Group 6: Marketing Plan Part I – The Consumer and Market Profile

MGCR 352, Section 006 Professor: Sameer Mathur

Shan Chun Chak (David): 260321705

Laura Galin: 260315116 Sophia Herbst: 260353577

Stephanie Taras: 260302965 Rebecca Varon: 260425752 Aminata Wurie: 260299751

Monday November 1st 2010

Section 1: Our Product and its introduction into a new market

Build-A-Bear Workshop, Inc. is a company based out of St. Louis, Missouri, that

was founded in 1997 by Maxine Clark. It is the only global company that specializes in

offering children an interactive experience in creating their own customized plush teddy

bear. The company operates 21 stores in Canada and more than 400 stores worldwide

(Build-A-Bear Workshop).

Build-A-Bear Workshop offers fun, unique, and customized products. When a

bear is created, the child goes through a number of steps – “choose me, hear me, stuff me,

stitch me, fluff me (grooming), dress me, name me, and take me home.” These steps are

not just steps; they are an experience, making our product comparable to dolls. Prices

range from $12-$30CDN for the bears, with the clothes and accessories at an additional

cost. Also, a free online service called CyBEAR Space is offered, which allows the child

to create an online world for its bears (Build-A-Bear Workshop).

We hope to capitalize on the currently stable Brazilian economy by franchising in

Sao Paulo, Brazil’s largest and wealthiest metropolitan city (PricewaterhouseCoopers).

The Brazilian toy and games market is expanding due to the increase in demand for these

kinds of products. The reason for this is mainly the share of imported goods, which has

increased almost five-fold within five years. Imports are responsible for 63% of the toys

sold in Brazil, but national production has remained at a constant level for some years

(World of Toys: Home).

This growing demand illustrates that introducing Build-A-Bear Workshop in Sao

Paulo will satisfy customer needs and wants. Additionally, plush and active toys

encompass approximately one third of the toy market in Brazil (Industry Profile -Toys &

Games in Brazil, 11). Changing fashion and technological trends, cartoons, toys, and

advent of corporate advertising in the gaming world are some of the major factors that

influence the children’s toy and game choices.

Introducing our product into the Brazilian market goes along with Build-A-Bear

Workshop’s strategy to expand via franchising. We aim to bring the teddy bear to life for

as many children as possible, all over the world. It is important that our products possess

and incorporate an extensive understanding of the Brazilian culture.

In order to effectively establish our product in the Brazilian market, our primary

goal is to provide appropriate staff for in-store demonstrations, advertise and promote

through television and street-side ads and launch on October 12th. October 12th is

National Children’s Day, one of the most important dates for the Brazilian toy trade. This

date and Christmas generate 70% of the total annual sales (World of Toys: Home).

Section 2: Consumer Profile

We aim to appeal to children ages 5-14, who make up about 25% of the Brazilian

population, and is a relatively undeveloped niche in the market (Euromonitor,

“Consumer”). Kids have become increasingly influential in family purchasing habits, and

now influence 82% of overall purchasing decisions (Euromonitor, “Consumer”). We

therefore plan to capitalize on this advantage by advertizing to both boys and girls in the

Sao Paulo area, who ultimately control a large portion of their parents’ purchases in the

toy realm. Also, in Sao Paulo, out of the 43% of mothers who bring their children ages 2-

14 to supermarkets, 61% of the children ask for specific products, and 32% ask for

specific brands (Euromonitor, “Consumer”).

Our secondary market is the working family of all income levels with fewer

children, particularly focusing on dual-income, middle and upper class families. We

would also like to target baby-boomer grandparents in retirement who wish to buy our

product as gifts for their grandchildren. Although game consoles do present a threat to

our market, when grandparents go searching for toys for their children they “purchase

toys and games based on the iconic image of their youths” (Euromonitor, “Global”). As

children grow older, it becomes increasingly difficult for grandparents to purchase toys

due to the generation gap; therefore, Build-a-Bear is ideal for them. The annual

disposable income in Brazil has risen dramatically in recent years (Euromonitor,

“Global”), and the average household size has shrunk to about three to four people in

2007, compared to the five person family in 1995 (Euromonitor, “Global”). Fewer

children per family, and a higher household income results in a higher spending average

per child. The bears are priced to be affordable for all income levels, and the unique

option of buying additional accessories appeals to all income groups as a viable gift and

toy. It is also important to note the growing trend of married, working mothers, who are

delaying marriage and childbearing until they have established a career at about 26 years

old, resulting in the working woman’s ability to spend more money on her children

(Euromonitor, “Consumer”). Dual income families often compensate for being “absent

parents” by purchasing toys; and all parents look for durable toys that are well-priced and

stimulates their children’s imaginations (Euromonitor, “Consumer”). Build-a-Bear

encompasses all of the said qualities, while offering quality parent-child time.

The Sao Paulo metropolitan area is ideal for our company; it has an estimated

19,889,559 people in 2009 ("Estimated…"). It was named the 10th richest city in 2008,

and currently the Brazilian economy is relatively stable, being the 9th largest in the world

(“Economy Watch”). Typically, households in urban areas have higher incomes than

those in suburban or rural areas, therefore, Sao Paolo is perfect as our first stop in

penetrating the Brazilian market.

All of these facts can be summarized as follows: Our typical consumer would be a

dual income, middle to upper class families in the greater Sao Paulo metropolitan area,

with 1 or 2 kids, and possibly having a close relationship with one of their grandparents.

Section 3: Market Profile Situation/ Market Analysis:

As previously stated, Brazil is one of the world’s fastest growing economies. In

2009, Brazil’s total population was 194,578,500 (Brazil - Country Profile). Our target

market, children under 14, comprised 26% of the Brazilian population as of 2009 (Brazil

– Country Profile). Therefore, the total size of our primary market is 50, 590, 410.

Within the Americas, the United States and Canada represent 85.2% of the toys &

games market (Industry Profile –Toys & Games in Brazil, 12). Among the remaining

14.2%, Brazil accounts for 6% (Industry Profile –Toys & Games in Brazil, 12). This

makes Brazil the largest consumer of toys & games throughout central and South

America. This makes Brazil the perfect place for our launch.

In 2009, the Brazil Toys and Games market had revenues of $1779.7 million.

This is projected to reach $3251.2 million by the year 2014, representing a growth of

82.7% (Industry Profile –Toys & Games in Brazil, 2). However, intense competition

serves as a barrier to entry for independent toy stores, as discussed in the following

section (Industry Profile –Toys & Games in Brazil, 2).

Activity toys represent the largest segment of the toys and games market in

Brazil, with a 20.5% share of the market (Industry Profile –Toys & Games in Brazil, 11).

Dolls represent the second largest chunk (17.3%) and plush toys represent 8.9% (Industry

Profile –Toys & Games in Brazil, 11). The Build-A-Bear product and its experience is a

combination of these 3 sectors. This is extremely important because the activity toys,

dolls and plush toys segments together represent 46.7% of the total toys and Games

market in Brazil. This huge potential market, along with forecasted market growth

provides support for our launch of Build-A-Bear in Brazil.

One trend in the market that will potentially contribute to our success is the

wealth of the grandparents of the baby-boomer generation. They are “more able to spoil

their grandchildren” (Industry Profile –Toys & Games in Brazil, 13). As well, demand for

new toys is always high, due to short-lived popularity inherent in toys (Industry Profile –

Toys & Games in Brazil, 13). Build-A-Bear offers thousands of different accessories,

which will hopefully extend the life of the product. Lastly, the growing economy and

rates of consumption in Brazil have seen a corresponding rise in wealth among a majority

of the population (Industry Profile –Toys & Games in Brazil, 14). Due to the increase in

affluence, “Demand for […] toys […] has increased and the choice of domestic and

foreign toys […] is plentiful” (Industry Profile –Toys & Games in Brazil, 14).

Competitor Analysis: The competitive field in the Brazilian toy market is very fragmented. There are

multiple manufacturers producing toys in various sub-sectors. These range from the

traditional plush toys we plan on introducing to class dolls, board games, puzzles and

much more. In 2008, Mattel was the clear market leader. There are many other reputable

manufacturers, but none represent the market power of Mattel. Mattel is an international

manufacturer that, in 2008, had an estimated market share of 30.5% (Appendix). As

Table 1a shows, there are many flaws in Mattel that will be advantageous to the launch of

Build-A-Bear in Brazil. Piracy and product recalls weaken Mattel's market share and

negatively affect the brand image. This is beneficial to us as we will be seen as a viable

alternative. Despite this, Mattel's undeniable market size and brand loyalty are a

significant threat.

Multibrink will represent the second most serious threat to Build-A-Bear. This is

because it focuses on the same market segment as our product, dolls and soft/plush toys

(Multibrink, Toys and Game – Brazil). It also incorporates the use of licensed children's

products in order to attract young consumers. This is a threat to us as we plan on doing

something similar with our customization options. Furthermore, Multibrink positions

itself as a manufacturer of low priced items which are distributed using various channels.

The ease in purchasing this established product will deter interest in visiting our location.

Indirect competition also exists in the market. This includes toy companies such

as Estrela and Grow as well as video gaming companies. Leading manufacturers have

been increasingly investing in the Brazilian market (Traditional Toys and Games –

Brazil). For more information on all competition, please refer to Table 1a and 1b in the

Appendix.

Bibliography: Build-A-Bear Workshop-Canada: Home Page. Web. Oct. 2010.

<http://www.buildabear.ca/>. Toy Industry Association. (Feb 15, 2010). 2010 Toy Trends Get Straight “A's” at 107th American International Toy Fair. Earth Times. Retrieved Sept. 26, 2010 from earthtimes.org/articles/press. Industry Profile – Toys & Games in Brazil. DATAMONITOR. June 2010. Retrieved from Marketline Database. PricewaterhouseCoopers. "SP Sera 6a Cidade Mais Rica Do Mundo Ate 2025, Diz Ranking." O Estado De S. Paulo - Notícias, Vídeos, Fotos Do Brasil E Do Mundo,Online E Celular. 9 Nov. 2009. Web. 29 Oct. 2010. <http://www.estadao.com.br/noticias/geral,sp-sera-6-cidade-mais-rica-do-mundo-ate-2025-diz-ranking,463359,0.htm>.

World of Toys: Home. Rep. Web. 29 Oct. 2010. <http://www.world-of-toys.org/south-america/toy-market/?L=1>. Brazil – Country Profile. Euromonitor International. July 2010. Retrieved from Global Market Information Database. Grow Jogos e Brinquedos SA - Toys and Games – Brazil, Competitive Positioning. 30 Nov 2009. EUROMONITOR. Retrieved from Global Market Information Database. Gulliver Manufatura de Brinquedos SA - Toys and Games – Brazil, Company Background and Competitive Positioning. 30 Nov 2009. EUROMONITOR. Retrieved from Global Market Information Database. Industry Profile –Toys & Games in Brazil. DATAMONITOR. June 2010. Retrieved from Marketline Database. Manufatura de Brinquedos Estrela SA - Toys and Games – Brazil, Production and Competitive Positioning. 30 Nov 2009. EUROMONITOR. Retrieved from Global Market Information Database.

Multibrink Brindes e Brinquedos Ltda - Toys and Games – Brazil, Strategic Direction Competitive Positioning. 30 Nov 2009. EUROMONITOR. Retrieved from Global Market Information Database. Traditional Toys and Games – Brazil, Competitive Landscape. 30 Nov 2009. EUROMONITOR. Retrieved from Global Market Information Database.

"Brazil Market." Economy Watch(2007): n. pag. Web. 29 Oct 2010.

<http://www.economywatch.com/market/world-markets/brazil-market.html>. "Estimated population of municipalities in Brazil on 2008-07-01." Estimativas das

Populações Residentes. Instituto Brasileiro de Geografia e Estatística, 2008. Web. <http://en.wikipedia.org/wiki/S%C3%A3o_Paulo>.

Euromonitor. Consumer Lifestyles – Brazil (2009). Global Market Information database,

McGill University 28 October, 2010. ---,Toy and Games: How Demographics and Income Shape Demand. Global Market

Information database, McGill University 28 October, 2010.

Appendix:

Table 1a – Main Direct Competitors Manufacturer Information Market

Share (2008)

Mattel - an international manufacturer - operates in many sub-sectors which include “dolls, action figures, model vehicles, games and puzzles, and infant and pre-school toys” - manufactures famous brands such as Barbie, Hot Wheels, and Fischer-Price - faces constant problems with piracy as well as recall problems with individual product lines (OPPORTUNITY = negatively affects the brand image of Mattel)

30.50%

Multibrink - focuses on the same market segment as our product, dolls and soft/plush toys (THREAT) - incorporates the use of licensed children's products in order to attract young consumers (THREAT) - positions itself as a manufacturer of low priced items which are distributed using vary channels - Super/hypermarkets account for nearly 20% of its sales, where it faces little competition. - also uses department stores and wholesalers, accounting for 21% and 25% of sales respectively

top 10

Gulliver - focuses on the niche market of action figures and dolls - has been experiencing a decline in market share since 2004 - planned to launch 13 new toys in 2009 which would stimulate a 10% growth in their market share. - focuses on selling toys with “slightly smaller unit prices than its competitors” - sales are heavily concentrated to the South-eastern region of Brazil, particularly in São Paulo (THREAT, this is where we plan to launch)

2.10%

Information retrieved from Global Market Information Database, Toys and Games – Brazil, EUROMONITOR. Compiled for this report.

Table 1b – Main Indirect Competitors Manufacturer Information Market Share (2008)

Estrela - did not face product recalls - restructured its operations and opened new factories in Itapira (São Paulo) - has a range of products targeting the middle and lower income classes - a large portion of Estrela's focus is on classic dolls, which it markets to higher-income consumers (OPPORTUNITY = can gain from the established market here if higher income consumers also desire our product)

3.60%

Grow - primary focus is on the market of puzzles and board games - Board games account for approximately 50% of company sales. - targets both children and adults - strong in the infant and pre-school sub-sectors

3.20%

Video Games - many children move out of our market into this one - largely different product at a much higher price point

Information retrieved from Global Market Information Database, Toys and Games – Brazil, EUROMONITOR. Compiled for this report. Table 2 = Market Share of Competition in Brazilian Toy Sector % retail value rsp

2004 2005 2006 2007 2008

Mattel do Brasil Ltda

9.5

10.2 35.1 31.4 30.5

Candide Indústria e Comércio Ltda

4.9

5.3 5.9 6.1 5.9

Manufatura de Brinquedos Estrela SA

6.0

3.9 3.8 3.8 3.6

Grow Jogos e Brinquedos SA

3.7

3.1 4.3 3 3.2

Gulliver SA

4.0

3.8 3.6 2.2 2.1

Others 71.9

73.7 47.4 53.5 54.7

Total 100 100 100 100 100