A scene from 'Barbie'.
Courtesy: Warner Bros.
If there is one thing Mattel CEO Ynon Kreiz wants to strip shareholders of Barbie's power on Thursday.
As the toymaker faces activist pressure from Barington Capital, especially around its strategy with the Fisher-Price and American Girl brands, it is presenting Barbie as a blueprint of what's possible at the toy company, with a presentation to investors Thursday.
“Our job is to make these timeless brands current,” Kreiz told CNBC ahead of the presentation.
Since taking the helm of Mattel in 2018, Kreiz has initiated a turnaround plan for the company that has seen the resurgence of major brands, including Barbie, and its stock price rise 44%. He has touted Mattel's “playbook,” the company's strategy to make beloved franchises available to consumers across multiple segments.
With 'Barbie' – the film of the same name, directed by Greta Gerwig and nominated for eight Oscars this year – that plan has become reality.
“The idea was to find ways to create multiple touchpoints, to build strong toy brands,” Kreiz said. “And once you have the established fan base and the cultural resonance around brands, you expand that into other experiences, other products and other opportunities to connect with your fans.”
“The 'Barbie' movie was really a manifestation of that, a showcase of how we think about the opportunities ahead of us,” he said.
Gerwig's “Barbie” generated nearly $1.5 billion at the global box office by tapping into pop culture relevance – both the reverence and revulsion for the toy brand that consumers have felt for more than sixty years. The film's success led to approximately $150 million in sales of toys and consumer products such as sweatshirts with the phrase “I am Kenough” and Mattel's share of the movie ticket proceeds.
“We now think of people buying our products not just as consumers, but as fans,” Kreiz said.
From July, the film will tour 37 cities to various music venues, accompanied by the Sinfonietta, an all-female orchestra. And then there's the Academy Awards this Sunday, for which “Barbie” is nominated for acting awards, best original song, best costume design and best picture, among other awards.
“Whether we're talking about products, entertainment, television, music, publishing, digital gaming, we're all creating an ecosystem of a true franchise flywheel,” said Josh Silverman, chief franchise officer at Mattel.
In Barbie's footsteps
While Kreiz has acknowledged that future film and television projects may not reach the same lofty heights as the Margot Robbie-led film, he noted that “Barbie” provides a template for expanding Mattel's intellectual property beyond the toy realm.
“It's not about whether our brands resonate outside the stores,” he says. “Because they do. We've proven it. It's about whether we can do it because we're doing it and we've done it very successfully. It's about doing it at scale.”
This is especially important for the company's Fisher-Price and American Girl brands, which have been in the midst of their own transformations for several years.
A combination of changing consumer purchasing behavior and the disappearance of Toys R Us has led to significant sales declines for both brands in recent years. Last year alone, American Girl's net global sales fell 9%. For the company's baby, toddler and preschool segment, which includes Fisher-Price, sales fell 10%.
Activist investor Barington Capital wrote a letter to Kreiz ahead of the company's February earnings report, saying it believes “these brands are now detracting from the success in Mattel's other segments and damaging shareholder value.”
However, Mattel still sees value in continued investments in these brands and had already begun efforts to revive American Girl and Fisher-Price before the activist investor's letter, Kreiz said.
American Girl was already seeing weak sales before the pandemic forced store locations to close. Copycat dolls that resembled the iconic American Girl dolls lined shelves at a fraction of the price, and the once-appealing experiential shopping associated with the brand's flagship stores was gone.
Although American Girl dolls can be purchased online, e-commerce has historically not been Mattel's main strategy. Much of the marketing was spent promoting shops with their cafes and doll hair salons and the catalog by post.
The American Girl brand emerged from the pandemic lean, with fewer store locations, a bigger push for direct-to-consumer online shopping and a renewed focus on modernizing its dolls for a new generation. Turnover even increased by 5% in 2021. However, they fell again in both 2022 and 2023.
When it comes to the American Girl brand, Kreiz admits that the challenges “weren't product-driven,” but rather a commercial strategy issue.
He said that going forward, the brand will see growth in its flagship stores, more product innovation and expanded licensed entertainment, including a partnership with Disney princesses and a film project with Decisive.
American Girl doll from Mattel
Source: Mattel
“We think there are some real opportunities to continue to grow the brand and thoughtfully expand the story that exists within American Girl, and we want to do it authentically,” Silverman said. “The franchise is very much the bridge between toys and entertainment.”
Mattel executives remained tight-lipped about what to expect from an upcoming American Girl film, which currently has no release date.
“We're currently working closely with a writer to unlock that story,” said Lisa McKnight, Mattel's chief brand officer. “We believe it will be a great opportunity for the brand when the film is released.”
Where Fisher-Price fits in
Amid a slew of film projects, including a Hot Wheels movie starring JJ Abram's Bad Robot, a Major Matt Mason movie starring Tom Hanks, and a Lily Collins-led Polly Pocket movie written and directed by Lena Dunham , Mattel is revamping some of its preschool entertainment properties.
Starting this fall, the company will relaunch Barney with an animated series, with a product line to follow in 2025. Marc Forster (“Quantum of Solace” and “Finding Neverland”) has also been tapped to direct and produce a film based on the Thomas & Friends franchise.
“We will evaluate, manage, incubate and relaunch properties in the preschool space with full franchise capabilities,” Silverman said.
These brands fall within Mattel's multibillion-dollar infant, toddler and preschool division, where the company has been trimming fat and emphasizing innovative ways to grow in recent years.
“It's a big business, and it's a complex business,” McKnight said. “And so what we've done over the last few months is really getting under the hood and recognizing that there are two fundamental aspects. There's the core of the business, which is for babies and toddlers, [where] parents are really the buyers. And then there's an entertainment company for preschoolers. This is really driven by child demand and fueled by content.”
Fisher-Price makes up the largest portion of the overall division, contributing approximately 70% to 80% of the division's revenue annually. In 2023, Fisher-Price's net sales were approximately $850 million, down 9% from the previous year.
Two segments that Mattel is actively exiting are weighing heavily on Fisher-Price: Power Wheels, battery-powered ride-on vehicles and baby gear. Kreiz said Mattel does not have a “unique advantage” when it comes to these items and faces intense competition for market share. He also noted that much of the losses in the infant, toddler and preschool division were due to these exits.
Meanwhile, Mattel is working to bring more innovative products to the more than 90-year-old brand, even tweaking the color and material of its child development toys to be more “aesthetically appealing” to younger parents.
“We're starting to look at the fabric choices and the color palettes for those items… that work well with the interior,” McKnight said, noting that millennial parents often want baby toys that better match their interior design style.
Mattel is also introducing a new line to the Fisher-Price portfolio of wooden toys, launching exclusively on Walmart in North America this spring and globally in the second half of 2024.
“It's a beautiful product that people feel comfortable having in a display, and it's made from sustainable materials, which is also very important to this customer,” said McKnight.