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Lego to Boost China Sales With Local Factories Supplying to Asia

Lego CEO Joergen Vig Knudstorp
Joergen Vig Knudstorp, chief executive officer of Lego A/S, speaks during an interview in Singapore. Photographer: Munshi Ahmed/Bloomberg

Oct. 3 (Bloomberg) -- Lego A/S, Europe’s biggest toymaker, plans to expand its sales in China as rising income boosts demand for its building-blocks in the world’s most-populous nation.

Lego is building manufacturing facilities in China to serve both the country and across Asia, Chief Executive Officer Joergen Vig Knudstorp said yesterday. The region contributes about 10 percent of revenue, he said.

“Asia is not a supply base, it’s a market and a growing market,” Knudstorp said in a Bloomberg television interview with Haslinda Amin in Singapore. “The urbanization where 500 million people are going to become members of a middle class that will look to great schools, great infrastructure but also play as an important part of childhood.”

The closely held company is seeking to boost sales as the world’s second-largest economy is expected to expand 7.6 percent this year, according to the Asian Development Bank’s forecast yesterday. By 2022, more than 75 percent of the country’s urban consumers will earn 60,000 yuan ($9,800) to 229,000 yuan a year, Mckinsey & Co. said in June.

Billund, Denmark-based Lego plans to increase its business in parts of Asia, as well as in Africa and Latin America, which will offer “huge growth potential” in the future, Knudstorp said.

The company wants the Europe, Africa, and Middle East region, Asia and the Americas to contribute equally to sales over time, he said, without being more specific.

Sales Jump

Lego said last month its first-half sales jumped 13 percent with the strongest growth in Asia amid a slower start to 2013 in the toy markets of North America and Europe. Revenue rose to 10.4 billion kroner ($1.9 billion) from 9.13 billion kroner in the same period a year earlier.

Lego, which is closely held, said it boosted its global market share to 8.8 percent in the first half from 8.6 percent at the end of last year. The company is controlled by Denmark’s richest man Kjeld Kirk Kristiansen, the grandson of Lego founder Ole Kirk Kristiansen, who has a net worth of $6.8 billion, according to the Bloomberg Billionaires Index.

“We are on a journey of major expansion where over the next 5 to 10 years, the major growth driver is going to be the Asia region,” Knudstorp said.

To contact the reporter on this story: Pooja Thakur in Singapore at pthakur@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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