The $90 billion global toy industry is competitively gridlocked; it’s not a playground for a child. But a Mumbai-based toymaker has found such a prosperously peaceful corner in the couch that the Marvels of the world have begun an envious crosstalk. Anuj Mehta, Co-founder & Director of Pegasus ToyKraft, counts proper nouns that helped make his brand a reality across 22 countries.

Sachin Manawaria | @TheDollarBiz 

TDB: Only 20% of the Indian toy market is served by domestic players and rest by import of toys from various countries particularly from China and Italy. So, what actually was in your mind when you started Pegasus ToyKraft in 2007?

AM: Pegasus ToyKraft is promoted by two families – the Mehtas and the Makhijas. The Mehtas have been in the toy industry for the last four decades. In fact, the Mehtas were the OEM for Blow Plast India, which used to manufacture toys under the Leo Toys brand name. During 1998-99, when I was just out of college, the joint venture between Blow Plast India and Mattel Toys collapsed. This was the time when a whole host of Chinese manufacturers were flooding the Indian streets with a plethora of choices in the toy segment. Despite being a fresher out of college, I decided to take charge of my family business, which had tremendous goodwill in the market.   Soon after taking charge, I started appointing distributors across India for my company’s product. I also started approaching the distributors of Blow Plast. This is when I met Shyam Makhija, who happened to be one of the distributors of Blow Plast. So, for first 3-4 years my partner was selling my products through his distribution network. Interestingly, Shyam Makhija is a doctorate in organic chemistry and was then doing a research on educational aids & innovative games. He had come out with an innovative toy product line and was looking for a partner who could manufacture toys for him and market them across India. With a lot of cross trading happening between the two of us in the initial years, we decided to merge our entities in 2006. And this is how our synergies converged and we established Pegasus ToyKraft  in 2007. Within no time we had launched around 100 odd products and started capturing new markets. By the time we launched our 150th odd product, we decided it was time to go global. Thus, we began exploring and started participating in some of the world’s biggest toy shows like Nuremburg in Germany.

TDB: Exhibiting at a trade show is a great way to find customers for your business. What has been your experience?

AM: The results have been wonderful. Our participation in these events have ensured a steady flow of customers – both from India and overseas. Today our products are exported to over 22 countries across the globe. TDB: Studies suggest that over 40% of Indian toy manufacturers have shut shop in the last five years. How have you ensured you stay afloat? AM: Even during the first 2-3 years, after starting out, we were selling through a pan-India dealer network apart from having our own sales team. Today, we are present in all organised retail outlets like Shoppers Stop, Reliance, et al. Apart from this, we also sell our products through online shopping stores like Flipkart, Firstcry, Amazon etc wherein we are getting very good response from customers. In short, we make sure that we don’t put all our eggs in one basket at any given point in time.

TDB: The toy industry in India is concentrated mainly in the small and cottage sectors, with over 4,000 manufacturers producing cheaper look-alikes of original products. How does this impact your business?

AM: The Indian toy market is pegged at Rs.4,000 crore with unorganised sector having a 70% market share. Although there are no major competitors in our business, we do face a lot of piracy issues. Reason: the unorganised sector still lacks innovation and access to modern technology to run the business. It’s because of this we face some competition in Tier-3 towns where quality doesn’t really matter. But when it comes to Tier-1 and Tier-2 cities, we have a clear edge.

TDB: Do Indian toys find acceptance at the global level, particularly when they are competing with established global manufacturers?  

AM: This is the biggest problem. Since India is not recognised as a toy manufacturing hub, unlike China and Germany, major toy shows around the world are not enthusiastic about Indian toys. In fact, at some of the global toy fairs, even people who have been regular visitors to my stall, are yet not confident about India. However, lately the rise in minimum wages in certain Chinese provinces has forced players to look towards India.

TDB: What about “dragon effect”? How have Pegasus ToyKraft managed to remain unaffected?

AM: We clearly identified the categories where we didn’t want to compete with Chinese suppliers. These were some of the categories where we knew that we cannot compete and hence we decided to make inroads into categories of toys where Chinese players were conspicuously absent. We moved into categories where creativity and educational value was of high importance. This is why our toys in the art and craft category stand out in the market and have made us the leader in India with over 120 extremely popular products.  

TDB: And what about competition from other countries?

AM: Our competitors are way ahead of us when it comes to technology and innovation. Their specialisation is in plastic toys. Though they are also present in categories of art and craft, they are more into craft than art. On the other hand, we try to give a traditional touch or an Indian theme to our toys. For instance, in art and craft category, we teach kids the traditional Warli or Madhubani art. Normally, today’s kids wouldn’t know anything about such art forms. So, we have gone back to the basics by providing this unique traditional touch to our toys. This is the edge of our company in the international market. In fact, we are  slowly gaining acceptability in countries like Greece, Poland, and Romania. Our exports to Russia and the Middle East are also growing.

TDB: How was your exports’ growth last year and what can we expect this year?

AM: Last year, European regulations changed. Due to this, our exports were flat. Having said that, our facility is now fully compliant with the regulations of most developed countries. I expect our exports to grow at 30% this year.

TDB: How do you plan to increase your exports going forward?

AM: Globally, the toy industry is driven by intellectual property (IP) rights. Therefore, from this very year, we have started developing our own IP, at least in categories of toys falling under Educational Aids and Board Games. There is an opportunity we don’t want to miss – when we have our own IPs, even one of them clicking at the global level can do wonders for our company. At the same time, we have started approaching global players that buy or lease IPs and pay royalties. This will help us in future.