Getting SKOOL’d in the business of FUN

Many consider Mr. R Jeswant (SVP – Sales & Mktg) Funskool India to be one of the doyennes of the Indian toy industry. We managed to get some time with him for a chat about his life before and at Funskool!

ILP: Tell us a little about your journey before you joined Funskool?

R. Jeswant (RJ): I have been with Funskool (India) Limited for over 18years now after joining the company in April 2000. Prior to that, I’ve worked with TI Cycles of India as Regional Manager at Delhi and Kolkata and was heading Product Management when I left in 1996 . I have also had a stint with Blue Star Ltd as  General Manager (Sales) in their Packaged Airconditioning Division at Chennai and before joining Funskool I did spend 3 years in Sana’a(the capital of The Republic of Yemen) heading a company which represented Philips, Whirlpool etc… as exclusive distributors for the Republic of Yemen.

ILP: You’ve been at Funskool for more than 18 years. How has the journey been, please tell us a little about the highlights.

RJ: It has truly been a fantastic experience. I started as DGM(Sales), then GM (Sales & Marketing) and am Sr VP(Sales & Marketing) now. From when I started to now, the business has grown more than 10 times, We have over the last few years been able to build many of our own brands, have added many new licenses, represent many more companies as exclusive distributors for India etc…Many of us have been with the company for long periods and the journey together to get Funskool to its position as India’s leading toy company has been a wonderful experience.

ILP: Looking at the Funskool catalogue you seem to have licenses from all the majors like Cartoon Network, Disney, Warner Bros and many more. How have these brands fared in the Indian market from a toys point of view?

RJ: Licenses are beginning to work very well in toys though it is nowhere near what it is in the more developed markets. The toy market here estimated at around US$  450 million at retail is about 0.5% of the world toy market of nearly US$ 90 Billion. In addition to Disney, Warner Brothers, Viacom etc… we also manufacture products for the Indian market under license from some of the major international toy companies like Hasbro of USA, Takara Tomy of Japan, Ravensburger of Germany, Jumbo of Netherlands, University Games of USA and many others.

ILP: You also retail your own brand of toys – Giggles for infants and toddlers, Handicrafts – your arts and craft line, FunDough – your range of colorful dough and Play & Learn – your range of educational products. Was there are a conscious shift to launch these product lines to fill gaps that overseas brands were not able to meet?

RJ: Affordability is very critical in the Indian market . Customs duties went up by 10% in the last union budget, GST introduced in July 2017 resulted in roughly a 5% increase over VAT, introduction of new testing standards for all imports into India, all resulted in imports becoming more expensive. With our own brands and licensed products manufactured at our factories we are able to hit optimum price points which take products to within reach of the average Indian consumer for toys.

ILP: Considering you’ve witnessed the toy industry from such close quarters for almost 2 decades, what are some of your key learnings?

RJ: There is very little history for toys in India. Most parents have not had much exposure to branded toys and do not understand the need for toys in the development of children. The toy market is just evolving here and there is a dearth of shelf space for toys. The high rentals in malls and the rather low returns from the toy area compared to some of the more evolved categories result in a lower allocation of space for toys. Affordability is critical and we have an advantage here because of our ability to manufacture quality products at affordable prices. We have also embarked on a program which we have called “Operation Reach” to get to smaller towns where branded toys are sparsely available as of now. We hope this will give us the first mover advantage and pay off in the long term. During the last 6 months, we have added 75 small towns to our distribution network which is, without a doubt, the largest in the country. We service over 5000 retail points, have 16 warehouses across the country, 6 Regional offices and over 85 sales and marketing personnel.

ILP: It is estimated that 20% of the Indian population is between 1-12 years old. That’s a HUGE addressable market, isn’t it?

RJ: This is the reason why all major toy companies are making a beeline for India. They all feel that India with its large young population will be the market of the future. We are very upbeat about the future and estimate the market to grow at a CAGR in double digits for several years into the future.

ILP: According to the LIMA global study 2017, the Toys category comes in 2nd (13.3%) after apparel (14.9%) of the Global retail sales of licensed merchandise which amounts to approx. $262 Bn. India seems to be lagging far behind! What can be done to improve this scenario?

RJ: With more young parents who have had some exposure to branded toys and licenses coming into the market, we expect to see exponential growth in the market soon. With viewership for Indian Animation surging (Chotta Bheem is a glorious example) and companies like Disney, Warner Bros and other licensors building awareness for their properties in India, the market for licensed products is bound to grow. With manufacturing activity for toys picking up in India, the licensed products should also become more affordable and that is when the sales will really grow faster.

ILP: How do you keep the wheels of innovation churning within the company, considering you are catering to a very demanding audience?

RJ: The toy industry is driven by novelty and by merchandise based on TV animation and movies. We have a full-fledged team of design and product development professionals who work tirelessly to come up with new toy concepts. The concepts are then tested with children, retailers and our own sales teams before they see the light of day! Tooling is expensive and therefore till the Indian market really evolves molded toys based on animation or movies will have to be imported to a large extent as the Indian market at this moment is just not big enough to justify large investments in tooling unless a worldwide market is targeted. This will take time. However, when it comes to the generic infant & preschool toys market which is the biggest chunk of the Indian market, we have made considerable investments in tooling because the generic line of products tend to have longer life cycles. Our investments in our own brands like Giggles, Fundough etc..have paid off well and we are now present with some of our own brands in markets outside India as well.

ILP: According to your website, Funskool is India’s largest toy company, with a revenue of around INR 220 Cr. (public source) What percentage of this is attributable to Indian brands vs foreign brands?

RJ: We expect our locally manufactured products to be roughly 40% of our domestic business during the current financial year.

ILP: We also noticed that your website funskoolindia.com doesn’t sell toys directly but diverts traffic to Amazon. Is this because of FDI norms? Is a full-fledged e-commerce shop in the offing? Do you think it will deliver adequate volumes?

RJ: We sell our products online through Amazon, Flipkart, First cry and on many other e-commerce platforms. While there are no FDI norms that prevent us from selling through our own online platform, we feel that at this point of time it may be more prudent to sell through the major e-commerce players. We may look at having our own e-commerce portal sometime in the future.

ILP: Which is the best performing brand for you?

RJ: The biggest success for us has been Giggles, our own Infant & Preschool brand. This has been most satisfying and we expect the brand to grow much stronger in the years to come.

ILP: You mentioned in another interview that Rubik’s cube is one of the most pirated toys in India. Any theories on why this is so?

RJ: Rubik’s cube for which we are the only authorized licensee in India sells very large numbers. The product that we distribute is of a much higher quality than the cheap imitations that are available in the market. Knock Off’s or imitations of best selling products are bound to flood the market and that is happening in the case of Rubik’s cubes as well . However, where there have been patent/trademark violations strict action has been taken in the past.

ILP: To what extent does piracy affect the board games / toy industry? What measures has the government taken to reduce the same?

RJ: Legal remedies are always available to check piracy but are often cumbersome and not worth the effort. While piracy is a problem, it has not got out of hand probably because of the size of the Indian market itself!

ILP: What are your key checkboxes before you license a brand?

RJ: The relevance of the license to the Indian consumer, how the license lends itself to toys, investments required in developing licensed merchandise are all considered before we decide to go ahead.

ILP: Which distribution channel has proven to be most effective for the toys category?

RJ: For high priced toys, toy specialists like Hamley’s and large stand-alone toy stores are very important. However for brands like Giggles which we target at a wider spectrum of customers, hypermarkets, and mom & pop stores are very important. We have a strong presence in toy specialists, hypermarkets, department stores as well as Mom & Pop stores. Our own retail chain of “Funskool” stores now has 16 stores and we are targeting to increase the number rapidly.

ILP:What would be your advice to an entrepreneur looking to get into the licensing business?

RJ: To tread carefully! Toy distribution is not easy and unless you have the infrastructure to reach out to across the country and to service the network it may be better to stick to a limited geographic area.

ILP: Tell us of one instance which comes to mind where licensing helped?

RJ: We are hoping to have a licensed range of our own Giggles brand in the market soon and we are all hoping that it will happen soon. Our biggest success in licensing has been with Beyblades. We have had the Beyblade license for India for several years now and the products are sourced from Takara Tomy of Japan. Over a period of time Beyblades has probably been the largest selling toy for boys in India and continues to do well. Whenever a new animation season of Beyblades is on air, sales start to peak. We will have new animation on air soon and are looking forward to sales hitting new highs!