The toy industry saw significant growth in 2020 amid the COVID-19 pandemic as parents turned to toys to keep children engaged while they remained homebound. During this period, some categories such as building sets, board games, and digital games have grown in popularity, generating sales for their manufacturers.
Looking ahead, the general feeling appears to be that this strength is likely to continue in the near term as long as the effects of the pandemic persist and outdoor entertainment options remain limited. Once life returns to normal and children come out to play, this momentum should subside and growth patterns will normalize.
Based on NPD group data, U.S. toy retail sales amounted to $ 25.1 billion in 2020, reflecting 16% year-over-year growth. Sales surged around mid-March, when foreclosure measures were widely imposed, and again in October, with the start of the holiday season. The year was also marked by a spike in online sales, which increased 75% year over year. The global toy industry grew by 10%.
Major toy makers Hasbro Inc. (NASDAQ: HAS) and Mattel Inc. (NASDAQ: MAT) benefited greatly from increased demand for their products and growth in online sales last year. Hasbro saw 15% gaming revenue growth in 2020 while its Wizards of the Coast division generated $ 816 million in revenue during the year, up 24% year-on-year.
Wizards’ growth was led by Magic: The Gathering and Dungeons & Dragons, which saw revenue gains of 23% and 33% respectively. The Wizards unit is almost halfway to its goal of doubling revenue from 2018 to 2023.
Mattel has witnessed strength in categories such as outdoors, games & puzzles, and construction sets in 2020. Based on data provided on its Analyst Day, Mattel occupies a leading position in dolls , which is an $ 8 billion super-category, according to NPD, thanks to its brands Barbie and Polly Pocket. The vehicle category, valued at $ 3.7 billion, grew 8% in 2020. Mattel’s Hot Wheels, Matchbox and Disney-Pixar Cars are growing well within this category.
Mattel is seeing significant momentum in the $ 6.9 billion games category through its UNO, Pictionary and Scrabble brands, each of which saw double-digit growth during the year. In the $ 6.3 billion building sets category, Mattel’s Mega brand is just behind world leader Lego. Mega saw double-digit growth in 2020.
Based on ReportLinker data, the global toys, dolls and games market is expected to grow from $ 97.99 billion in 2020 to $ 102.26 billion in 2021 at a compound annual growth rate (CAGR) of 4.4%. The market is expected to reach $ 135.66 billion in 2025 at a CAGR of 7%.
Looking ahead to this year, Hasbro expects its traditional toys and games business to grow in line with or ahead of the industry. Its Wizards of the Coast and Digital Gaming segment is expected to grow faster than the rest of the business.
The digital games market has over 2 billion consumers worldwide and $ 150 billion in revenue. Hasbro sees a significant opportunity in this space. This year Hasbro plans to release several new Wizards-branded games in development. Over the past five years, Hasbro has spent $ 210 million on digital game development, which is expected to generate hundreds of millions of dollars in revenue over the medium term.
Hasbro estimates that over the next five years, categories such as games, figurines, plush, arts and crafts, and outdoor sports will achieve an addressable market opportunity of over $ 30 billion in the world. The company occupies a leadership position in these categories and estimates that simply maintaining its share over this period could generate $ 500 million in revenue.
For 2021, Mattel is working to drive growth and expansion with the launch of new products in its doll and vehicle categories. In the games category, the company is seeing momentum in digital games and rolling out variations for its board games like Pictionary and Scrabble. Mattel is also seeing growth in the plush and action figure categories and for 2021, the company expects accelerated growth in the action figure category to overtake the industry.
In summary, the toy industry is expected to experience significant growth through 2021, but not at the levels seen in 2020, as the demand for toys and collectibles will remain stable for the foreseeable future.
Click here to learn more about toys and play stocks