On My Mind / One Asset & Worth Noting
This week’s CIO Note has a little different format. I am combining all three sections in one theme:
A CNBC article on Mattel brought toy manufacturers to my mind again.
Mattel posted peak sales in 2010. After that, the industry changed. Cheap imports from China, Vietnam, and elsewhere commoditized large parts of the toy market. Consumers became more price-sensitive, and recent inflationary pressures have likely reinforced that behavior. Add to that pressure from tariffs.
The total return numbers over the last decade tell the story:
Hasbro: +92%
Mattel: –42%
Games Workshop: ~+5000%
At first glance, Mattel and Hasbro look like excellent businesses:
Global footprint
broad product portfolios
powerful brands such as Hot Wheels, Play-Doh, Fisher-Price, Nerf, and Monopoly
But strong brands and scale are not enough if industry dynamics work against you. Mass-market toys are often hit-driven, retailer-dependent, and vulnerable to price competition.
Games Workshop, on the other hand, is different:
Games Workshop is a British manufacturer and retailer of miniature wargames, best known for the Warhammer and Warhammer 40,000 universes. The company does not just sell toys. It sells a hobby ecosystem.
Customers assemble and paint miniature figurines, they meet for games, buy rulebooks, novels, hobby supplies, and increasingly engage through licensed video games and other media. Games Workshop owns the intellectual property behind the Warhammer universe, this includes characters, stories, and artwork which creates a defensible and monetizable asset base. While Mattel and Hasbro optimize for mass-market reach, Games Workshop optimizes for intensity of engagement. It is easy to manufacture a toy for a 5 year old kid of plastic, but it is almost impossible to replicate decades of world-building, customer engagement, and brand loyalty in a niche.
One additional thought: in an increasingly digital world, physical communities built around shared hobbies may become more valuable in the future.
This podcast is very good starting point if you are interested in the topic:
This is not investment advice. Do your own research.
Thank you for reading and enjoy the next week!