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Hasbro
HistoryHasbro, Inc.
1027 Newport Avenue
Public Company Truly successful toy companies do not just make toys; they manufacture popular culture. Hasbro, Inc., which is the second largest toy maker in the world, behind only Mattel, Inc., certainly fits that description. From America’ s Action Hero to a plastic anthropomorphized potato to vehicles that transform into robots to the largest bird in the world, Hasbro toys are instantly recognized by millions of Americans. Hasbro makes G.I. Joe, Mr. Potato Head, and Transformers, and owns licenses for Sesame Street characters. Thanks to numerous acquisitions in the 1980s and 1990s, it also makes Playskool and Romper Room preschool toys, Tonka trucks, Kenner ’ s Nerf toys, and Cabbage Patch Kids (by way of Coleco). Hasbro has become dominant in the area of board games and puzzles through its ownership of Milton Bradley (maker of Scrabble and Parcheesi) and Parker Brothers (maker of Monopoly). Into the late 1990s and early 21 st century, Hasbro has continued to acquire popular brands, adding Pokemon game cards with their procurement of Wizards of the Coast and reacquiring the license to toys developed from Disney Studios movie releases. Early History From 1923 To The 1930sHasbro traces its origin to an enterprise founded in Providence, Rhode Island, in 1923 by Henry, Hilal, and Herman Hassenfeld, brothers who had emigrated to theUnited StatesfromPoland. The Hassenfeld brothers engaged in the textile remnant business, selling cloth leftovers. By the mid-1920s they were using the remnants to make hat liners and pencil-box covers. After realizing the popularity of the covers, they soon began making the boxes themselves with eight employees— all family members. In 1926 the company incorporated under the name Hassenfeld Brothers Inc. Hilal Hassenfeld became involved in other textile ventures, and Henry took control of the new company. Although a paternalistic employer, Henry Hassenfeld was also a tough and shrewd businessman. During the Great Depression— with 150 employees in 1929 and 200 employees in 1930— Hassenfeld Brothers commanded annual sales of $500,000 from sales of pencil boxes and cloth zipper pouches filled with school supplies. At that point, however, the company’ s pencil supplier decided to raise its prices and sell its own boxes at prices lower than Hassenfeld’ s. Henry Hassenfeld responded with a vow to enter the pencil business himself, and in 1935 Hassenfeld Brothers began manufacturing pencils. This product line would provide the company with a steady source of revenue for the next 45 years. Transformation To Toy Manufacturing From The 1930s To 1960During the late 1930s the Hassenfeld Brothers began to manufacture toys, an extension of the company’ s line of school supplies. Initial offerings included medical sets for junior nurses and doctors and modeling clay. During World War II Henry’ s younger son, Merrill Hassenfeld, acted on a customer’ s suggestion to make and market a junior air raid warden kit, which came complete with flashlights and toy gas masks. By 1942, as demand for school supplies tapered off, the company had become primarily a toy company, although it continued its large, profitable pencil business. Hilal Hassenfeld died in 1943, at which point Henry Hassenfeld became CEO and his son Merrill Hassenfeld became president. Also duringWorld War II, the company ventured into plastics, but was forced, due to labor shortages, to reduce employment to 75. After the war Merrill Hassenfeld began marketing a girls makeup kit after seeing his four-year-old daughter play with candy as though it were lipstick and rouge. In 1952, the company introduced its still-classic Mr. Potato Head, the first toy to be advertised on television. In 1954 Hassenfeld became a major licensee for Disney characters. By 1960, revenues hit $12 million, and Hassenfeld Brothers had become one of the largest private toy companies in the nation. Turbulent Times During The 1960s And 1970sHenry Hassenfeld died in 1960. Merrill Hassenfeld then assumed full control of the parent company, while his older brother Harold Hassenfeld, continued to run the pencil making operations. Merrill Hassenfeld’ s succession was logical given his interest and expertise in the toy business, but it also marked the beginning of an intramural rivalry between the two sides of the company. Harold Hassenfeld would come to resent the fact that the pencil business received a lower percentage of capital investment even though it was a steadier performer and accounted for a higher percentage of profits than toys. In 1961 Hassenfeld Brothers (Canada) Ltd., now Hasbro Canada Inc., was founded. Hassenfeld Brothers seemed to defy the vagaries of the toy business in the early 1960s when it introduced what would become one of its most famous and successful product lines. According to author Marvin Kaye in A Toy Is Born, the company conceived G.I. Joe in 1963 when a licensing agent suggested a merchandise tie-in with a television program about the U.S. Marine Corps called “ The Lieutenant.” The company liked the idea of a military doll, but did not want to pin its fate on a TV show that might prove short-lived; so, it went ahead and created its own concept, and in 1964 Hassenfeld unleashed G.I. Joe, a 12-inch “ action figure” with articulated joints. In its first two years, G.I. Joe brought in between $35 and $40 million and accounted for nearly two-thirds of the company’ s total sales. The company changed its name to Hasbro Industries, Inc. in 1968 — it had sold its toys under the Hasbro trade name for some time — and went public. Only a small portion of Hasbro stock went on the open market, however; the majority stake remained in the hands of the Hassenfeld family. At the same time, Hasbro decided that it could no longer ignore the public’ s growing disapproval of war toys, which was fueled by disillusionment with theVietnam War. In 1969 G.I. Joe, still the company’ s leading moneymaker, was repackaged in a less militaristic“ adventure” motif, with a different range of accessories. Also in 1969, the company acquired Burt Claster Enterprises, theBaltimore, Maryland-based television production company responsible for the popular“ Romper Room” show for preschoolers. Burt Claster Enterprises had also begun to manufacture a line of“ Romper Room” toys. Nevertheless, a month-long Teamsters strike and troubles with Far Eastern suppliers hurt Hasbro in 1969, and the company posted a $1 million loss for the year. The 1960s ended on a turbulent note for Hasbro, providing a foretaste of the decade to come. In 1970 Hasbro decided that it had to diversify, and it opened a chain of nursery schools franchised under the “ Romper Room” name. The company hoped to take advantage of President Richard M. Nixon’ s Family Assistance Plan, which subsidized day care for working mothers. Running the preschools was a very big mistake. Merrill Hassenfeld’ s son, Alan Hassenfeld, told the Wall Street Journal, “ We’ d get phone calls saying, ‘ We can’ t find one of the kids.’ The whole company would stop.” Within five years Hasbro had left the day care business. Another ill-fated diversification move was Hasbro’ s line of Galloping Gourmet cookware, which sought to capitalize on a contemporary television cooking show of the same name. That venture literally fell apart when termites ate salad bowls stacked in a warehouse. In addition, two products from Hasbro’ s 1970 line turned into public relations disasters: Javelin Darts were declared unsafe by the government, and Hypo-Squirt, a water gun shaped like a hypodermic needle, was dubbed by the press a “ junior junkie” kit. Both products were promptly removed from the market. The continuing success of “ Romper Room” and its related toy line proved to be a bright spot for Hasbro, although the company came under fire from the citizens group Action for Children’ s Television, which accused the program of becoming an advertising vehicle for toys. In 1974 Merrill Hassenfeld became CEO of Hasbro, while his son, Stephen D. Hassenfeld, became president. Hasbro regained its profitability but floundered once again later in the decade. Poor cash flow accounted for some of the problems, but the company’ s underlying mistake was casting its net too far and too wide in an effort to compensate for G.I. Joe’ s declining popularity. Hasbro discontinued G.I. Joe in 1975 because of the rising price of plastic. By 1977— the year Hasbro acquired Peanuts cartoon characters licensing rights — the company suffered $2.5 million in losses and carried a heavy debt. The financial situation became serious enough that Hasbro’ s bankers forced it to suspend dividend payments in early 1979. The toy division’ s poor performance fueled Harold Hassenfeld’ s resentment that the Empire Pencil subsidiary continued to receive a smaller proportion of capital spending to profits than did the toy division. The dam threatened to burst in 1979 when Merrill Hassenfeld died at age 61. Stephen Hassenfeld was chairman Merrill Hassenfeld’ s heir apparent, but Harold Hassenfeld refused to recognize Stephen Hassenfeld’ s authority. Company Perspectives:The company’ s focus will be on building a strong global business and further strengthening its presence in the children’ s and family leisure time and entertainment industry. Hasbro is well poised to leverage its incredible portfolio of classic brands globally, regionally and locally, and aims to achieve this goal with an increased emphasis on global brand marketing and product development, complemented by coordinated regional and local marketing and sales activity. The feud was resolved in 1980, when Hasbro spun off Empire Pencil, which had become the nation’ s largest pencil maker, and Harold exchanged his Hasbro shares for shares of the new company. At the same time, Stephen Hassenfeld became the toy company’ s CEO and chairman of the board, and dedicated himself to turning Hasbro around. Where it had once been overextended, the company slashed its product line by one-third between 1978 and 1981, while its annual number of new products was cut by one-half. Hasbro also refocused on simpler toys, such as Mr. Potato Head — products that were inexpensive to make, could be sold at lower prices, and had longer life cycles. This conservative philosophy precluded Hasbro from entering the hot new field of electronic games, as did the fact that it could not spare the cash to develop such toys. The decision to stay out of the market was vindicated in the early 1980s when the electronics boom turned bust and shook out many competitors. Perhaps the most important event in Hasbro’ s revival was the 1982 return of G.I. Joe. The U.S. political climate at the time made military toys popular again, and G.I. Joe was reintroduced as an antiterrorist commando, complete with a cast of comrades and exotic villains, whose personalities were sculpted with the help of Marvel Comics. Two years later, Hasbro introduced its highly successful Transformers line— toy vehicles and guns that could be reconfigured into toy robots. Transformers were tied into a children’ s animated TV series and proved so popular that People magazine asked Stephen Hassenfeld to pose with them for a cover photo. Key Dates:
Major Acquisitions Mark The 1980sIn 1983 Hasbro acquired GLENCO Infant Items, a manufacturer of infant products and the world’ s largest bib producer. Hasbro also sold about 37 percent of its own stock to Warner Communications in exchange for cash and Warner’ s struggling Knickerbocker Toy Company subsidiary, which made Raggedy Ann and Raggedy Andy dolls. The new Warner holdings did not threaten the company’ s autonomy, however; the shares were put into a voting trust controlled by the Hassenfeld brothers and other Hasbro executives. In 1984 Stephen Hassenfeld turned over the position of president to his brother, Alan, while remaining CEO and chairman. In the early 1980s Hasbro was the nation’ s sixth best-selling toy maker, with revenues of $225.4 million and $15.2 million in profits. Flush with newfound strength, in 1984 it acquired Milton Bradley, the nation’ s fifth best-selling toy maker, and second only to General Mills ’ s Parker Brothers subsidiary in production of board games and puzzles. Milton Bradley had been founded by a Springfield, Massachusetts, lithographer who set up shop in 1860 and immediately turned out a popular reproduction of a portrait of presidential candidate Abraham Lincoln. Bradley’ s portrait, however, showed Lincoln clean-shaven, so when Lincoln grew his beard, sales fell off. Looking for a way to stay in business, Bradley invented and produced a board game called The Checkered Game of Life, a distant precursor of a popular Milton Bradley game, The Game of Life, which was introduced in 1960. The game’ s success convinced Bradley to stay in the game business. During the Civil War he produced a lightweight packet of board games for the amusement of Union troops. The company incorporated in 1882. During the late 19th century, Milton Bradley (MB) relied mostly on such favorites as chess and checkers and traditional European games. During the 20th century, however, the company designed and marketed more original games, sometimes with great success. During the Depression, a Milton Bradley financial game called Easy Money became popular. In the 1950s, Milton Bradley pioneered games with tie-ins to television shows — Concentration was an early favorite. In 1968 MB acquired Chicago-based Playskool Manufacturing, which was noted for its preschool toys. Among Milton Bradley’ s later successes was the “ body action” classic Twister, which was published in 1971 and became a popular prop with talk show hosts for a while after Johnny Carson challenged Eva Gabor to a go-around on “ The Tonight Show.” In 1984, however, Milton Bradley had found itself in an uncertain financial position after fending off a hostile takeover from British conglomerate Hanson Trust. In the wake of that failed bid, several unidentified parties bought up large blocks of MB stock, fueling speculation that another takeover attempt was imminent. Finally, in May 1984, MB agreed to be acquired by Hasbro for $360 million. MB ’ s strength in board games and puzzles complemented Hasbro’ s plastic toys and stuffed animals. Milton Bradley’ s Playskool subsidiary provided a solid preschool line including classics such as Lincoln Logs and ABC blocks. The new Hasbro Bradley Incorporated immediately challenged Mattel ’ s position as the nation’ s leading toy maker. In 1985 Hasbro Bradley became Hasbro, Inc. If Hasbro’ s and Milton Bradley’ s product lines merged well, their chief executives did not. Stephen Hassenfeld became president and CEO of Hasbro Bradley, with Milton Bradley chief James Shea, Jr., becoming chairman. After only a few months, however, Shea resigned. Stephen himself became chairman, with brother Alan Hassenfeld replacing him as president. Hasbro surpassed Mattel to become the largest toy company in the world in the mid-1980s. Having done so, it then attempted to dethrone Mattel’ s Barbie, queen of the fashion doll market. In 1986 Hasbro introduced Jem, a fashion doll given the dual identity of business woman/record producer and purple-haired rock musician. While Jem posted strong initial sales, her popularity quickly faded and she was retired the following year. In 1988 the company brought out Maxie, a blonde doll scaled to match Barbie in size so that she could wear Barbie clothing and accessories. Maxie lasted twice as long as Jem and was discontinued in 1990. In 1989 Hasbro acquired bankrupt rival Coleco Industries, owners of the Cabbage Patch Dolls, for $85 million. The Coleco acquisition proved to be Stephen Hassenfeld’ s final business achievement. In 1989, he died at age 47, having converted the relatively modest toy company that his grandfather had founded into a juggernaut at the top of its industry with 1989 sales of $1.41 billion, a huge increase over the $104 million figure of the year he took over. Acquisitions Continue During The 1990sA new and more challenging era began when 41-year-old Alan Hassenfeld became chairman and CEO of Hasbro. The younger Hassenfeld continued the acquisition trend of the 1980s, as Hasbro acquired Tonka Corporation in 1991 for $486 million. With the deal, Hasbro added not only the Tonka line of toy trucks but also Tonka ’ s Parker Brothers unit, the maker of Monopoly, and Kenner Products, which featured Batman figures and the Strawberry Shortcake doll. The Parker Brothers unit was merged into Hasbro ’ s already strong Milton Bradley division. Hasbro took a $59 million charge in 1991 to cover costs of consolidating the Tonka acquisition and restructuring overall operations. In the late 1980s, Alan Hassenfeld had spearheaded an effort to increase Hasbro ’ s international sales, primarily by taking toys that failed in the U.S. market and remarketing them overseas at prices as high as four times their original prices. He had helped increase international sales from $268 million in 1985 to $433 million in 1988. So it was not surprising that as chairman he would push to increase Hasbro’ s international presence. He did just that in 1991, establishing operations in Greece, Hungary, and Mexico. It was the Far East, however, which Hassenfeld saw as a critical market for Hasbro to develop. He gained two more distribution channels there in 1992 by purchasing Nomura Toys Ltd., based in Japan, and buying a majority stake in Palmyra, a Southeast Asian toy distributor. Thanks to these efforts, by 1995, Hasbro ’ s international sales had reached $1.28 billion, which represented almost 45 percent of total sales, a significant increase over the 22 percent figure of 1985. More than 46 percent of the company ’ s operating profit was attributable to operations outside the United States in 1995. One international setback came in 1993 when Hasbro lost out to arch-rival Mattel in a bid for J.W. Spear, a U.K.-based maker of games. While international results were improving, Hasbro began to show some weaknesses on the domestic front. Much of the growth since 1980 had come from the company’ s various acquisitions, along with Hasbro’ s largely successful efforts to leverage the new assets it gained through the deals. Many new product development activities, on the other hand, were not as successful, with the exception of product lines developed to tie in with the movie Jurassic Park and the popular children’ s television show “ Barney.” As a result, domestic sales stagnated in the early 1990s, and actually fell from $1.67 billion in 1993 to $1.58 billion in 1995. And worldwide sales showed much slower growth as well. From 1991, the year of the Tonka acquisition, to 1995, sales increased only 33.5 percent, with half of the increase occurring in 1992 alone. To help improve the company’ s domestic performance, a reorganization was completed in 1994 that merged the Hasbro Toy, Playskool, Playskool Baby, Kenner, and Kid Dimension units into a new Hasbro Toy Group. Meanwhile, in 1993 Mattel acquired Fisher-Price and soon thereafter regained the number one spot in the toy industry. Also contributing to Hasbro’ s challenges in the 1990s was its belated struggle to enter the market for electronic games. Eventually, in 1992, the company began development of a mass market virtual realitygame system. Although such a system was successfully developed, it was judged too expensive for the mass market and the project was abandoned in 1995, resulting in a charge of $31.1 million. In 1993, Hasbro bought a 15-percent stake in Virgin Interactive Entertainment, a producer of game software for Sega and Nintendo systems, with the intention of developing software based on Hasbro toys and games. Two years later, however, Hasbro dissolved the partnership and sold its stake. A more promising venture began in 1995 with the establishment of Hasbro Interactive and the release of its first product that same year, a CD-ROM version of Monopoly. More than 180,000 units were sold in the first eight weeks following its release. Additional titles to be released in 1996 included Risk, Battleship, and Playskool-brand games. In 1995, Mattel approached Hasbro about a possible merger of the two largest toy companies in the world. Negotiations took place in secret over the course of several months until the Hasbro board early in 1996 unanimously turned down a $5.2 billion merger proposal that would have given Hasbro stockholders a 73 percent premium over the then-current selling price. Hasbro officials expressed doubts that the merger could pass antitrust challenges and wanted a large up-front payment to help the company’ s performance during what would have likely been a lengthy antitrust review and to protect itself against the possibility that the merger would collapse. Mattel officials, on the other hand, maintained that the merger would have had little difficulty gaining approval, but backed away — and did not initiate a hostile takeover— when Hasbro waged a vigorous media campaign emphasizing the possible negative ramifications of such a mega-merger. Also clouding the deal was an ongoing Federal Trade Commission investigation into alleged exclusionary policies between toy manufacturers and toy retailers, involving most notably the Toys “ R” Us chain. Having maintained its independence, Hasbro adopted a multi-pronged strategy for reinvigorating its performance as the turn of the century approached. Its strategies included leveraging its well-known brands in new ways; stepping up efforts to market electronic versions of established games, particularly through the Hasbro Interactive initiative; continuing to grow internationally; and bolstering new product development primarily through media tie-ins. Already planned for 1997 were several promising film tie-in prospects, including the movies Jurassic Park 2, Batman and Robin, and Barney’ s Great Adventure, as well as the theatrical re-release of Star Wars. As the new millenium approached, Hasbro looked to be moving towards regaining the top spot in the ever more international and multimedia consumer landscape of children’ s toys and entertainment. In 1995, it acquired the Laramie Corporation, creators of the SuperSoaker line of water guns; within three years it had added Tiger Electronics, makers of Furby and Poo-Chi interactive toys. In the April 16, 1999 issue of theWall StreetJournal,Joseph Pereira stated that Furby Generaled about ten percent of Hasbro’ s total revenue for the quarter as the“ must-have” toy of the 1998Christmasseason. That same year also marked the procurement of Galoob Toys, Inc., makers of Mi-croMachines. The following year, Hasbro not only acquired Wizards of the Coast, makers of the popular 1999 Christmas children ’ s gift, Pokemon game cards, but they also reaped huge dividends from merchandise associated with the first of three Star Wars prequels,The Phantom Menace. The movie broke the single-day take record in its first 24 hours of release and helped influence high sales of the Phantom Menace line of action figures. With two more prequels to be released in the following decade, Star Wars looked to be a continuous source of revenue for Hasbro, justifying the steep price paid for the license in 1997— almost $600 million and a 7.4 percent stake in Hasbro, Inc. Restructuring For The 21 st CenturyAs the 20th century came to a close, Hasbro seemed prepared to seriously challenge incumbent children’ s toy leader Mattel. However, precipitous drop-offs in Pokemon and Star Wars merchandise sales and a weak interactive games market led to Hasbro’ s first negative financial quarter since 1995. Hasbro’ s software games division, Hasbro Interactive, and their interactive gaming Web site, Games.com, had lost over $100 million in 1999 and in 2000, and for the final quarter of 2000, Hasbro overall posted a net loss of $180 million. Determined to return to profitability in 2001, Hasbro took decisive action. It sold Hasbro Interactive and Games.com to French video game company Infogrames Entertainment and consolidated its U.S. toy group in Pawtucket, Rhode Island, shutting down plants in Cincinnati, San Francisco, and Napa, reducing its workforce by 850 jobs. The company refocused attention on its core group of brands and more traditional toy lines, including Mr. Potato Head, Monopoly, and G.I. Joe; dedicated itself to expanding these brands and toys beyond their traditional markets; and announced movie licenses with Pixar and Disney, as well as Harry Potter movie tie-in trading cards by Wizards of the Coast. Although Hasbro again reported losses in the first quarter 2001 ($25 million loss on revenues of $463 million), the company persevered in rededicating itself to the brands that have made it into one of the most influential producers of popular culture in the previous century. Principal SubsidiariesGaloob Toys, Inc; Tiger Electronics Inc.; Milton Bradley Company.; Playskool, Inc.; Tonka Corporation; Parker Brothers & Co; Nomura Toys Ltd. (Japan); Romper Room Enterprises; Kenner Products; Wizards of the Coast, Inc; Oddzon Products, Inc.; Laramie Corporation; WowWee, Inc. Principal Operating UnitsHasbro Games Group; Hasbro Toys Group; Hasbro Canada; Hasbro de Mexico; Hasbro Latin America; Hasbro France; Hasbro Deutschland; Hasbro Italy; Hasbro Spain; Hasbro UK. Principal CompetitorsMattel; LEGO; Acclaim Entertainment; Applause; Bandai; Electronic Arts; Infogrames, Inc.; JAKKS Pacific; Marvel Enterprises; Nintendo; Ohio Art; Play-By-Play; Playmates; Play-mobil; SEGA; Sony; Toymax International; Ty; Vivendi Universal Publishing.
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