Spielwarenmesse: Interview with Dennis Gies, HAPE: New role on the market

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Interview with Dennis Gies, HAPE: New role on the market

from Ulrich Texter

With its Hape, Käthe Kruse, Poly-M and EurekaKids brands, Hape Holding AG is one of the world's leading manufacturers of baby and children's toys. In order to expand its international presence in the retail sector, the company has been on a buying spree with Dan Finanz AG for a few years now. At the same time, the company is positioning itself in Western Europe as a "manufacturing service provider". We asked Dennis Gies, Board Member of Hape International AG, about the new role of a manufacturer who started off making classic wooden toys.

Mr Gies, before we get started, please put a stop to all the speculation once and for all: Is Hape the largest manufacturer of wooden toys in the world or not?

Portrait von  Dennis Gies
Dennis Gies is Board Member of Hape International AG.

Dennis Gies: With our pure production volume of more than 100 million euros, we know of no other manufacturer in the wooden toy industry that can top that.

Was 2018 also the best year in the company's history, as your CEO promised it would be?

D. G.: Without wanting to appear arrogant: yes. However, we have been able to say this for the last 32 years, as we have never stopped growing in terms of earnings and sales.

Tell us which business you enjoy most and what the percentage distribution is: the ODM business (Original Design Manufacturer) or the OEM business (Original Equipment Manufacturer)?

D. G.: Naturally we get the greatest pleasure from seeing products from our company actually in the hands of children. We see a much greater potential to incorporate the know-how we've gleaned from production and design and, of course, our values in the ODM business, since we are involved in the development process of a product from very early on. The result is a good, educational toy which we can stand behind. Experience has shown us that it is precisely this close interaction between the brand and the manufacturer that is fundamental for the economic success of a product.

And what about the distribution?

D. G.: The ODM share is already more than 70 per cent – with a rapid upward trend. Besides classic OEM/ODM production, we naturally also take great pleasure in observing our "own" successes with the Hape brand.

At the Spielwarenmesse, you told us that Hape is not a "timber merchant" because parents don't primarily ask for wooden toys, but for "sustainable toys". So what is Hape, then?

D. G.: Hape comes from the educational sector. Our guiding principle has always been "play and learn" or "learning by playing". In all our products, we make children and their holistic development our top priority. This has not and will not change, not even in our dynamic company.

So the material is of secondary importance, then?

Child is playing with Touch Piano
Touch Piano from Hape is the winner of the ToyAward 2019 in the category Baby & Infant.

D. G.: Over the last five years, the toy industry has changed faster than it has in the 20 years before. These days, children are greatly influenced by the media and new technologies. We have to respond to these trends, too. With this year's ToyAward winner – the Touch Piano – we have created a symbiosis of tradition and technology. For the first time ever, children can now play a piano without having to learn it beforehand, and this is precisely how they learn to play the piano. We are also keeping up with the times when it comes to sustainability. Our favourite raw material is bamboo, which is unbeatable from an ecological point of view.

With Junior Inventor, you have created a series that requires some explanation. What worries you more – the fact that you might not be able to find retailers who can explain your "workbench for experiments" because there are fewer and fewer people who can explain such tings or that you might not be able to attract customers who are taken with such things?

D. G.: We were nominated for the ToyAward this year on account of this item, too, because we had the opportunity to explain the line – and naturally, we also need that in the retail trade. The whole world is calling out for STEM articles and we are meeting this demand with our Junior Inventor series. Our new line stimulates curiosity and inventiveness – which is precisely what little explorers are demanding today. The difficulty with the products – as you have so rightly recognised – is getting this message across to the end consumer.

Traditional sales markets such as North America and Europe are under pressure. Toys R Us – gone; BR Toys and Intertoys – their plugs have been pulled. Are manufacturers increasingly becoming the plaything of Internet giants and supermarket groups?

D. G.: Ultimately, it's the end consumer who decides where he wants to shop. I am convinced that every retailer who recognises and meets the needs of his or her customers has a future. We at Hape have never tried to change or define markets: we regard our willingness to adapt as a recipe for success. In this context, I always like to quote Charles Darwin: "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change." Until five years ago, size basically guaranteed success – in line with the idea of a company being "too big to fail". These days, however, it's a company's flexibility to adapt to change that is vital for its survival.

Is the situation in the United States especially critical because the process of concentration is particularly advanced there? You once said that, as a brand, you needed specialist retailers, but they weren't well positioned in all countries.

D. G.: In the US, the processes bringing about change are more advanced; that's true. Those retailers who have survived there have a good concept that ensures their continued existence.

Nevertheless, this obviously doesn't seem to be enough, because with your Hape subsidiary DAN Finanz AG based in Lucerne, where you sit on the Board of Directors, you play a very active part in influencing sales, don't you?

D. G.: The Hape Group doesn't hold any stake in DAN Finanz AG. Since a lot of wholesalers and retailers in Europe and America are currently bowing out, this is opening up completely new opportunities for us. We can build up a global wholesale network for our ever-growing brand portfolio, which has its own branches in the 20 most relevant markets around the world. Our aim is to build a service platform for the retail sector.

You took over UK company Marble Toys in 2017, EurekaKids in Spain in June 2018 and Playwell in Canada just a month later. What do you specifically hope to achieve with these acquisitions on their respective markets?

Toy store Eurokids in Madrid
EurekaKids is distributor from Hape in Spain.

D. G.: Marble was our distributor for the UK and Ireland. As there was no chance of it continuing to be a going concern, we got on board there in 2017. Playwell was acquired through a friendship between my father and Henry Lim, the owner of Playwell Canada. At more than 70 years of age, Lim wanted to enjoy his well-deserved retirement. Since his employees were very close to his heart, he was looking for a successor who would keep them on. He knew that he could count on us in this case.

However, the two EurekaKids founders were not of retirement age!

D. G.: EurekaKids is our attempt to break new ground with a franchise system in the retail sector. In Northern Europe, we are expecting difficulties with the EurekaKids system, which is why we are only offering shop-in-shop solutions there; in Southern and Eastern Europe as well as Asia and South America, however, we believe that the EurekaKids franchise system has great potential for expansion.

Early in November 2018, you invited retailers to Spain to present the Eurekakids stores and pioneering retail concepts to them. What does the future look like in Germany?

D. G.: We think it's fundamentally important that we work together with partners and that we familiarise the end customer with products that are in some need of explanation – such as those from the Junior Inventor series. That's why we are transforming our structures in Western Europe and turning the company into a manufacturing service provider that supports the retail trade with a wide variety of concepts: starting with innovative marketing concepts, unusual point-of-sale solutions and highly sought-after products via various process improvements such as "vendor managed inventory", "drop shipping" and a lot more.

Dennis Gies, thank you for talking to us.

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