Birth rates are among the most important variables to watch for any toy manufacturer.
With approximately 90% of traditional toys targeted at children and teenagers, changing birth rate patterns can have a strong influence on the size/performance of the toy market.
In general, families across the world in 2010 had fewer children compared to a decade ago, and this is true for both developed economies as well as emerging markets. However, there are also a few regions where the birth rate has surprisingly picked up in recent years.
Birth rates in Asia Pacific in decline but picking up in Eastern Europe
A few interesting trends are emerging, the first being a significant increase in the birth rate in Eastern Europe.
For example, in Russia, the average birth rate picked up from 8.7 per 1,000 people in 2000 to 11.8 in 2010, which is slightly higher than the Western European average of 11.5. This trend is also true for other Eastern European countries and stands in stark contrast to the trend in the 1990s when birth rates declined significantly.
Combined with a rise in disposable incomes, Eastern Europe will be a more attractive market for toy companies in the coming years.
The second trend concerns the “rich” Asia Pacific countries. Japan is already known to have a declining child population, but, surprisingly, South Korea, Singapore and Taiwan all saw their birth rates drop from above average levels in 2000 to among the lowest in the world in 2010. Alternatively, Hong Kong saw the opposite trend, with its birth rate increasing by 32% since 2000.
In emerging markets, birth rates are also declining. An increasing number of working women has resulted in couples delaying having a family. Countries which have seen their birth rate decline by more than 25% in the last 10 years include Brazil and Turkey. China, meanwhile, with its famous one-child policy, has a birth rate comparable to Western Europe.
Impact on traditional toys
While the declining number of children may not necessarily negatively impact the size of the toy market as families with fewer children may spend more per child, the trend is interesting in a number of ways.
Firstly, a higher number of children may be beneficial for companies focused on cheaper toys, such as Mattel, provided disposable income passes the level where it is high enough for a family to be able to afford any toys at all.
On the other hand, fewer children and a subsequent higher spend per child may benefit more expensive toy manufacturers, such as VTech or Hasbro, in markets such as Latin America.
Of the established toy markets, the US and Australia stand out as having relatively high birth rates, and this should make these markets even more important in the future.
Markets with a strong birth rate, high disposable incomes and ageing baby-boomers will offer a healthy environment where both toys targeted at children and adults are poised to grow.
Analyst Insight by Giedrius Daujotas.
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6 July 2011