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Tiny Playmates Help Lego Group Rebuild

Forced to Reinvent Itself After a Record Loss, Company Rose From Popular Childhood Staple to Sharp Brand

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Lego opened in 1932, when Ole Kirk Christiansen started making toys to cheer kids up during the Great Depression. The rise from popular childhood staple to a sharp brand, however, started only after Lego posted a record loss of $225 million in 2004 and was forced to reinvent itself.

Lego Minifigures
Lego Minifigures

The company sold the Legoland theme parks, axed separate products for girls and laid off workers. It then refocused efforts on core products, which included refining Minifigures. For the past five years, Lego -- still owned by the founder's family -- has enjoyed double-digit growth.

Minifigures are the top-selling toy in the U.K., despite being priced at only $3.75. Though generic when they were introduced in 1978, the tiny toys have gradually become more articulated. They have been pivotal in the success of the Star Wars and Harry Potter Lego sets, in which they closely resemble the characters.

In 2010, Lego packaged Minifigures as a collector's item, selling them in sealed bags that conceal their identity until opened. That encourages swapping to obtain a full set.

David Buxbaum
David Buxbaum

"Lego Minifigures are great avatars for children -- they are extensions of themselves and their imaginations," said David Buxbaum, director-marketing for Lego U.K. A 10-year veteran of the company, he was previously director-marketing for Lego Americas and global director-product development.

"Lego Minifigures are great avatars for children, they are extensions of themselves and their imaginations," Mr. Buxbaum said. "You can tell great stories with Minifigures, and the more you have, the richer the play. But we are a construction and lifestyle brand. Our ambition is that Minifigures will encourage children to play with [Lego bricks]."

The company doesn't spend much on advertising, although it won the Cannes Lions' Outdoor Grand Prix in 2005 and the Print Grand Prix in 2006 for ads from Ogilvy & Mather in Chile and FCB in South Africa, respectively. This year, Lego did an attention-grabbing short film, "The Brick Thief," by Pereira O'Dell in San Francisco.

The brand does a lot with PR to promote creativity and imagination, and Mr. Buxham said Lego magazine is the largest subscription kids' publication in the U.K., with 350,000 readers.

According to Lego, it is the No. 4 toymaker in the world. With sales in 130 countries, it had a 5.9% of the global toy market at the end of 2010, vs. 4.8% the year before, and a 5% share in the U.S. The brand is growing in all its markets, and 2010 revenues were up 37.3%, to nearly $3 billion.

Lego, born in bad times, has weathered the latest recession well.

"The toy industry is more recession-proof than many other industries," Mr. Buxbaum said. "Parents would give up a heck of a lot before they didn't put a toy under the tree for their kids."