The second-largest toy company in the United States, Mattel, is responding to tariffs on China by scaling back its toy manufacturing operations and focusing on movies starring its biggest brands, such as Barbie.
According to data from Statista, Mattel is one of the world’s leading companies in the games and toys sector, generating approximately $1.5 billion worldwide in 2022 thanks to the sales of its star doll: Barbie.
It’s no secret that one of the films that caused a global sensation this year was Barbie, boosting the presence of Mattel’s iconic pink doll. The Warner Bros. Pictures film, directed by Greta Gerwig, ranked as the highest-grossing movie in the U.S. market for the third consecutive week.
According to company data, it has earned $459 million in the U.S. and Canadian markets, while adding $572.1 million worldwide since its release on July 21. In total, its revenues amount to $1.0315 billion, almost 10 times its production cost — a figure only matched this year by the Super Mario Bros. movie.
Mattel’s CEO to Offset Toy Production with Licensing
According to CEO Ynon Kreiz, who spoke at an investment conference on Thursday, this transition comes at a time when Mattel, second only to Hasbro, has been reducing its manufacturing operations and prioritizing licensing its flagship products — like Barbie, Hot Wheels, and Uno — and earning royalties from them.
“We used to be considered a toy manufacturer,” Kreiz said at the UBS Global Consumer and Retail Conference in New York. “Now, we’ve become an intellectual property company.”
We must remember that the success of the Barbie movie in 2023 triggered a pink mini-revolution that Mattel fully capitalized on, with more than 15 companies producing Barbie-inspired clothing, furniture, bedding, jewelry, and even toothbrushes.
At the same time, the El Segundo, California-based company has closed or consolidated five factories, including a sixth one this year, according to the CEO’s statement on Thursday.
Mattel began scaling back its manufacturing operations six years ago, long before tariffs became a controversial issue, Kreiz stated.
Mattel’s goal is to reduce its reliance on China, which accounts for approximately 40% of its production, and to develop relationships with other low-cost countries. It currently manufactures in seven countries, including Mexico, which could face a 25% tariff starting April 2.
However, a 20% tariff on products made in China poses an existential threat to the toy industry, which manufactures 80% of its products in China.
Mattel executives have previously stated that tariffs will likely increase the cost of their toys this year. Other toy companies are also striving to find alternatives to China.
“We don’t expect any single country to account for more than 25% of our production,” said Mattel’s Chief Financial Officer, Anthony DiSilvestro, at the conference. He did not specify a timeline for these manufacturing goals.
Meanwhile, Mattel is currently filming two movies: “Masters of the Universe” in London and “Matchbox” in Morocco.
“We have another 14 films and TV products in development,” Kreiz said. “We don’t need the success of a Barbie movie to have a positive impact on the company.”
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