availability of ethnic toys.; Colorful Worlds embraces diversity with its line of Cultural Toys. TOY COMPANIES TAKE UP DIVERSITY COMPETITION, NOT SOCIAL ISSUES, SPURS INCREASED THHNIC WARES

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The face of America is changing. Just ask the kids.

As "cultural diversity" becomes part of the everyday vocabulary, marketers are adjusting to the fact that they're competing in a land where not everyone is or wants to be the same.

The differences have become mainstream: Miss America 1995, Heather Whitestone, is deaf; the ABC sitcom "All-American Girl" is about a Korean-American family and stars stand-up comedian Margaret Cho; Walt Disney Co. will soon release an animated Native American heroine film,

"Pocahontas"; and lesbians and gays have their own cable specials on Comedy Central.

The crucial question is how a product will be marketed in a country that by 2020 will have 325 million people, including 51 million Latinos, 42 million blacks and 21 million Asians.

One way of looking at what the consumer of 2020 will want may be found in the way the child of 1995 is targeted.

Toy companies large and small are focusing more and more on children of various races, cultures and abilities with a growing number of dolls and toys that reflect the shifting population and attitudes as well as an estimated $1.5 billion market.

"Toy companies have taken big leaps in the last few years," said a spokeswoman for Toy Manufacturers of America.

Ivory Dorsey, author of "Universal Appeal: Bottom Line Benefits of Diversity," said toy companies are responding to market demands. "Diversity [in business] has nothing to do with social issues, it has to do with competitive issues."

Marketing support for "Pocahontas," set for a June release, is a prime example. In the aftermath of its heady success with 1992's "Aladdin" (with more than 21 million videocassettes sold), featuring Middle Eastern characters, Disney is working with heavy hitters on more than $100 million in promotional support for Pocahontas.

But the change in the way ethnic groups are represented is most obvious in the plans of Mattel, master toy licensee for "Pocahontas." On top of collectibles and plush and activity toys, Mattel in May begins shipping a line of Native American-theme fashion dolls. The dolls' faces are distinct from Mattel's classic Barbie, having different features and thicker, smoother hair.

While sales figures for the ethnic doll varieties are not available, Mattel said all Barbie versions have done well. The traditional blond Barbie still far outsells the others, with $1 billion in sales in 1993.

The turning point in "ethnically correct" dolls came around 1990, said Wla Eason, president of Olmec Toys, New York. Mattel came out with its Shani doll (now discontinued) and Tyco Toys followed with Kenya, both black.

"Retailers saw for the first time someone else besides myself pitching them," said Ms. Eason, whose 10-year-old company had 1994 sales of $5 million.

Jacob Miles joined the toy marketing ranks with "a social agenda as well as an economic agenda" two years ago. The president of Minneapolis-based Cultural Exchange, with $1.4 million in 1994 sales, said he wanted to help children feel good about themselves.

"The toys needed to be self-reflective, so kids feel like it's them," he said.

Dinkytown Daycare Kids, eight soft dolls, are each of a different race or culture and come with a storybook about them. A wheelchair accessory is available. "We decided we wanted to demonstrate that any kid could be in a wheelchair," Mr. Miles said.

Cultural Exchange sells to Toys "R" Us, Wal-Mart Stores, J.C. Penney Co. and others and expects to hit $50 million in sales within five years.

These retailers have expanded efforts to sell such products. Penney publishes "Influences," a special ethnic catalog; Wal-Mart is establishing a Minority Vendor Council and may set up cultural toy shops in some stores; and Toys "R" Us is starting an in-store merchandising program in stores located in ethnic neighborhoods.

Parents of all races and cultures are changing their buying habits, said David Niggli, senior VP-new business development at FAO Schwarz.

Other well-known companies also have put forth multicultural offerings. Playskool introduced African Kente cloth Soft Blocks, Soft Book and Kente Pets last year and Kids of Color rag dolls (licensed from Olmec) in 1993.

Cutting-edge toy catalog company Hearth Song sells Native American dream-catcher kits and tepees, multicultural crocheted dolls and various crafts. Its pictures show boys with doll baby carriers and kids of many races.

The 10-year-old Sebastopol, Calif., business mailed catalogs to more than 5 million people and had more than $20 million in sales from its catalog and six Bay Area stores in 1994.

Advertising support for multicultural products remains low. Most of the smaller companies do not have budgets for it, and large ones like Mattel do not try to reach specific races.

Lisa McKendall, manager of marketing communications at Mattel, said ads focus only on the traditional Barbie through "TV directed at children," though its mass advertising includes a variety of ethnic children's faces.

But some find such approaches halfhearted. "The bulk of advertising over the last 10 years that tries to incorporate everybody looks artificial," said Carol Moog, a psychologist and advertising consultant based in Bala-Cynwyd, Pa. "Beyond the face game, how do they really relate to other cultures? You really don't want people to think you're doing the `PC thing."'

Ms. Dorsey said big companies will be forced to advertise their new offerings. "Customers now know that they have a choice and they're choosing it. Smart companies are going to build the various dolls, but if you just want to sell your personal opinion, you'd better be prepared to buy it."

Kate Fitzgerald contributed to this story.

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