, the company is growing at 20 per cent compounded annual growth rate (CAGR).
Unlike Funskool which has a manufacturing base, Germany-based Simba Toys is actively scouting for one to hedge itself from the rupee slide in the long term.
Shree Narayan Sabharwal, Business Head, Simba Toys, said, “At present, just about 1-2 per cent of our products are being locally manufactured. We are exploring opportunities for local manufacturing and will definitely have a manufacturing base in India in the long term. For the moment though, we may have no choice but to increase prices in sync with the dollar appreciation, which is almost 20 per cent right now. The festival season is just starting and the new consignment which comes now will have higher prices.”
Currently, Simba Toys is in talks with Indian companies for manufacturing plush toys and board games.
“Investments would be made by the parent company in Germany for buying a stake in Indian companies. We would like to treat India as a sourcing base, since labour costs in China have become expensive,” added Sabharwal.
Slowdown pressures too have started seeping into the category. “Footfalls in malls are down. There has been a bit of slowdown in the toys category at 12 per cent this quarter, compared to 14 per cent in the corresponding period a year ago. However, toys are not a discretionary item compared with big-ticket items such as holidays,” said Baby.
Despite mulling price hikes and local production, both Simba Toys and Funskool are not willing to put on hold the expansion of their retail footprint. Being the exclusive distributors for Lego Toys, Funskool has recently launched the first Lego store in Chennai and intends expanding to other metros with more toy brands from its stable. Simba Toys is also venturing into non-metros with 100 stores planned by 2014.
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