Business India ×
  Magazine:
Corporate Report

Published on: Feb. 19, 2021, 4:51 p.m.
Funskool and the art of toy making
  • Jeswant sees a bright future for Indian toys in both domestic and global markets

By Sekhar Seshan. Consulting Editor, Business India

With April and May normally being big months for the toy business because of the schools’ summer vacation, Funskool India had stocked up for the 2020 season. “We ended up carrying a lot of inventory because Covid-19 ensured that both months ended up being a total wash-out!” says R. Jeswant, CEO of the Chennai-based toy manufacturer. “With hardly any business, payments from customers were also not forthcoming, resulting in cash flow issues as well.” However, like most other industries that were overwhelmed by the pandemic, the toy major was already on the way to making a strong comeback and strengthening its market leadership as the year-end celebrations began.

All three Funskool factories – two at Ranipet in Tamil Nadu and one in Goa – and all stores selling its toys were closed for almost all of April. The following month was not much better though the factories resumed operation with restrictions towards the end of May, as did some shops outside malls. “Sales picked up to some extent in June; with exports growing exponentially from July onwards, we are in a much better shape now,” says Jeswant. “Domestic demand is also growing and from all accounts, we are back on track!”

The fact that the pandemic continued through gifting season from October to December – a peak selling period for toys, with Diwali and Christmas falling during these months – added to the challenges. However, the domestic business picked up considerably this year too, compared to the earlier months. “Sales were still below our expectations, particularly in December which is a critical gifting month,” he says. “Toys are a discretionary category, particularly in markets like India where awareness is low and impulse buying forms a good percentage of sales.”

With the pandemic continuing to impact footfalls in malls and large standalone stores, combined with the fact that children have been stuck indoors, word of mouth about new products under its home-grown brands – Fundough, Giggles, Play & Learn and Handycrafts – also did not come into play, resulting in taking more time to establish them. The company could manage the situation thanks to exports being largely not impacted. 

More opportunities

Another favourable factor the industry has going for it is that the reforms under the ‘Make in India’ initiative, especially with the specific discouragement of China-made toys, have given a boost to the domestic toy industry. For Funskool, the fact that its factories have BIS certification adds to its edge.

More opportunities have opened up for Indian manufacturers, thanks to the implementation of the Toy Quality Order of the Bureau of Indian Standards (BIS) from 1 January 2021, postponed from 1 September 2020, which makes it mandatory to have all toy manufacturing facilities within the country to be certified by BIS. Products must be also certified by BIS-approved testing labs. The steep increase in customs duties in the last Budget has made imports difficult and non-remunerative. The Foreign Manufacturers Certification Scheme (FMCS) also mandates that imports can now be only from BIS-certified factories.

“Unscrupulous importers tend to look for ways to circumvent the law to save on import duties,” says Jeswant. “Only strict implementation of the new order can weed out low-quality imports from the market and provide a good platform for the Indian manufacturers.” From all indications, he feels, the government appears to be serious in realising the potential of the domestic toy industry and this gives Indian manufacturers hope about the industry growing exponentially over the next few years.

Funskool, Jeswant points out, has been focussing on developing its own brands over the last few years and has had considerable success in the Indian market with its Giggles for infants and pre-school children, Fundough dough, Handycrafts arts and crafts, Play’N’Learn educational puzzles and several board games developed in-house or being made under licence arrangements. “We intend to widen our domestic offerings and will target to introduce well over 100 new products over the next one year,” he explains.

Funskool (India) Ltd, established in 1987 as a joint venture by the Chennai-headquartered tyre major MRF Ltd and American toy manufacturer Hasbro, Inc, is a Rs200-crore company as of 31 March 2020. This was a drop of nearly 11 per cent from the Rs221.8 crore it had chalked up the previous year, because it discontinued the Hasbro business during the second half of 2019-20. The effect of Covid-19 and its aftermath are yet to be brought into the books of the parent company, which does not divulge Funskool’s detailed financial separately.

Its retailers, however, are recovering from the effects. Says Faisal Khatri, who owns Souvenirs Toy Store in south Mumbai: “We are a premium toy retailer since 1960 and have been selling Funskool toys since their inception.” Describing his relationship with the company as ‘symbiotic and good’, he says he prides himself in selling Funskool products as they are of a high quality, safe for children and educational – especially its board games. “The company is also ethical,” Khatri adds.

India is also fast emerging as a major sourcing destination for international toy majors, Jeswant points out. Several vendors have begun setting up shop to cater to sourcing requirements. This, according to him, is the start of the evolution of India as a major hub for manufacturing of toys – “clear proof that we have the capability to manufacture toys which satisfy all requirements of world markets”. Says Subhash Jangam, proprietor of S.P. Enterprises at Mumbai suburb Vasai: “I supply printed boxes and packaging materials, as well as instruction leaflets to Funskool.” Jangam, who owns an offset printing press, also does other work, mainly for pharmaceutical companies. “But I pick and choose among them because Funskool’s volumes are so high: more than 100,000 boxes a month,” he adds.

With at least seven in every 10 toys sold in India till recently having been imported, the new regulations will help more domestic companies to scale up and build their own brands. There is a $450-million market for toys in India - but this, as Jeswant points out, is a meagre 0.5 per cent of the world market $90 billion.

Exports push

The next stage will be for Indian brands to make a global presence. The industry being driven by novelty, the launch of new and globally-acceptable products is a must. However, the high tooling costs - and amortising them over the small volumes sold in India – have been the biggest challenge so far in developing new products. This, Jeswant feels, could change as exports push manufacturing activity. “We can expect to see a lot of innovation in design and development of toys emerging out of India. The challenge is clearly to be a globally relevant player while providing the inputs to grow the fledgling domestic industry,” he says. “We have full-fledged product development teams at our head office in Chennai and at our Goa factory, who are working continuously on churning out new products.”

Funskool’s exports business consists of two streams. The bigger one now is of several toy majors of the world sourcing products from it, while exports of its own brands to overseas markets are also growing significantly. “Currently, we export our own brands to the Middle East, Africa, and several Asian countries. We have been able to make inroads into the more developed markets as well and we have distributors operational in countries like the US and the UK.” 

Another feather in Funskool’s cap is the Platinum Award it was awarded by the Sports Goods Export Promotion Council (SGEPC) for outstanding performance in export of sports goods and toys, exporting the largest from India in 2019-20. “Our own brands have made an impact in several overseas markets and we have emerged as a reliable manufacturing partner for several international toy companies,” says Jeswant. Adds Shabir, general manager - international division at Funskool India: “We share our prime minister’s vision of making India a hub for manufacturing high-quality toys. Funskool shall lead the way in getting toys designed and made in India exported to every major country in the world.” 

SGEPC executive director Tarun Dewan points out that the company has consistently achieved the highest export of toys for the last three years. “Funskool has also registered an exponential growth in export in last few years, thus contributing to the PM’s Team up for Toys mission,” he says, adding: “Its quality products have replaced many imported toys in the Indian market.” Funskool had also received the Gold Award in 2018-19 and 2017-18 in the same category of the awards, which are sponsored by the commerce and industry ministry. 

SGEPC is an apex industry forum and a common platform for companies from all over the country, with common interests, to meet and exchange views, decide on common strategies for promotion and interact regarding where they can voice their concerns at both national and international levels. It acts as a direct link between the industry and the Indian government, providing the latter with feedback on the industry’s requirements and conveying its directives to the industry. It also collects export data from its members, maintains a statistical record of exports of sports goods and toys and evaluates its performance on an annual basis.

 

Jeswant is also one of the key speakers on an international list of names for ‘The India Toy Fair 2021’ being organised virtually from 27 February to 2 March to highlight the toy and games industry’s ‘crucial’ role in realising the aspirations of building a new Atmanirbhar Bharat by 2022 to mark the 75th anniversary of Independence. The fair, with the theme ‘Indian Toys, Global Playground’, will allow participants to exhibit their toys for buyers to browse and buy, as well as participate in events and activities and network with other stakeholders of the industry.

So is Dr Aravind Melligeri, the US-based chairman and CEO of aerospace machining major Aequs which has plants in Houston, Bengaluru and Belgaum. “Aequs is one of India’s largest contract manufacturer of toys focused on exports,” Melligeri says, pointing out that the precision machining required for children’s playthings makes a natural synergy between the two lines of business. With a Who’s Who of the world’s toy manufacturers on his client list, he however pleads confidentiality contracts that prevent him from naming them.

The government has also launched ‘Toycathon’, an online toy hackathon for innovative concepts on toys and games. Toycathon-2021 is aimed at challenging India’s innovative minds to conceptualise novel toys and games based on India’s civilisation, history, culture, mythology and ethos. 

The long-term potential of the Indian toy industry continues to be ‘quite positive’, especially as it is so labour-intensive and labour is abundantly available  at costs lower than those of China. “This should result in more global toy companies moving sourcing from China to India, which augurs well for our exports business. The domestic demand will also be more stable with clear signs of the pandemic coming under some control as we build and nurture our own brands in the Indian market,” Jeswant predicts, adding: “For Funskool, we are well equipped to scale up manufacturing with our three large manufacturing facilities. We are also seriously considering a fourth manufacturing facility.” Play on!

Don't miss this

Cover Feature

Why September is crucial

The true picture of the economy has started to emerge. A lot now depends on consumer demand

Special Report

Markets on a new high

The markets, which have given a thumbs-up to the government’s policies, may hit the pause button for a few sessions

Focus

Island of distress

Lanka’s fragile liquidity situation has put it at high risk of debt distress

Corporate Report

JB Chemicals new formulations for growth

The company is all geared up to start its next growth phase

Our letter to you, once a week.
Register with The CSR Weekly for free!

E-MAGAZINE
Why September is crucial
Top Business Houses
Paytm The Indian Fintech Giant
FROM THIS ISSUE

Business & Industry

Corporate Report

Automobiles

Corporate Report

Education

Milestones

Social Responsibility

Healthcare

Goodyear India partners Americares India Foundation

Published on Feb. 2, 2021, 9:21 p.m.

The partnership will support COVID-19 healthcare facilities in Faridabad and Aurangabad

Environment

Tata Motors launches a 'Go Green' initiative

Published on Dec. 23, 2020, 10:34 a.m.

The company will plant a sapling for the sale of every new commercial vehicle

Women Empowerment

Tata Starbucks ties up with Educate Girls to empower women

Published on Dec. 2, 2020, 3:10 p.m.

The partnership aims to provide volunteering and educational support to those who have relocated to urban cities from villages

Environment

Indian Oil has a social initiative for a clean and green world

Published on Nov. 25, 2020, 2:53 a.m.

The public sector company is planting a tree for every retail customer visit during its TreeCheers campaign period

Climate Change

E-vehicles

Ola creates history

Published on Sept. 22, 2021, 3:38 p.m.

The company sells electric two-wheelers worth Rs1,100 crore in two days

Sustainability

Mastercard’s masterstroke for sustainability

Published on Sept. 22, 2021, 3:20 p.m.

Mastercard launches Sustainability Innovation Lab

Government and Policy

Kerry launches Indo-US Clean Energy Partnership

Published on Sept. 14, 2021, 8:31 p.m.

US senator introduces Bill to boost bilateral cooperation

Renewable Energy

Let a thousand Solar Parks bloom!

Published on Sept. 14, 2021, 11:08 a.m.

TN Energy Minister V Senthilbalaji says the state will have Solar Parks in every district

Stay ahead of the times.
Register with The Climate Change Weekly for free!