How Hasbro Went From Rags To Riches

How Hasbro Went From Rags To Riches

Hasbro went from a family business selling textile remnants and school supplies to a multinational conglomerate behind some of the most beloved entertainment brands and products. Here is the company’s literal rags to riches story...

From playing with the Transformers figurines, Nerf guns, the cute and colorful My Little Pony toys to showing our skills at Monopoly, we share some of our most precious memories with Hasbro products and franchises.

Even now, Hasbro continues to expand its range of products and services to cater to countless children, families, and die-hard fans that enjoy these games and franchises.

Be it TV shows, toys, or video games, Hasbro has got it covered across three primary lines of business: Entertainment, Consumer Products, and Digital Gaming. Today, the company is a leading entity in the Entertainment media industry.

To get a true estimate of its standing, here are some facts and figures:

Hasbro’s story starts in a drastically different context than what we know of it today.

After almost a century in business, Hasbro has undergone various changes and evolutions to become the corporation we know today. Let’s take a look at its inspiring growth journey…

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The Hassenfeld Brothers

Hasbro’s history predates its official establishment in the 1920s; instead, it is intimately tied with the story of its founders - the Hassenfeld brothers.

The Hassenfelds were three Polish-Jewish brothers who had emigrated to the United States in the early 1900s and set up their original business venture that later evolved into Hasbro.

The Hassenfelds Come To America

The Hassenfelds were a Jewish family residing in a small village in what is now Poland. In 1903, they heard of anti-Semitic mobs in Eastern Europe that were perpetrating violence against Jews. Two of the brothers, 17-year-old Hillel and 14-year-old Henry, were sent by their parents to America to be safe from such anti-Semitic violence.

To support themselves, the brothers engaged in the textile remnant business where they would sell cloth leftovers they purchased from Manhattan’s Garment District.

An Idea Strikes

Initially, the brothers would simply buy the textile remnants and sell them as is. Soon, however, an idea captured their imaginations: they could use high-quality textile remnants to line wooden pencil cases.

In the early 1900s, schoolchildren carried their stationery in wooden pencil cases. Lining these cases with cloth proved to be immensely popular.

By the mid-1920s, the rest of the Hassenfeld family members (including their brother Herman) joined the two brothers in Rhode Island, U.S.A. Some of them joined the venture as employees and helped manufacture the plush-lined pencil cases. By 1926, the business was officially incorporated under the name Hassenfeld Brothers.

Henry Hassenfeld Takes Charge

Henry Hassenfeld took control of the new company as Hillel had left to pursue another textile venture. Henry was known to be a tough and shrewd businessman as well as a paternalistic employer.

Under his leadership, the company prospered. Even during the Great Depression, Hassenfeld Brothers reported annual sales worth $500,000. The company’s pencil boxes and cloth zipper pouches filled with school supplies accounted for these impressive figures.

Another remarkable feat attributed to Henry Hassenfeld is his response to the company’s pencil supplier raising its prices and selling its own pencil boxes at a much lower rate than Hassenfeld Brothers.

Henry strongly responded to this turn of events. In 1935, the Hassenfeld Brothers began manufacturing its own pencils. This decision proved to be momentous as the company continued to generate a steady stream of revenue from this line of business for the next 45 years.

Key Takeaway 1: Opportunities Come In Various Shapes

The Hassenfelds recognized an opportunity when they saw one, no matter how it presented itself to them - be it in the form of an idea or a challenge that needed to be overcome. The idea of lining the pencil cases was an opportunity for them to introduce a novel product to the market and establish their own business.

Henry Hassenfeld also made the most out of a challenging situation when the pencil supplier stopped cooperating. He recognized and embraced the opportunity to slash the company’s dependence on external sources and open a new line of business.

This outlined how the company would make the most of every situation to grow and excel.

Reorienting As A Toy Company

Despite starting as a supplier of stationery, Hassenfeld Brothers soon transitioned into a toy manufacturing company.

Initially, the toys produced by the company were an extension of its school supplies range, but eventually, it reoriented itself primarily as a toy manufacturer.

More Than Just Pencil Boxes

Although the standard pencil boxes were still trendy, Hassenfeld Brothers was determined to showcase its creativity by including paints, crayons, and modeling clay along with the usual stationery. 

Not only did this improve an already existing product, but it also emphasized how in-tune the company was regarding the needs and desires of its target population - the children.

Kits For Kids

Soon, the company extended its idea to include Junior Doctor and Junior Nurse kits packaged within its signature boxes. These boxes contained toy stethoscopes, needles, and medical charts, etc.

When the Second World War broke out, despite the harsh conditions, the company’s introduction of unique new toys propelled it to greater heights. Henry Hassenfeld’s son Merrill, who had joined the company in 1938, was inspired by the idea of Air Raid Wardens that were established to counter the threat of German submarines and planes attacking the East Coast.

Merrill proposed that the company develop Junior Air Raid Warden kits for kids. These kits included play equipment such as armbands, whistles, flashlights, and warden caps.

After the war, Merrill also introduced the idea of makeup kits for girls after watching his four-year-old daughter play with candy, pretending as if it were lipstick and rouge. By this time, the demand for school supplies was dwindling, and the company had essentially transitioned into a toy company.

Introducing Mr. Potato Head 

In 1952, the company struck gold as George Lerner - a foreign inventor - approached Merrill with an idea for a new toy. The company purchased “Mr. Potato Head” from Lerner and made it the first toy ever to be advertised on TV.

mr-potato-head-figure-hasbroSource

Mr. Potato Head was a plastic model of a potato “head” to which one could attach various plastic parts such as eyes, ears, nose, hat, mouth, shoes, etc. The unique toy was an immediate hit all over the country giving the company the big break that propelled it towards becoming the gigantic entertainment firm it is today.

In 1954, the company also became a major licensee for Disney characters. By 1960, the company’s revenues amounted up to $12 million - Hassenfeld Brothers had truly cemented itself as one of the largest private toy companies in the U.S.

The G.I. Joes Take The Field

The company continued to expand the range of its toys in the subsequent years, and although it had experienced tremendous success in the past, nothing could compare to the sensation created by the G.I. Joe toys.

In 1963, a licensing agent had approached the company with the idea of a merchandise tie-in with a TV program about the U.S. Marine corps called “The Lieutenant.” Although the company liked the idea of a military doll, it was unwilling to tie its fate with a TV show which could very well be short-lived.

Thus, Hassenfeld Brothers created its own concept of what it called an “action figure” of a G.I. Joe. The response for this new toy was phenomenal - it brought $35-40 million and accounted for almost two-thirds of the company’s sales.

Key Takeaway 2: Novelty Pays Off

Hassenfeld Brothers’ toys were so successful because of how unique they were. The makeup kit for girls, Mr. Potato Head, the G.I. Joe action figures were all novel additions to the kids’ toy lines that were quite distinctive from the rest of the toys in the market. The company was not afraid of conceiving new forms of play and entertainment for the kids and confidently diverged from popular toy designs to introduce something new to the market. Hence, Hasbro was able to reap multifold returns from its products, establishing itself as one of the largest firms in the industry.

The Highs And Lows Of Business

The company underwent significant developments during the 1960s and 70s - some of them positive, some not so much.

When Henry had died in 1960, Merrill had taken over the parent company while his brother Harold took charge of the pencil business. The change in leadership was the beginning of a series of changes that the company would undergo in the subsequent years.

Harold Hassenfeld Leaves

Merrill Hassenfeld was the most appropriate person to assume the parent company’s leadership because of his interest and extensive expertise in the toy business.

However, Harold Hassenfeld was unhappy that Empire Pencil’s pencil business received a lower percentage of capital investment despite bringing in a higher percentage of profits than the toys.

By 1979, it became apparent that the two businesses could not continue side by side. Thus, separating the toy and pencil operations with Harold leaving was a difficult but necessary step to ensure future stability and avoid internal conflict.

Hassenfeld Brothers Becomes Hasbro Industries

The company had previously sold toys under the Hasbro trade name, but it officially changed its name to Hasbro Industries, Inc. in 1968. The new name was a shortened mesh of the old one with the “Has” from Hassenfeld joining with the “bro” from Brothers.

In the same year, Hasbro also went partially public. The company had sold a minor stake in the corporation to the public while the majority stakes remained in the hands of the Hassenfeld family. The move granted the company a much-needed impetus for growth and aided in its further development.

Repackaging The G.I. Joes

By the late 1960s, the Vietnam war had drastically altered public perceptions of military or war-inspired toys. The people were disillusioned by the war and increasingly disapproved of toys like the G.I. Joe.

The G.I. Joe was the company’s most profitable toy, and they could not afford to have its popularity decline. Thus, they replaced its military theme with an adventure motif and a new range of accompanying accessories. The repackaging of the toy was necessary for its survival in the market.

The move also demonstrated the company’s responsiveness to public perceptions and its ability to adapt to changing market dynamics.

Facing Difficult Times

In 1974, Merrill’s son Stephen D. Hassenfeld became the company’s president, while Merrill himself assumed the CEO position.

The company was desperately trying to regain its footing while the popularity of the G.I. Joes declined. However, by 1975, Hasbro Industries was forced to discontinue production of the action figures because of the rising plastic prices. The returns on the action figures could not justify nor support its production any longer. By 1977, the company’s losses amounted to $2.5 million, buried under heavy debt. The financial situation worsened, and Hasbro had to suspend its dividend payments in early 1979. 

Finding The Silver Lining

However, Stephen Hassenfeld came with a plan in hand. He identified what went wrong with the company’s existing policies and devised a remedy for it. Instead of being discouraged by the company’s poor performance, Stephen focused on the potential for betterment by enhancing the aspects of the business that showed promise. Subsequent years saw him tackle the issues Hasbro was facing with a thorough strategy that was guided by the lessons learned from this period of turmoil. 

Key Takeaway 3: Navigating Tough Phases With Resilience

The company hit a rough patch in the 1960s and ‘70s even though it had been doing splendidly in previous years. It showed that running a business means they are difficult days that require incredible resilience to get through.

By surviving such misfortunes, not only did the company develop resilience but also learned from its mistakes. It was able to identify what strategies had worked in such difficult circumstances and which ones had failed. Thus, it was better equipped to face future challenges and return to a path of growth.

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Finding Its Footing

Stephen Hassenfeld’s strategies proved vital in helping the company find its footing again and continue as a thriving business.

Hasbro Plays It Cautious

Previously, Hasbro had overextended itself by delving into too many different things at the same time. The strategy had not worked; rather it had backfired and stretched the company too thin. In response, Stephen cut down its product line to one-third between 1978 and 1981. He also halved the number of annual new launches.

Instead, the company was to focus on toys that were simpler and relatively less expensive to produce. Mr. Potato Head was one such toy that could be sold at lower prices and had a longer life cycle. The strategy prevented Hasbro from entering the electronic game business as it did not have the money to develop such games.

The decision not to enter the market proved to be the right one as the early 1980s saw the electronic games industry go bust, which took out some of Hasbro’s competition.

The Toys That Turned The Tide

Although the conservative business approach yielded positive results, the return of the famous toy line, the G.I. Joe, helped accelerate the company’s revival.

The political climate in the U.S. was once again conducive to military toys. Therefore, in 1982, Hasbro Industries relaunched G.I. Joe - this time as an anti-terrorist commando. Marvel Comics even helped develop a cast of comrades and exotic villains to accompany the action figure.

In 1984, the company launched a new toy line that quickly became one of the most popular franchises in history with avid fans worldwide. The Transformers were toy vehicles and guns that could be reconfigured into toy robots. An animated TV series was also created, which served to boost the toy’s popularity.

The 1980s saw the launch of yet another incredibly popular franchise - My Little Pony. The combined popularity of all these toy lines proved pivotal in turning the tide in Hasbro’s favor.

Branching Out The Business 

The 1980s also market a series of significant acquisitions that helped the company expand and diversify its lines of business. In 1983, Hasbro purchased GLENCO Infant Items - a manufacturer of infant products and the world’s largest bib producer. In 1984, Stephen’s younger brother Alan Hassenfeld took over as president while remaining chairman and CEO.

Hasbro was the country’s sixth best-selling toymaker around the early 1980s. Riding the momentum built up by its recent successes, Hasbro moved to acquire the Milton Bradley Company - the fifth best-selling toymaker in the U.S. The merger brought in big names like The Game of Life, Twister, Easy Money, and Playskool into the company’s product line-up.

Hasbro vs. Mattel

In 1985, the resulting new company from the merger, Hasbro Bradley Incorporated finally adopted the name we know it by today - Hasbro, Inc. By this time, Hasbro was on par with Mattel to become the world’s largest toy company.

Hasbro also sought to challenge Mattel’s Barbie in the fashion doll market by introducing Jem - a record producer/rock musician dual identity fashion doll. Despite strong initial sales, Jem’s popularity fizzled out, and it had to be discontinued. Hasbro tried again by introducing Maxie in 1988, but it too could not last longer than 1990.

In 1988, Stephen Hassenfeld also passed away. His relentless efforts to revive the company could be seen by how Hasbro’s sales went from $104 million to $1.4 billion under his leadership. He was also single-handedly responsible for strategically turning the tide of the business around when the company was going through a tough time.

It was a testament to his great leadership how within a few years after going through such difficult times the company was directly going up against the industry’s largest competitor. He was succeeded by his younger brother Alan Hassenfeld. 

Alan’s Notable Contributions  

Alan Hassenfeld was a worthy successor to his brother’s legacy and committed to expanding the business and enhancing its international sales.

In the late 1980s, he devised a strategy for increasing international sales by taking the failed toys from the U.S. into the global market and selling them for significantly higher prices. Consequently, international sales went from $268 million in 1985 to $433 million in 1988.

In 1991, Hasbro acquired Tonka Corp., whose unit, Parker Brothers, was the maker of the renowned board game Monopoly and Kenner Products. Milton Bradley and Parker Brothers were merged into one division. 

monopoly-board-game-hasbro

Alan wanted to extend Hasbro’s business to the Far East as he deemed the region a significant market. In 1992, Hasbro purchased Nomura Toys Ltd. and bought majority stakes in Palmyra - a Southeast Asian toy distributor.

The two acquisitions served as crucial distribution channels in the targeted regions. The efforts paid off as Hasbro’s international sales increased to account for 45% of total sales as opposed to the previous 22%.

Key Takeaway 4: Slow And Steady Wins The Race

When Hasbro was undergoing its initial revival phase, it opted for a conserved and cautious strategy instead of diving into the latest trends. Its caution saved it from the early electronic game bust.

Moreover, by focusing on its existing strengths and shedding off dead weight, Hasbro could revitalize its business and start fresh with new ideas. Instead of rushing through the re-establishment process, the company gave precedence to steadily building up its capacity for entering the market with renewed zeal.

Looking Towards The Future

While international sales were looking better, Hasbro’s performance in the domestic market took a downward turn. However, once again, Hasbro was eventually able to bounce back from this series of setbacks as well.

Change Of Strategy

Hasbro had relied on mergers and acquisitions to drive its growth, along with successfully leveraging the new assets gained through these deals.

Except for the product lines developed for the Jurassic Park movie and the popular kids’ TV show “Barney,” Hasbro’s new product development activities were largely unsuccessful. Consequently, domestic sales suffered from $1.67 billion in the early 1990s to $1.58 billion in 1995. International sales slowed down as well.

But Hasbro was an experienced corporation that had gone through the highs and lows of business. It took the company’s dip in performance as a challenge to overcome and responded in kind. Its response was to reorganize itself in 1994 by merging Hasbro Toy, Playskool, Playskool Baby, Kenner, and Kid Dimension units into a new Hasbro Toy Group.

Hasbro Enters The Electronic Games Market

Despite being late to the party, Hasbro knew the importance of penetrating the digital gaming industry. Thus, it began developing a mass-market virtual reality game system.

Although the game’s development was completed, it was deemed too expensive for putting into mass production. The project was shelved and had cost the company $31.1 million.

Hasbro also bought a 15% stake in Virgin Interactive Entertainment - a game software producer for the Sega and Nintendo systems. The impetus behind this partnership was to develop software based on Hasbro toys and games. However, the venture failed, and the partnership was dissolved two years later.

Hasbro was relatively successful in establishing Hasbro Interactive and releasing a CD-ROM version of Monopoly. Initial sales of the units amounted to 180,000 in the first eight weeks after its release. Hasbro soon added other titles such as Risk, Battleship, and Playskool brand games to the platform in 1996.

Rekindling Hope For The Future 

In 1995, Mattel had approached Hasbro for a possible merger between the two largest toy companies in the world. The two sides opened negotiations that spanned several months.

mattel-logo

However, the idea fell through in 1996 when the Hasbro board unanimously turned down the proposition due to antitrust issues and possible negative consequences of the merger. 

Hasbro then refocused on rejuvenating its performance by adopting a multifaceted approach: it found new ways of leveraging its popular brands, invested in developing electronic versions of established games, committed to expanding internationally, and oriented new product development around media tie-ins

As the 20th century came to an end, Hasbro’s prospects were looking considerably better. It could very well regain the top spot in the children’s toys and entertainment industry. The acquisition of Tiger Electronics gave Hasbro access to the must-have toy of 1998 - Furby. Its sales generated about 10% of total revenue for the quarter.

In 1999, Hasbro acquired Wizards of the Coast, a vital subsidiary that publishes games with predominantly fantasy and science fiction themes. The same year, Hasbro bought rights to Pokemon toys, specifically its game cards. It also reaped huge dividends from the merchandise of the three Star Wars prequel movies.

The company had successfully covered the cracks that surfaced in its performance and was ready to reach greater heights in the new millennium.

Entering The 21st Century 

Despite ending 1999 on a positive note, Hasbro turned up with a loss in 2000 as the sales of Pokemon and Star Wars merchandise had dwindled. The interactive games market was also not faring well.

These developments led the company to take decisive action to regain its profitability. It sold off Hasbro Interactive and consolidated its business in Rhode Island by shutting down Cincinnati, San Francisco, and Napa plants. It also removed 850 jobs from its workforce.

Once again, the company refocused on established traditional toy lines such as Mr. Potato Head, Monopoly, and G.I. Joe. Hasbro also announced movie licenses with Pixar and Disney.

These changes once again helped the company stabilize itself and enhance its existing strengths.

Key Takeaway 5: Focus On Your Strengths

Hasbro’s journey was by no means an easy one. However, the company was always able to pull through by emphasizing its existing strengths.

Despite the harsh market conditions, Hasbro’s established traditional toy lines were the pillar that kept the company standing through it all.

Instead of trying to find new lines of business to stabilize itself (which would have been very risky), the company chose to fall back on the old and familiar - a strategy that had served it well in the past.

Becoming The Hasbro Of Today

In 2008, Brain Goldner became the company’s CEO - the first outside the Hassenfeld family to occupy this position.

The following decades brought in a series of interesting projects for the company that transformed it into the play and entertainment corporation it is today.

Hasbro On TV

In 2009, the company established Hasbro Studios for TV development, production, and distribution. It produced TV shows based on Hasbro properties and broadcast them on various multimedia platforms.

In 2010, Hasbro collaborated with Discovery to launch The Hub, a cable television network targeting children and families. The network was rebranded as Discovery Family in 2014.

discovery-family-logoSource

The project successfully revived the My Little Pony franchise, which became the network’s highest-rated program and developed a cult following amongst teens and adults alike.

Important Deals And Developments

In 2013, Hasbro renewed its deal to continue the production of Marvel Comics and Star Wars toys till 2020.

Hasbro also entered into a new deal with Disney over the Disney Princess line. Disney wanted to evolve its Princesses from damsels to heroines and, in 2016, announced Hasbro as the licensee for its Princess line.

The company also gained the “Descendants” license from Disney because of its work on Star Wars.

In 2016, Hasbro decided to launch its convention - HasCon - featuring all its brands and franchises. The inaugural event was held at the Rhode Island Convention Center in 2017.

Another interesting development in 2017 was the company’s takeover offer to Mattel. Mattel was worth $5 Billion at the time, while Hasbro’s worth was $11 Billion. Although Mattel rejected the offer, it was apparent to see how the tables had turned.

Hasbro Hospitality Deals

In the following years, Hasbro signed a series of hospitality deals based on its popular brands.

In 2018, it announced the Monopoly Mansion, a hotel agreement with M101 Holdings overseeing the construction and its Sirocco Group taking over management once the project was completed.

Hasbro also licensed Kingsmen Creatives to build a chain of NERF Action Xperience centers for family entertainment.

The centers were essentially arenas laden with multiple themed activity zones where players could engage in active play using NERF accessories.

Recent Reorganization

During its 2021 Investor Event, Hasbro announced a reorganization into three primary divisions:

  • Consumer Products
  • Entertainment
  • Wizards & Digital

The simplification of its corporate structure was done to maximize its growth by providing a clearer view of which segments were driving Hasbro’s revenue and profit generation.

Wizards Of The Coast Drives Revenues

The pandemic outbreak in 2020 spelled disaster for the global economy and caused drastic shifts in consumer behavior. As a result, many toy retailers had to shut down businesses which caused Hasbro’s net revenue to suffer.

However, while the revenue generated from toy sales decreased, revenues from the Wizards of the Coast experienced a 24% increase from 2019. Hasbro attributed the revenue generation to the success of Dungeons & Dragons and Magic: The Gathering; both had had an exceptional run in 2020.

The Wall Street Journal reported that WotC had become Hasbro’s predominant business line. The WotC division alone was considerably more profitable than Hasbro’s consumer products segment.

Key Takeaway 6: Change Is Good For Growth

The last few decades saw Hasbro delving into new projects after spending a cautious period stabilizing itself.

The Monopoly Mansion and NERF Action Xperience centers were unique ways of introducing fun and entertainment to the world. They also brought in revenue for the company.

Hasbro was also willing to change its corporate structure to emphasize growth. It welcomed the success of WotC when the traditional consumer products struggled to generate sufficient profits. 

Summary & Key Takeaways

Hasbro has almost been in business for a century, but even more important is its legacy of entertaining kids, families, and fans all over the world.

Hasbro’s journey to the top of the play and entertainment industry has not been without its challenges, but the company continues to climb to greater heights even today. 

Growth By The Numbers

 

2020

2010

Net revenue

$5.47 Billion

$4.0 Billion

Assets

$10.8 Million

$4.0 Million

Dividends paid

$372.7 Million

$133.0 Million

Employees

6822

5800

Investments and acquisitions

4.4 Million

0$

Key Strategic Takeaways

Adapt In The Face Of Adversity

Hasbro went through phases where the strategies that had served it well in the past failed to pull it through a dip in the business cycle. In such cases the company had to alter its approach to business such as discontinuing toy lines with insufficient returns, shutting down units that were not generating profits, and reorganizing its corporate structure to enhance growth. When certain toys failed in the U.S. market, Hasbro marketed them in other countries and generated considerable revenue.

Prioritize Stability

A big reason Hasbro was always able to bounce back from the brink after a rough business cycle was that it prioritized stability over risky ventures. The company did not enter the digital gaming industry until it had re-established its business stability. It avoided delving into new ideas that would have introduced uncertainty into the company’s recovery cycle and opted to play it safe while revitalizing itself.

Know Your Strengths

A critical factor in Hasbro’s success was that it knew where its strengths lay. Whenever it encountered trouble, it refocused on areas that were better established. Hasbro knew that certain toys and brands were timelessly popular amongst the masses, such as Mr. Potato Head, so it continued to rely on the revenue it generated to support itself. It also opted to develop electronic versions of established traditional games when newer ideas failed to capture the market.

Have A Strategy To Fall Back On

Hasbro had two significant phases of business decline in its history; in both instances, it followed a similar strategy. It shed off unnecessary business segments, cut down on the variety of toy lines to focus on the ones that had potential, and dedicated itself to enhancing and consolidating existing operations. The formula had worked well the first time and did not let the company down the second time either.

Go With The Flow

There were many instances in the company’s journey where it had to adapt itself to changing market trends. Hasbro was in tune with the current realities of the world and its products reflected this fact. The idea of the Junior Air Raid Warden kits inspired by real-world developments at the time, and the repackaging of the G.I. Joes following a dip in the approval rating of militaristic toys are prime examples of Hasbro being responsive to changing dynamics. 

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