Spirits ran high at the TOTY awards dinner and the Toy Industry Association did a fantastic job landing a great new venue – Jazz at Lincoln Center. The very fun evening was dominated by seeing lots of familiar faces and by Mattel’s Sing-a-ma-jigs. In a sense, the event was a well deserved Victory Lap for Neil Friedman who will be retiring from Mattel. Congratulations to all award winners, nominees, of course, Neil and Carter Keithley and the TIA.

The Women in Toys dinner was upbeat as always. Speechifying was kept mercifully short. Congratulations to everyone in attendance for being such a lovely and cheerful crowd.

Toy Fair itself was the best I’ve seen in several years with very strong traffic on Sunday and Monday even in what I’ve formerly called “the basement of gloom”. The bustling basement may have been the result of the strangely bifurcated main floor where it appears that the Teamsters are trying to secretly build a nuclear submarine. The smell of fear was gone. The falling have already fallen and the survivors were getting back to business. It was also nice to see major toy companies like Mattel, Lego and MGA supporting an industry wide trade show again.

The reason for all this cheerfulness was that the economy has been picking up. NPD reported that US retail toy sales for 2010 increased slightly from 21.4 billion to 21.9 billion. US GDP grew at a 3.2% annual rate in the fourth quarter. That’s up from the 2.6% pace in the quarter before. Toy industry hiring has increased as companies seem to have been much more comfortable putting together their 2011 budgets than they were for the previous two years.

Other positive post Toy Fair news includes John Barbour, everyone’s favorite Scotsman (with apologies to Bob Wann) being named President of Leapfrog. The company has always had great product but has been hurt by consistently tumultuous “leadership”. Mr. Barbour should be a stabilizing force that will allow the company to keep its eye on the ball. The toy industry should also welcome Tomy’s purchase of RC2. After their recent pull back from the US market, Tomy is showing confidence in the future growth of the US toy business. It also appears that they will be keeping most or all of the current RC2 team in place.

Now for the bad news. This has been the most difficult part of this piece to write because major events around the globe have been changing so rapidly over the last week or so. New information should naturally bring a shift in analysis and attitude. So rather than “phoning it in” like some Obvious Huckster in Ohio (OHiO) we’ve been repeatedly revising this as new information comes to light. The final revision was today – Wednesday, March 16 @ 8:57am (EST)

The – let’s call it what it is – Civil War in Libya has caused an upward spike in oil prices. This has already translated to a significant hike in the price of plastic resin. In their infinite wisdom the global community has opened an investigation into crimes against humanity thereby guaranteeing that Gaddafi will “fight to the last drop of blood” (Dudes! Do that – AFTER!). He has already begun to have his air force bomb oil infrastructure situated in rebel controlled zones so they can’t sell oil for currency or swap it for supplies. In Congressional testimony, US Director of National Intelligence, James Clapper stated that “Gaddafi is relying on two of his brigades which appear to be very, very loyal, disciplined and robustly equipped” – “his superior military forces mean that his regime will prevail in the longer term”.

The drop in Libyan oil production can be offset by Saudi Arabia which has significant reserve production capacity and acts as the world oil market stabilizer. Unfortunately, Mideast unrest has reached there as well. At this point, a few smaller protests appear to have been contained but, make no mistake, there are tiny but growing bubbles percolating in the Saudi streets. Saudi troops have also crossed the causeway into neighboring Bahrain after Bahrain’s police force was overrun by Iranian inspired Shiite protesters. Any real trouble in Saudi Arabi itself will cause oil prices to skyrocket and could cause the global economic recovery to stall.

Add to this the terrible triple disaster in Japan – quake, tsunami,and the Fukushima nuclear crisis which resembles a slow motion but ever escalating train wreck. Our hearts go out to everyone affected by this ongoing tragedy and their families. It’s just too awful to even think about…

Japan is the world’s third largest economy and an estimated 10% of their electricity is offline and is likely to be disrupted for the long term. They will need to import tremendous amounts of oil, diesel, natural gas and coal for a very long time. Over time, this will put significant upward pressure on the cost of these commodities and things made out of them (i.e. plastic resin). Japan is also a major supplier of electronic chips. There are several factories down and we could potentially see shortages of electronic components, wafer boards and chips into the late summer. Price hikes on these items have already begun.

What all this adds up to is that there is significant new upward pressure on the cost of making plastic consumer goods. This comes on top of already rising costs for wages, transportation, etc. Taking the good with the bad, Toyjobs’ (easy to make) forecast is for increased toy sales at tighter margins. That said, keep a wary eye on Saudi Arabia because if that blows it all goes Kablooey.

Again, our hearts and prayers go out to everyone in Japan and their extended families.


Tom Keoughan