HONG KONG -- China's economy may be slowing down, but that is not stopping Lego Group from investing more than 100 million euros ($113 million) in a new plant there.
Sales in Asia, the Danish toymaker's fastest-growing region, have been increasing at an annual clip of over 50% in recent years. Lego's new factory -- in Jiaxing, about 100km southwest of Shanghai -- will soon launch with a staff about 230. That figure is slated to rise to 600 by the end of the year, with full production set to begin by 2017, backed by a staff of about 2,000.
John Goodwin, chief financial officer of Lego Group, spoke with Nikkei about the company's growth plans. Goodwin joined the company in 2012 after 22 years in a variety of senior management positions at U.S. consumer goods manufacturer Procter & Gamble.
Q: How is Lego performing in Asia now?
A: We grew in the strong double digits in Asia in the first half of 2015. We don't actually give out geographically specific data, but within Asia, China and Japan did particularly well. China is our fastest-growing market. Japan had a strong performance in the first half of this year as well.
Q: Do you have different strategies for the U.S., Europe and Asia?
A: We develop a global portfolio anchored around the Lego bricks, and that will continue to be our central approach. We are increasing our research into children's play patterns in the Asia region so we have a better understanding of how Asian children play relative to their peers around the world.
Creativity and innovation are things that are universal and global. All children love to create and love to have opportunities by which they can translate their imagination into physical products. What we are researching is how to communicate that approach effectively to children and also their parents so that they can see the great versatility of Lego bricks.
We have a wide portfolio of products, so what we are doing is to understand on a region-by-region basis what parts of our portfolio are appealing. And then finally we are building our manufacturing capabilities. That is an important part of our overall operating model, to be close to the markets we are supplying to ensure that we can adjust the portfolio lineup to the interests and ... appeal to the consumers of different markets.
Q: Which Asian city or country are you focusing on the most?
A: Not so much cities; [rather], we have a focus on some established markets where we've been around for a while, [namely] Japan, Korea and Singapore. In terms of new markets, China is a key new market for us which we have been pushing into. Quite recently, we opened up activities in Malaysia as well, where our partner Merlin has a great Legoland [theme park].
We will continue to invest in and grow the China factory in line with the growth in our Asia business. We expect it will be able to supply about 70-80% of our total Asia demand. It is a very big factory, and while we will begin packaging Lego products this year, construction will continue.
We have an office in Singapore as well as Shanghai already. As we are expanding our Asian presence, we expect to need to move into a new office in Singapore in the near future.
Q: China's economy is slowing, as is the manufacturing industry there. Why is Lego choosing to open a factory in China now?
A: We are a long-term investor. We are a family-owned company. What's important for us is that we develop our business over the long term. Roughly 60% of the world's children from 0-9 years old are in Asia.
For a complete focus on children's development of creativity through the amazing Lego bricks, it's absolutely essential that we take a long-term view in being present in that critical region.
Q: What challenges and risks will Lego face in the future?
A: The risk is always for us to be able to keep innovating. Children are very discerning. They want products that are relevant for them. So we have to keep innovating and we see that there is a massive opportunity for us. About 60% of our products are new every year. So we have a big innovation machine lined up. And it is important that continues to function really well.
Interviewed by Nikkei staff reporter Zheng Zhi