Hasbro, Inc.

FOUNDED: 1923 by Henry and Hilal Hassenfeld as Hassenfeld Brothers Company

Contact Information:

HEADQUARTERS: 1027 Newport Ave.
Pawtucket, RI 02861
PHONE: (401)431-8697
FAX: (401)431-8535
URL: http://www.hasbro.com

OVERVIEW

Hasbro, Inc. is currently the second largest toy maker in the United States, ranked only behind Mattel. The company designs and manufactures a diverse line of toy products and related items throughout the world, including traditional board and card games, electronic and interactive CD-ROM games, puzzles, action toys, plush products, and infant products. Hasbro also licenses a number of trade names and property rights for use in connection with the sale by others of noncompeting toys and nontoy products.

The company is organized into a Toy Group and a Games Group. The Toy Group includes the Playskool, Playskool Baby, Hasbro, Kid Dimension, and Kenner divisions. The Games Group includes the Milton Bradley and Parker Brothers divisions. Milton Bradley produces a line of more than 200 games and puzzles for children and adults. Its most popular products include Scrabble, Battleship, Chutes and Ladders, Operation, and Twister. Parker Brothers' staple products include Trivial Pursuit, Monopoly, Clue, Risk, and Sorry!. Hasbro Interactive develops interactive CD-ROM games based on the company's traditional products such as Monopoly and Battleship. Hasbro's Emerging Business Group has developed the Super Soaker line of water toys, the Koosh soft play items, and a line of interactive candy.

Hasbro continues to market its classic items, such as Tonka Trucks, Nerf products, and its extensive line of Kenner toys. These, and the high-quality infant and toddler products from Playskool and Playskool Kids, are major sources of revenue. The company plans to regain the number-one toy maker position by aggressive marketing, corporate acquisitions, and introducing new toys based on popular movies, comic books, and television programs. Hasbro also plans to invest in the further development of CD-ROM games and online gaming.

COMPANY FINANCES

In 1997 worldwide sales totaled $3.12 billion. Of this, 37 percent was derived from two retail outlets: Toys 'R' Us (22 percent) and Wal-Mart (15 percent). Also in 1997 the company spent $386,912 on royalties and product development and approximately $411,574 on marketing programs. Hasbro's current licensing agreements are expected to cost the company up to $500 million in royalties between 1998 and 2005.

As of March 1998, more than 133 million shares of Hasbro's common stock were outstanding. The total market value of the common stocks held by nonaffiliates (i.e., people not considered officers of the company) was approximately $4.49 billion. Hasbro's stock prices ranged from $22 7/8 to $36 3/4 over the prior 12-month period.

ANALYSTS' OPINIONS

Standard & Poor's includes Hasbro in its S&P 500 index, and its February 1998 Stock Report recommends buying Hasbro stock. They expect the company's new products, reduced inventory, and corporate restructuring program will help the stock outperform the market.

Some consumers, however, have been complaining about unfair business practices. A 1998 Fortune magazine article notes that many collectors are asking why the toy maker allows its miniature sports collectibles to be sold "out the back door." The article notes that "out the back door" sales are a problem with all toy collectibles, but most seriously with Kenner's Starting Lineup figures. This line of miniature sports action figures initially flopped, but demand for them increased after production was cut and shortages developed—or as the article suggests, were encouraged.

HISTORY

Hasbro traces its origin to an enterprise founded in Providence, Rhode Island, by Henry, Hilal, and Herman Hassenfeld, brothers who had emigrated from Poland. They formed the Hassenfeld Brothers Company in 1923 to distribute fabric remnants. Hilal Hassenfeld became involved in other textiles, and Henry took control of the company. Although he took the role of a father figure at the company, Henry was a tough and shrewd businessman. During the Great Depression, with 200 employees, Hassenfeld Brothers commanded annual sales of $500,000 from sales of pencil boxes and cloth zipper pouches filled with school supplies. At that point, the company's pencil supplier had raised its prices and began to 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.

During the late 1930s Hassenfeld Brothers began to manufacture toys. Some of the early products included toy medical kits and modeling clay. During World War II, Henry's younger son Merrill acted on a customer's suggestion to make a junior air-raid warden kit complete with flashlights and toy gas masks.

By 1942, as demand for school supplies declined, the company had mainly focused on toy manufacturing. During this time, Hassenfeld ventured into plastics to better support its toy making. In 1952 Mr. Potato Head became the first toy advertised on television. In the 1960s, the toy division introduced G.I. Joe. An instant success, the doll quickly became their most popular toy.

Although still run by the Hassenfeld family, the company went public in 1968 and changed its name to Hasbro Industries. The pencil and toy divisions were run by different family members in the 1970s, and disagreements regarding finances, leadership, and the company's future direction led to a separation in 1980. The toy division continued to operate under the Hasbro name, and the pencil division became the Empire Pencil Corporation.

Under new CEO Stephen Hassenfeld, Hasbro grew rapidly in the 1980s. He reduced the number of products by one-third in order to concentrate on specific markets. The company also refocused on simpler toys, like Mr. Potato Head-products that were inexpensive to manufacture, could be sold at lower prices, and had longer life cycles. Hasbro introduced a successful line of toys during this time, which included Transformers and a smaller version of G.I. Joe dolls. In 1983, Hasbro purchased much of Knickerbocker's inventory, including Raggedy Ann and Raggedy Andy dolls, from Warner Bros.

In the early 1980s Hasbro was the sixth-best-selling toy maker in the United States, with revenues of $225.4 million and $15.2 million in profit. Hasbro surpassed Mattel as the country's number-one toy maker when it bought Milton Bradley (the nation's fifth-best-selling toy maker at the time) in 1984. The company acquired Cabbage Patch Kids, Scrabble, Parcheesi, and other products from Coleco in 1989. Stephen Hassenfeld died that year, and his brother, Alan, took control of the company.

In 1991 the company purchased Tonka for $486 million and, in that same year, established operations in Greece, Mexico, and Hungary. In 1992 Hasbro purchased Nomura Toys, a Japanese corporation, and acquired a majority interest in the Asian toy distributor Palmyra. In 1994 the company formed a joint venture with Connector Set Limited Partnership to market its K'Nex construction toys outside the United States. It also established operations in Israel, purchased British game maker John Waddington, and the puzzle and board game businesses of Western Publishing. Mattel again became the number-one toy maker in 1994 and attempted a takeover bid for Hasbro. Hasbro blocked the takeover by insisting that antitrust authorities in the United States and Europe would block the sale.

The 1990s were also a time of scandal for the toy maker. The Federal Trade Commission (FTC) accused Hasbro of deceptive advertising and of violating antitrust laws.

STRATEGY

Hasbro plans to surpass Mattel as the number-one toy maker again. Its strategy includes continuously developing and acquiring new products and implementing an aggressive marketing campaign. New products include computer versions of their popular board games and action figures based on popular television and movie characters.

CURRENT TRENDS

Acquisitions are likely to continue at Hasbro. In 1997 the company announced plans to acquire Tiger Electronics, Russ Berrie's Cap Toys, and OddzOn Products. In 1998 The Wall Street Journal speculated that Hasbro might also be eyeing Galoob Toys as a potential acquisition. They also reported that two former Milton Bradley officials had been indicted for tax fraud and money laundering. Although Hasbro settled its deceptive advertising lawsuit with the FTC in 1993, they were still found guilty of violating anti-trust laws in 1997 by entering into vertical agreements with Toys 'R' Us to restrict certain toys to warehouse club retailers.

PRODUCTS

Throughout the years, Hasbro has introduced many nationally recognized products. Toys have ranged from board games to action figures geared toward several age groups. The Kenner division develops Batman, G.I. Joe, and Star Wars action figures. These particular products are especially popular toys for children and adult collectors.

The Playskool division is geared toward toddlers and pre-schoolers. Playskool products include Play-Doh, Lincoln Logs, Weebles, and the Easy Bake Oven. The Tonka division manufactures realistic versions of trucks that are well-built and sturdy enough for any playtime adventure.

Milton Bradley and Parker Brothers produces Battleship, Monopoly, Twister, Scrabble, Clue, Risk, and Trivial Pursuit.

CORPORATE CITIZENSHIP

Hasbro donated $6.5 million in 1996 to service programs that help children, their families, and their communities. The company helps disadvantaged children through the Hasbro Children's Foundation and the Hasbro Charitable Trust. The Hasbro Charitable Trust also supports the Hasbro Children's Hospital, which opened in 1994.

GLOBAL PRESENCE

Hasbro manufactures and sells its products throughout the world. The company has subsidiaries on six continents and sells its products through more than 20,000 retail outlets worldwide. International sales accounted for approximately 45 percent of revenues in 1996.

The company relies especially heavily on Chinese manufacturing. Its 1997 annual report expressed concern over the potential impact of the United States or European Union imposing sanctions against China. Such an action could significantly increase the cost of importing toys to the United States and Europe.

SOURCES OF INFORMATION

Bibliography

"Company News' SEC Is Asked to Investigate Trading of Hasbro." Bloomberg Business News, The New York Times, 8 May 1996.

"Ex-Officials at Unit of Hasbro Are Indicted on Tax Fraud Charges." The Wall Street Journal, 15 April 1998.

Fitzgerald, Kate. "Hasbro, Mattel Play for Keeps in Cyberspace." Advertising Age, 15 January 1996. Available at: http://www.conceptone.com/netnews/nn713.htm.

Greenberg, Herb. "Hasbro's Short-Toy Shortage." Fortune, 27 April 1998.

"Hasbro, Inc. Company Profile." 19 March 1997. Available at http://www.efund.com/Hasbro_Co_Prof.html.

Hasbro, Inc. Homepage. 20 April 1998. Available at: http://www.hasbro.com/corporate/index.html.

"Hasbro, Inc." Hoover's Company Profiles, Hoover's, Inc.: Austin, TX, 1997. Available at: http://www.hoovers.com.

For additional industry research:

Investigate companies by their Standard Industrial Classification Codes, also known as SICs. Hasbro's primary SICs are:

3942 Dolls & Stuffed Toys

3944 Games, Toys, & Children's Vehicles