Zuru: From global toy domination to vitamins and pet food

A toy business that started in a shed on a Waikato farm in 2004 is now one of the biggest in the world – producing booty-shaking llamas, rainbocorns and huge bunches of water balloons for kids all over the world.

Its turnover last year topped $850 million and it now has 5500 staff in its toy business.

While you probably know of Zuru as the provider of thousands of kids’ birthday presents, some of its most rapid growth is now coming from other parts of the retail environment, including nappies, haircare, vitamins, skincare and pet food.

Zuru also operates a consumer business, Zuru Edge, which describes itself as delivering “disruptive brands in big, stodgy consumer goods categories”. Recently, it’s made big strides into a range of other product categories.

Zuru’s Rascal + Friends nappy brand will expand into 24 markets around the world this year. Its Monday haircare range will go into the United States at the end of the year, as well as Tesco and Boots outlets in the United Kingdom. It has partnered with Nood, a new pet food brand, to launch internationally.

READ MORE:
* Coronavirus: shut New Zealand’s borders, says Zuru toy company executive Anna Mowbray
* Coronavirus disruption will cost tens of millions, create product shortages, toy company Zuru says
* Toy maker Zuru sued by US toy company MGA Entertainment for alleged copyright infringement

Chief executive Nick Mowbray said Zuru was now the seventh-largest toy company in the United States and that experience had given it a crash course in all the basics required to dive into a range of other products.

“Kids’ tastes change very six months, more or less, so you’re constantly changing products, running at a pace most industries can’t imagine.”

He said he was interested in the ability to create new, disruptive brands using data. Consumers were looking for something different, were sceptical of big brands, and wanted something with a unique story.

The data now available allowed new products to be targeted to a very specific audience when required. “The use of data offers the ability to build a brand more quickly…We can leverage our core competency to build brands with a 10-year view.”

Brett O’Riley, chief executive of the Employers and Manufacturers Association, said Zuru had developed a way of innovating that could be applied across a range of areas, where the business saw market opportunities. “That’s fascinating to me, that a great innovative company has that capacity where it effectively becomes a process rather than just about a product.”

He said the Zuru team was similar to Peter Beck at Rocketlab, “relentlessly innovative” and never accepting that what the business was doing was best practice. He said Zuru could be a case study for other New Zealand businesses as they shook off the impact of Covid-19. “If we understand what they view their secret sauce as being that might be something we could apply to other businesses.”

Many United States businesses had become successful as spin-offs of larger entities, he said.

University of Auckland Business School senior marketing lecturer Mike Lee has been working with Zuru on the new product lines.

He said it would not be a difficult transition for the company because the new lines were not Zuru-branded. “It’s a different type of brand altogether.”

Zuru’s business model was based on finding markets that were traditionally mature with little competition, he said, and coming in at a price point that was below the premium end, but  while not offering a no-frills product, either.

They were able to do that because they rad the resources to manufacture lower cost, he said.

“That’s what they have based all their decisions around, what can we do cheaper than the current players and offer a slightly better product?”

The first seed of Zuru was sown when Mowbray’s brother, Mat, was 12 and won the New Zealand Science Fair with a model hot air balloon kit set.

“He started making them more and got me involved. We were selling those door-to-door and then eventually in local stores, so I guess we stumbled into it really.”

Over time, they built up the enterprise before moving to China in the early 2000s, Nick aged 18 and Mat 21, with $20,000 of their parents’ money to help them start manufacturing.

Their story about living on $1 a day in an eighth-floor apartment in a building with no lift has become part of Zuru lore. A year later, their sister Anna, joined them. Now, 90 per cent of Zuru’s toys are made in China.

It was hard work to begin with, Mowbray said, although the trio are now listed on the NBR Rich List as being worth a combined $3 billion. “Moving to China so young, not having any money … the first five years were pretty horrific.”

The company hit trouble several times when other manufacturers complained it was copying their designs. That’s an accusation still being made by some – Lego has taken court action over allegations it copied designs and MGA Entertainment alleged copyright infringement.

“We didn’t understand much about IP and we didn’t understand how to design a toy that sold,” Mowbray said.

“We were actually far too innovative in the beginning. What we learnt was the difference between hard innovation and soft innovation – hard innovation was harder to communicate to the market, whereas incremental changes meant we received more re-orders. We learnt how to innovate, stay on trend and identify the categories to go after.”

Things started to get serious for Zuru when it did a million-dollar deal with David Beckham on a soccer Tamagochi game.

“We got an order for US$29 million (NZ$46.7m) from Walmart, but they ended up cancelling a bunch of the order,” Mowbray said.

He was able to convince the retail giant to take 800,000 toys, which earnt the company “a decent amount of money”.

But it came at a cost – those David Beckham toys were described by Mowbray in media reports as “like concrete on the shelf” and set Zuru-Walmart relations back for years.

“Our first success were toys called ZeeBeez, which were little discs that spun and popped off the ground. I think we must have shipped 6 or 7 million of those. But our first big success was a brand called Robo Fish; it won lots of toy awards and became one of the best-selling toys in the world.”

Having a central Asian base for manufacturing gave Zuru the ability to bring products to market quickly, Mowbray said. Bunch-o-balloons, X shot, metal machines and max build toys are all made on automated production lines.

“All our design, development, engineering, finance is done out of our Shenzhen hub, so our operating costs are much lower than most of our competitors’. Also, we build factories and automate our production, which means we are building quality products with better margins than our competitors. We run a lean supply chain without holding inventory globally.”

The company has had to grapple with the effect of coronavirus this year, which Anna Mowbray earlier estimated would cost it tens of millions of dollars. But since the Chinese impact had waned, things had improved. Zuru was “hiring like crazy” in New Zealand, and the toy market generally had lifted because children were at home around the world.

“Like any business there are lots of challenges. As a toy company we are always having to stay on trend and up with the play of what’s new. There are always curve balls and external factors that come with being an international business.”

In recent months, Nick Mowbray has been outspoken about the New Zealand response to Covid-19, calling on the Government for a swifter response. Mowbray has been part of efforts that brought millions of pieces of PPE to New Zealand, and has helped to distribute PPE around the world.

He said some of Zuru’s Chinese staff were making personal donations to Italy, and he has teamed up with Blake Lively and Ryan Reynolds to donate to the United States.

Mowbray, who now owns Kim Dotcom’s former mansion with his siblings, also matched donations to Salvation Army food banks and run a campaign to encourage donations – it had raised more than $2m. Mowbray said that at the time he contacted the food banks, they were down to only having three or four days’ worth of food. “It was good timing.”

Mowbray said he was motivated to help in part by conversations with the prime minister. Urged to close the borders earlier, Jacinda Ardern had said she was concerned about the effect on vulnerable people.

University of Auckland head of marketing Bodo Lang said Zuru was an excellent example of what good business and good marketing could look like.

“Zuru has an excellent understanding of the market, they pick up innovations early, for example through Kickstarter and they are innovative themselves. Unlike most businesses Zuru has a real growth focus: they constantly research, experiment, and launch new products, rather than having one or two that sell well and then rest on their laurels. Zuru, at its heart, is highly competitive and has a burning desire to succeed. And they have achieved tremendous success already.”

Mowbray said hard graft had helped the company get to the “top of the hill”,  and from that point it became easier to see the path ahead.

“You get to the top of the hill and understand how everything works and it clicks together… you’ve got to keep going, keep getting up the hill to get to that point but at that point it comes together and becomes clear. But getting to that point requires a certain degree of persistence.”