Toy manufacturers' shift from China is no child's play
By Richa Naidu
LONDON (Reuters) — Toy makers grappling with surging costs in China are finding no easy options when it comes to shifting production to cheaper centres elsewhere.
Six years ago, monopoly maker Hasbro (NASDAQ:HAS) approached Indian durable goods and aerospace supplier Aequs to sub-contract.
«They said if you can get into toy manufacturing, now we're looking to shift millions of dollars worth of product from China to India,» Rohit Hegde, Aequs' head of consumer verticals, told Reuters. «We said: as long as we can get at least about $100 million of business in the next few years, we can definitely invest in it.»
Fast forward to today and Aequs makes dozens of types of toys for Hasbro and others including Spin Master in two 350,000-square-foot facilities in Belgaum, India.
But Hegde and other manufacturers acknowledge that India and other countries cannot match China for efficiency, limiting companies' efforts to shift to lower cost bases and raising the risk of higher toy prices in future if the bulk of production remains in China.
«We don't have the port facilities (in India) that China does. We don't have the road facilities that China does. They have been doing this for the last 30 years, their efficiency levels are much better than ours,» Hedge said.
Still, for toy manufacturers including Hasbro and Barbie doll maker Mattel (NASDAQ:MAT), the risks of relying on China for most of their production were highlighted during the COVID-19 pandemic, when Chinese ports struggled to export goods and were periodically shut down, leaving shipments stranded.
Soaring labour costs in China had already been driving manufacturers across industries to diversify production geographically.
A report by Rhodium Group last
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