You can't buy Lego shares, but we can learn a lot from the company's success.
Lego Group is a Danish family-run company, so it's not publicly traded. But it is nice to see a product that has delighted generations of children (both young and old) bucking the economic downturn and bringing home the bacon. And we can probably learn something from it too.
According to figures just out, Lego saw first half sales for 2009 rise by an impressive 23%, during a time when we might have expected toys and games to reflect their status as discretionary items, and see people cutting down on such purchases. But instead, it looks as if parents are shunning expensive faddy toys that will be tossed aside as soon as they're no longer fashionable, and are turning towards more traditional and better value playthings.
Rising sales and profits
Despite the toy market in the UK declining, Lego's sales soared by 23% during the six months, leading it to become the only one of the top five toy manufacturers in the UK toy market to increase its sales this year. And that's before James May started building a house out of the eponymous plastic bricks -- maybe the UK's real housing market has something to learn from his plastic one.
With Christmas being the peak season for such things, the full year is understandably still uncertain, but this is a great start, and with a strong performance in North America and eastern and central Europe, that 23% growth in sales was turned into a 65% leap in pre-tax profits.
Building a brand
This good news from Lego tells us something about the enduring appeal of well-known quality goods. Despite our not being plagued with fancy adverts every time we switch on the TV or open our newspapers, just about everyone in the UK surely knows the brand, and popular stunts like May's Lego house help to keep it in our consciousness without any advertising spend at all.
And that's not the first, with the Lego house having been preceded by a few years by the rather wonderful Brick Testament. Presenting the Bible in scenes made entirely from Lego building bricks, the Brick testament claims to be "the largest, most comprehensive illustrated Bible in the world with over 3,600 illustrations that retell more than 400 stories from The Bible" -- I confess I'm not a believer myself, but I think it's cool.
Is it art?
Then, of course, there's Mike Stimpson's masterful Lego recreations of some of history's famous moments from photography and cinema ("Behind the Gare Saint-Lazarre" is my favourite), and Nathan Sawaya's intriguing brand of Lego art. In fact, if you do a quick Google image search for "Lego art", you'll find lots of examples.
But what's all this got to do with private investors, who can't actually buy any Lego shares? Well, I think it really is an excellent lesson in branding. Many companies spend billions on promoting their brands, and some of them are very successful at it. That's all Coca-Cola is, after all -- without branding it's just one of many sweet fizzy drinks. But a brand really flies when it's based on a good quality product, often a fairly simple one, which appeals across generations and can reach a critical mass of word-of mouth advertising, as we see in the examples above, that keeps it in people's minds better than any paid-for advertising can.
Little did Ole Kirk Christiansen know that he was about to change the world when, back in 1932 in his Copenhagen workshop, he combined the first letters of the Danish words "play well" ("leg godt") to create such a powerful brand. Can we find investments with the same brand success as Lego? We can but try.
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