Japan’s Toy and Game Industry (Part 2) – Toys-with-Sweets Industry –
Japanese Economy Division
The toys-with-sweets1genre refers to products consisting of toys packaged in combination with candy or snacks, and merchandised mainly on the confectionary shelves of supermarkets, convenience stores and other retailers. In addition to figurines and other conventional toys, items packaged with sweets include CDs, musical instruments, mobile phone straps and other items that cannot be defined as true toys. This report includes these types of products as well.
I. Market Overview
A. Market history The roots of the market date back to the “Nutritious Glico Sweets with Premium Toy” introduced by Ezaki Glico in 1927. From that point on, the sweets-with-premiums field rose to popularity, focusing on the children’s market. The toys-with-sweets category was triggered by the “Choco-Egg” marketed by Furuta Confectionery in 1999. This was an innovative product featuring a prize-like premium packaged inside an egg-shaped chocolate, which became a big hit with children and adults alike. This prompted the full-fledged development of toys-with-sweets by confectioners and toymakers as well, resulting in heated competition.
B. Product positioning To most purchasers, the attraction of toys-with-sweets is the toy, with the perceived value of the sweet being quite low. This had led to the view that if consumers are mainly interested in the toy, then why not sell it without the sweet? It has been found, however, that merchandising the toy as the premium actually leads to far greater sales. While toymakers consider the sweets to be little more than premiums, the combination of toys and sweets has broadly opened up sales routes for the toys. Figurines, for example, were originally sold as standalone products targeted at fans of these animation/comic book characters, so they offered little interest to general consumers. Once they were combined with sweets, however, their sales channels expanded to include convenience stores and supermarkets. The figurines became familiar to general consumers and the result was a brisk expansion in the customer base, adding, for example, collectors as the products became runaway hits.
C. Customer segments Children and adult males account for the broad majority of customers. While children are fond of the conventional sweets-with-premiums, the boom in toys-with-sweets over the past few years has spurred more elaborate premiums and resulted in a customer segment comprised of adult males who purchase the products as
1 Toys-with-sweets are also known as “candy-toys.”
collectibles. Interior decor goods targeting adult women have also appeared on the market.
D. Market scale Powered by the toys-with-sweets boom kicked Fig. 1 Toys-with-Sweets Retail Sales off by “Choco-Egg” in 1999, (billion yen) the market expanded rapidly, 120 peaked in 2002 and leveled off 100 in 2003 (Fig. 1). Once the market had matured, 80 manufacturers began devising 60 different approaches, such as 40 offering premiums beyond the realm of figurines and simple 20 toys. According to the Yano 0 FY2001 FY2002 FY2003 FY2004 Research Institute, retail sales (estimate) in 2003 came to 99.1 billion yen, down slightly from the previous year, and sales in （Unit: billion yen） 2004 were forecast to be about FY2001 FY2002 FY2003 FY2004 (estimate) the same at 98.6 billion yen. Toys with sweets 88.1 102.7 99.1 98.6 Source: Yano Research Institute E. Trends Sales of “Choco-Egg” (Furuta Confectionery), “Choco Q” (Takara) and other products targeting children and adult males have fallen off slightly, mainly due to a backlash after the initial boom. Items targeting new customer segments, such as female office workers and other adult women, include the “Petite Sample” series of food samples developed by toys-with-sweets manufacturer RE-MENT. Product lifecycles are short, with items either being modified or discontinued at a rapid pace. The number of products and packaged figurines circulating in the market is extremely large. As a result, it appears that market players are running short on themes. Likewise, while the quality of the figurines has improved, the demands of consumers have expanded beyond that level; it is no longer enough for a figurine to simply be realistic. To win consumer acceptance from here on, products will have to offer more value than before. In addition, it has become extremely difficult to generate high earnings because consumers appear to expect to pay no more than a few hundred yen, despite the fact that the premiums have grown more elaborate, so manufacturers face the additional challenge of having to develop and sell low-cost products.
II. Industry Structure
A. Manufacturing and distribution Fig. 2 shows the manufacturing and distribution structure that generally applies to toys-with-sweets. Companies that manufacture either toys or sweets play the focal role in the production and distribution of toys-with-sweets.
Fig. 2 Toys-with-Sweets Production/Distribution Structure
Contracted Toys with sweets Wholesalers Retailer outlets production at manufacturer Figurine domestic/overseas manufacturer Contracted collaborating Toymaker affiliated Food wholesaler production factories (Final item Joint Confection production Confectionery （Prototype production） Supermarkets, production) planning partnership wholesaler convenience stores, Confectioner affiliated sweets shops, toy stores In-house production Esports (local production） Confectioner Confections supplied to toymaker
The figurines packaged as premiums are either produced in-house or outsourced to figurine makers. Product development is usually handled jointly by toys-with-sweets producers and figurine makers. The figurine makers produce prototypes with molds and final items are produced in China and other countries. Recent years have witnessed the emergence of other types of premiums, such as CDs and mini-magazines, which has involved collaboration with content producers and other subcontractors. The major sales outlet is convenience stores and supermarkets. Intermediate distribution is handled by foods and confectionery wholesalers. Toymakers also use confectionery wholesalers for distribution through sweets sales channels. Leading manufacturers include Bandai, Tomy, Takara, Konami, Furuta Confectionery, Ezaki Glico and Kabaya Foods. Kaiyodo, which is globally renowned for its elaborate figurines, teamed up with Furuta Confectionery to produce the animal figurines for “Choco-Egg,” which triggered the toys-with-sweets boom (the partnership was later dissolved).
B. Types of companies Companies in toys-with-sweets are generally toymakers or confectioners (Fig. 3). Bandai, Japan’s largest general toy manufacturer, holds the top share of the market, approximately 30%. The company’s fiscal 2003 toys-with-sweets business sales came to 16.6 billion yen (wholesale, including overseas sales). Bandai entered the market early and established its Candy-Toy Business Department to exclusively manage and expand its toys-with-sweets business from 1981. Tomy, Takara, Konami and other major toymakers are also in the market.
Fig. 3 Major Toys-with-Sweets Manufacturers Company Head office Main Business Comments Largest general toymaker, holding top share in toys with sweets business, too. Strong in “Gundam” and other character toys, with characters providing main power in toys with sweets as well. FY2003 Bandai Co. Tokyo General toymaker toys with sweets sales were16.6 billion yen. Equity participation in confectioner Tohato in 2003, moving to bolster confectionery business. Major general toymaker. For “toys with sweets,” develops “Disney,” “Pokemon” and other character series. Toys with sweets products Tomy Corp. Tokyo General toymaker packaged with “Tomica,” “Plarail” and other staple-seller products also doing well.
Major general toymaker. Focus of “toys with sweets” business is Takara Co. Tokyo General toymaker “Choco Q” egg-shaped chocolate candy series. Uses animal figurine premiums produced by Kaiyodo. Toymaker with main strength in video games. “Toys with sweets” Konami Corp. Tokyo General toymaker focused on “Thunderbirds,” “Alien” and other TV and movie character series. Major general toymaker. “Choco-Egg” egg-shaped chocolate sweet became smash hit in 1999, kicking off “toys with sweets” boom. Furuta Osaka Confectionery producer Though “Chocolate Egg” is focused on animals, vehicles and other Confectionery Co. series, also sells unique toys with sweet series such as “Historical Adventures,” etc. General food manufacturer famed as the originator of “toys with sweets” genre though “Glico with Premium.” Among major recent General food products, “Time Slip Glico
Principal trade is general confectioner, but has traditionally committed Kabaya Foods Okayama Confectionery producer itself to “toys with sweets” business too (owns in-house factory to Corp. build toy component premiums packaged in toys with sweets, etc.).
Entered “toys with sweets” market in April 2002. Enjoys strong sales Toys-with-sweets of toys with sweets products packaged with plastic samples of foods, RE-MENT Co. Tokyo maker sweets, etc. Narrows product development target to adult women, maintaining unique market position. Other major market players include UHA Mikakuto, Meiji Seika, Lotte, etc.
The majority of the toymakers have entered the field to develop sales through confectionery channels — a sector that is vastly larger than that for toys. Moreover, convenience stores, supermarkets and other channels for confectionery comprise a field into which toymakers have not conventionally advanced and thus offering great appeal for toymakers. Although toymakers view toys-with-sweets as a peripheral business, they are attracted to the opportunities for business diversification through these products. A large number of confectioners are also in the field, ranging from midsized manufacturers of sweets to major food producers. Among those companies, midsize firms such as Furuta Confectionery and Kabaya Foods rank high in the sales. Furuta’s
“Choco-Egg” smash hit, of course, fueled the toys-with-sweets boom starting in 1999. Kabaya Foods, though a confectioner by trade, built an in-house factory to manufacture toys for packaging as premiums and expanded its business by positioning toys-with-sweets as a major product line. Ezaki Glico, UHA Mikakuto, Meiji Seika, Lotte and other major confectioners have also entered the business.
III. Product Trends
A. Product characteristics Although toys-with-sweets are handled as confectioneries in terms of distribution, the toy component is generally the focus. The major buy-factor is the inclusion of elaborate figurines and other premiums, rather than the generally low prices of around 200 yen to 300 yen. Most toys-with-sweets are associated with a product series, such as animals, vehicles, animation/TV characters or various other genres. The lineups include large numbers of figurines to reflect current themes in the respective series. Collecting these figurines is a key factor motivating consumers to continue purchasing a particular series. Another distinguishing characteristic of toys-with-sweets is the short lifecycles of individual products. Once a consumer collects all the products in a particular series, they tend to stop purchasing the product. There are also marked gaps in popularity between specific series.
B. Series Development Toys-with-sweets series may be broadly divided by type of toy (Fig. 4). Since the toy component is more important than the confection, consumers largely decide whether or not to buy on the basis of the toy. When developing a series, the manufacturer often targets serious adult collectors2 with collectible products, such as elaborate figurines designed by noted artists and other products, which the collectors buy in bulk in an attempt to obtain a complete set.
D. Collectability Toys-with-sweets producers have devised various means to boost sales, including the positioning of the toys as collectibles. The normal pattern is to render it impossible to judge from the package which item in the series is included in the box. Some manufacturers also use “secret” items not included in the “official” product list, rare items produced in extremely low volume and other strategies to stimulate the consumer to make repeat purchases. Other approaches include restricting sales to specific regions, set periods of time and limited-edition lineups. Besides making bulk purchases of products in a particular series, serious collectors use Internet auctions, online bulletin boards and other means to trade items. For the toymakers, therefore, increased sales depends not only on the popularity of the toys themselves, but also on their perceived value as collectibles.
2 Some serious adult collectors purchase particular toys-with-sweets, trading cards, etc. in bulk.
Fig. 4 Major Types of Toys Packaged in Toys-with-Sweets Type Comment Figurines of characters appearing in TV programs, animation, movies, etc. Widely Character series seen in toymakers already developing character products.
Figurines of animals, cars, trains, tanks, etc. Includes products through Animal/vehicle series collaboration with figurine producers, with many items elaborately designed.
Figurines in images of historical characters, landscapes from Showa era years, Specialized theme series other specialized themes. Retro-type miniatures, science miniatures, other types offered as well.
Figurine depictions of creations by Takashi Murakami and other noted artists. Art-linked series With figurines themselves being artwork, collectability is high –some packaged with certificates, labeled with sequential numbers, etc.
IV. Import and Export Trends
A. Exports There are no export statistics for toys-with-sweets, making it difficult to precisely determine how much exporting is taking place. As one example, however, toy giant Bandai is developing its toys-with-sweets business in Asian markets and is already selling in Hong Kong, Taiwan, Thailand, Singapore and Malaysia – all areas where Japanese characters enjoy high name recognition. The products are supplied both through exports from Japan and production in Thailand and Hong Kong. Products being marketed by Bandai and others include Gundam, fighting figures, Masked Rider, Hello Kitty, Naruto, Onepiece, PokeMon and other characters popular in Japan. Japanese culture is in vogue among youths in Taiwan, Hong Kong, Thailand and other Asian markets, so toys-with-sweets containing Japanese character toys are enjoying solid popularity across the board. So far, distribution has largely targeted core fans, so there is ample room to expand the breadth of sales through general confectionery distribution channels.
B. Imports There are no known examples of foreign products being imported for toys-with-sweets, but Japanese companies are organizing production of their own toy components primarily in China. There are numerous examples of such products being imported into Japan. For figurines, the basic workflow is to export prototypes from Japan to China, and manufacture the final product using locally-made molds. The figurines are then imported into Japan, where they are packaged with sweets. Toymakers generally handle this in-house, while confectioners tend to team up with prototype makers or premium producers, and outsource production to China. Kaiyodo and other figurine producers are the leading prototype producers. In
the case of CDs, mini-magazines and other non-figurine premiums, however, companies involved in content production, design and other fields are among the market entrants.
V. Industry Topics
A. Sweets packaged with CDs Products containing premiums other than toys are on the rise. Among them, sweets packaged with CDs are earning attention for their appeal to adults. The CD-premium sweets trend was initiated by the marketing of “Time Slip Glico — Youthful Melody Chocolate” by Ezaki Glico in 2003. The product consisted of two pieces of almond chocolate and an 8cm CD. The 8cm CDs, which packaged hits from the 1960s through 1980s as miniature reproductions of 45rpm records, right down to the record jackets and lyric cards, became a major hit. At present, CDs-with-sweets are being sold by Bourbon, Bandai, Lotte and other major confectioners and toymakers. In the midst of the current downturn in music CD sales, it is hoped that the hit status of CDs-with-sweets will motivate consumers to purchase regular CDs of best hits and new songs of the featured artists.
B. Capsule-sweets forms new distribution route Amid the current fad in capsule toys (toys packaged in plastic capsules and sold through special vending machines), capsule-sweets are also gaining in popularity. Bandai, Yujin and other makers of capsule toys are moving into this field. Yujin, a major producer of capsule toys, has made capsule-sweets one branch of its character merchandising lineup. To provide the sweets components, partnerships are being forged with OEM manufacturers in the confectionery industry. The capsule-sweets themes are largely based on Thomas the Tank Engine, Disney and other characters. The capsule toy field has yet to grow into a large market because it is limited by shelf space constraints, difficulties in ensuring food safety and hygiene, and on other issues. But capsule toys are enjoying popularity among certain consumers due to their attractiveness as collectibles, meaning that this field has potential for capsule-sweets.
C. Bandai purchases stake in confectioner Tohato Bandai took an equity position in Tohato, a confectioner in the midst of reorganizing, in 2003. The goal was business expansion into the toys-with-sweets field. Bandai is now studying the feasibility of using this position both to leverage its toys-with-sweets business and to enter the sweets market through use of its characters.
D. Bandai ties up with major Hong Kong confectioner In July 2004, Bandai entered into a sales partnership with Four Seas Mercantile Limited, a confectionery sales agent and member of Four Seas Holding’s group of food manufacturers and sellers in Hong Kong. Four Seas Mercantile is now selling Bandai-character toys-with-sweets at supermarkets, general merchandise stores, directly-run sweets shops and other sales routes owned by the company in Hong Kong. The business partnership expanded Bandai’s toys-with-sweets sales route fivefold, from some 300 stores to 1,600 stores. Bandai now aims to expand distribution in Hong Kong and grow its toys-with-sweets sales from 50 million yen to about 1
billion yen by 2007.
E. Live plants and other non-candy items A new trend in the with-premium marketing concept is the packaging of small plants and other non-candy items with toys. Although this trend has not solidified into a true market as of yet, novel new products for packaging with toys are garnering a high degree of attention. Takara in February 2005 launched its “MA-MAIL,” a tin pot containing soil which, when watered, causes a bean to sprout and grow into a plant containing a pre-etched message (“Thank you,” etc.) in about five days. Takara views the toys-with-plants field as a venture business and intends to develop a line of related products. Tomy is also set to market toys-with-plants full scale in March 2005, following advance sales in February. The “Mame Derumon no Tamago” (Bean Growing Egg) is an artificial eggshell in a container. After watering, a bean sprout contained inside the eggshell cracks open the shell and pops out in about one week’s time. The bean plant contains a message written in French on one side and Japanese on the other. Plant-toys will be sold at toy stores, gardening shops, home centers and other retail locations. For toymakers, this could provide a golden opportunity to expand into new sales channels.