Green Toys Expands into Housewares, Will Keep Sourcing Locally
Robert von Goeben and Laurie Hyman
Julie Cerrick/Green Toys Inc.
Robert von Goeben and Laurie Hyman in Mill Valley, CA in December, 2010.
Robert von Goeben and Laurie Hyman in Mill Valley, CA in December, 2010. Photographer: Julie Cerrick/Green Toys Inc.
In 2006, Robert von Goeben, a venture capitalist turned electronic toy designer in San Francisco, contemplated shifting course again. Instead of making more gizmos that required electricity and intricate parts, he’d listen to his wife and create a simpler line that would appeal to parents who identified with the green movement. “An Inconvenient Truth,” former Vice-President Al Gore’s Oscar-winning documentary on global warming, was attracting mainstream attention. Organic foods and household items billed as environmentally friendly were flying off shelves in supermarkets. “Children’s products were the next domino to fall,” he says.
As questions about toy safety made headlines the following year with the recall of more than 17 million Chinese-made toys, von Goeben partnered with former marketing executive Laurie Hyman, a business acquaintance from his days at Redleaf Venture Management, a venture capital firm in Saratoga, Calif. Together they invested $200,000 of their own money to launch Green Toys in 2007 to make playthings from recycled plastic milk jugs. The Mill Valley (Calif.) company was profitable from its first year on, with revenue from online sales and retailers growing 70 percent annually to $5 million last year, von Goeben says. He expects it to continue expanding at that pace through 2015.
Unlike its half-dozen eco-friendly competitors that manufacture or buy raw materials for their toys overseas, Green Toys, which has just six employees, contracts only with California companies. Monica Becker, a sustainability consultant in Rochester, N.Y., says sourcing locally means burning less fossil fuel and creating or maintaining more U.S. jobs. Green Toys can also track the chemical content of toys better than its counterparts. “In that sense, they are quite unique,” Becker says.
Green Toys’ products are about 30 percent more expensive than similar toys from major players. Von Goeben says he can narrow that price difference by at least two-thirds as the company grows, though it’s unclear how popular its market segment will become. Last year, eco-friendly toys generated just $21 million in sales at U.S. retailers, a miniscule fraction of the $22 billion for the toy industry as a whole, according to research firm NPD Group.
Von Goeben, 48, spoke recently to Bloomberg.com contributor Antone Gonsalves about his plans to make green affordable while keeping it profitable. Edited excerpts of their conversation follow.
Antone Gonsalves: How will you keep manufacturing in the U.S. and compete with competitors such as Mattel and Hasbro, which make their toys in countries where labor costs are less?
Robert von Goeben: I foresee within the next two years or so we’ll be within 5 percent or 10 percent of the price of other products, mainly due to an increase in manufacturing capacity. Our products are very simple. As a result, labor is a very small part. We don’t have sophisticated electronics that have to be assembled and have to be tested. We don’t do anything with electricity in it. We don’t do anything with batteries in it. So, without putting a lot of labor into your assembly, a lot of it is the cost of the capital equipment -- bigger machines to make more parts, bigger molds so you can make more parts at a time. That’s what’s really going to drive our business. It’s really more capital equipment than anything else.
I will say that the recent tax stimulus bills that provided incentives for capital equipment has been a godsend for us. I never actually thought I would be touting the benefits of tax policy, but I have to tell you that as a small manufacturer in the U.S., we’ve found the Obama economic stimulus for capital equipment to be a huge driver for increasing our capacity, so it actually worked.
Q: Your toys are sold in 5,000 U.S. stores, including Pottery Barn, Barnes & Noble, Whole Foods, and Buy Buy Baby. Green Toys also has distributors in 35 countries. Do you plan to keep all manufacturing in the U.S. as you grow?
A: Our goal is never to move [manufacturing] out of the U.S., unless we are doing that specifically to serve that market. As an example, I could see us manufacturing in Europe from locally sourced materials back to that local market, so we would be a local supplier.
Q: Assuming the market for eco-friendly toys continues to grow, do you expect to see consolidation, with bigger toymakers buying small businesses like yours?
A: I do see consolidation happening in the next two years. Larger companies that get into this business, they will make a make-vs.-buy decision, and they will decide either to acquire a company or to build a brand within themselves.
Q: Are you ready to sell to Mattel or some other major toymaker, if it comes calling?
A: I can’t comment on whether I would sell Green Toys to Mattel because I don’t know enough about Mattel. We are not for sale. We’re a happy private company. Do I see us someday being part of a larger organization and having the support and the marketing behind that? I could see that happening.
Q: You introduced tableware for children this year. Are you going to keep expanding beyond toys?
A: This year, 2011, is a turning point for our company -- we’ve gone from being a toy company to a children’s products company. When you look at children’s housewares and tableware, there’s a huge amount of opportunity there. Again, it’s food contact; it’s all the things parents care about.
Q: What are your target customers looking for?
A: What’s happening is a shift not just in toys, but in consumer products. The organic food market started as a niche market 15 years ago and really emerged because people started to think, “What am I eating; what’s in this food?” People are looking at consumer products -- specifically, children’s products -- the same way. People are waking up and saying, “No longer do I want to give my kids this anonymous, yellow plastic thing that I don’t know where it’s made.” People really want to know what the plastic is, what the components are, how it’s made.
Q: Did the 2008 Consumer Product Safety Improvement Act, which gives government regulators more authority over toy sales, affect your business?
A: It was not really a big issue for us. Compliance was very routine for us with that program. Because of the tightness of our supply chain, the way we monitor our raw materials, the way we track our products, most of what’s in the CPSIA we were doing anyway. There were additional reporting requirements with certifications and things like that, but for a business like ours, it really was no problem at all to come into compliance.
Q: How important is your online marketing?
A: Some of our biggest [retailers] sell online. The whole world of bloggers, specifically parents who are blogging about products and trends for their children, is huge. Our customer segment is parents between the ages of 25 and 40, and they’re predominantly female. Our consumer is what we call the Whole Foods mom, and they are online. I would say 99 percent of our marketing budget is spent online, easily.
To contact the reporter on this story: Antone Gonsalves at antonegonsalves@gmail.com;
To contact the editor responsible for this story: Nick Leiber at nleiber@bloomberg.net
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