Mega Brands

Mega Brands, Inc.
Subsidiary of Mattel
Industry Toys
stationery and crafts
Founded 1967; 49 years ago
Founders Victor and Rita Bertrand
Headquarters Montreal, Quebec, Canada
Key people
 Marc Bertrand (CEO)
Vic Bertrand (CIO)[1]
Products
  • construction toys
  • message boards
  • activity kits
  • art materials
  • school supplies
  • writing instruments
  • wood products
  • puzzles
Brands
  • Board Dudes
  • Locker Dudes
  • Mega Bloks
  • Mega Puzzles
  • Rose Art
  • Write Dudes
Revenue $405 million (Est. FY 2013)[2]
Number of employees
 1,700 (2014)[2]
Parent Mattel
Website megabrands.com

Mega Brands, Inc., formerly Mega Bloks, Inc., is a Canadian children's toy company currently owned by Mattel. Mega Bloks is the name of their most popular product, a line of construction set toys, with other brands including Mega Puzzles, Board Dudes and Rose Art. The company distributes a wide range of toys, puzzles, and craft-based products.

In 2014, Mega Brands' Bloks held second place in the $4 billion construction building sets category.[2]

History

Ritvik Holdings

In 1967, Victor Bertrand and his wife Rita founded the company as Ritvik Holdings (RH), a toy distribution company (Ritvik was a portmanteau word based on a combination of Rita and Victor). RH began by distributing toys made outside of Canada. The holding company also facilitated contracts between foreign brands and Canadian manufacturers.[3]

Ritvik later became a vertically integrated company as it expanded. The company added plastic injection molding operations, design operations, tooling manufacturers, and marketing services. The company had a leading share of the plastic injection molded market by the early 1980s.[3]

Wanting to expand beyond Canada, Victor Bertrand took an interest in construction block sets and saw room for growth despite them being an industry staple since the early years of the 20th century with Batima Block released in 1905 in Belgium. With Lego being the leading construction toy, Bertrand chose to make a similar set. Bertrand ignored friends and advisors as he figured he had two advantages in launching Mega Bloks. He aimed for jumbo sized bricks for the toddlers, which Lego bricks were not designed for, and he felt his expertise in injection molding would give him a price advantage.[3]

At 1984 trade shows, Ritvik showed the Mega Bloks line in the US and Canada. Immediately a hit, Mega Bloks had generally large sales in Canada, a $1 million sale to Toys 'R Us and were available most anywhere in the two markets in 1985. Several multinational companies had made offers just after the trade show for distribution rights, buying either Mega Bloks or Ritvik.[3]

By 1989, Mega Bloks were in 30 countries and popular in Europe, the US and Canada, and up to 30 play sets were available. A piano set with Mega Blok-compatible keys for the pre-school age was released in 1988. In 1989, Ritvik sold all of its other toy and plastics lines.[3]

A Mega Bloks "Micro" line was released in 1991 that were compatible with, or a clone of Lego bricks. This finally placed Ritvik and The Lego Group in direct competition. Soon, Ritvik was sued by Lego Canada for unfair competition, since Lego's brick shape patent had expired, for supposed confusion caused between its Micro Mega Bloks and the Lego line. The lawsuit dragged on for years as sales grew worldwide (at an average 70% a year until the mid-1990s), but finally Ritvik won the case by properly distinguishing its brand from Lego. Suits were filed in Europe and the U.S. with similar results.[3]

In 1996, a 27% share of Ritvik was sold to the Blackstone Group. Rita Bertrand and her daughter Chantal retired that year, while Marc and Victor Bertrand, Jr. were active in management. Two international subsidiaries were formed, Mega Bloks Latinoamerica S.A. de C.V. in 1997 and Mega Bloks Europe N.V. in 1998. International sales in the 1990s were at 30% with 70% from Canada and the US; all but 10% of that were from four major chains: Toys 'R Us, Wal-Mart, Target, and Kmart.[3]

Ritvik followed the late 1990s licensing trend in 1998 with its first licensing agreement being for Teletubbies, and then with toy company Fisher Price with its Sesame Street characters license. A NASCAR line was also introduced.[3] Ritvik Toys, Inc. was amalgamated with Ritvik Holdings Inc. on June 30, 1998.[4]

Lego, K'Nex and Ritvik added features to their lines in 2000. Ritvik made transformable building sets that changed into vehicles and a remote control electronic kit named the Mega Bloks RO Action Builder. Ritvik finally added TV advertising that year with a $2 million campaign, with a $30 million spend on advertising, marketing, and research and development in 2002.[3]

Mega Bloks

With sales about doubling since 1999, Ritvik went public via an initial public offering in May 2002 on the Toronto Stock Exchange under the new name of Mega Bloks, Inc.[3] The company traded at $14.50 a share.[1] The founders' sons, Victor Bertrand Jr. and Marc Bertrand, became chief operating officer and chief operating officer/president, respectively, while Victor Sr. remained chairman of the board.[3]

The toy market was in a down cycle from 2002 to 2003, with the construction toy segment losing 10 to 15%, but Mega Bloks experienced increased sales. Since 1986, the company had seen a run of 17 years of growth becoming the number two in the construction toy segment behind Lego.[3]

In 2003, the company formed a joint venture with the Japanese toy company Bandai for Asia. Bandai marketed Mega Blok sets with their already licensed Japanese cartoon characters. With J.K. Rowling's Harry Potter and Lord of Rings movies' success, a Dragon series was released in 2003. Meg Play!, a life size block set large enough kids could fit in, was also launched.[3]

Shares were trading at almost $30. Mega Bloks, Inc. acquired Rose Art Industries in 2005, including its Magnetix line of toys for US$350-million.[1] Soon, Magnetix was a source of lawsuits from choking incidents, causing its share value to drop quickly. Magnetix was then recalled.[1] The company acquired Board Dudes, Inc., makers of Board Dudes posting and marking boards and Locker Dudes locker products, in January 2006, through its subsidiary, Rose Art Industries, Inc.[5]

Mega Brands

On June 15, 2006, following the acquisition of several brand names not associated with construction brick toys, the company again changed its name, this time from Mega Bloks, Inc. to Mega Brands, Inc.[1] with Rose Art Industries, Inc. being renamed Mega Brands America, Inc.[6]

After 23 consecutive years of growing sales and profit, Mega lost $458 million in 2008. Heading towards bankruptcy, Mega Brands refinanced. Share were consolidated 1-for-20, with Fairfax Financial becoming a major partner in the recapitalization.[1]

The former owners of Rose Art, Jeffrey and Lawrence Rosen, offered to purchase back Rose Art in April 2008.[7] Then they sued company management for insider trading in September 2008 as they sold share previous to the Magnetix recall.[8]

Rose Art was placed on the market in March 2008 due to inquiries from the previous owners and others.[9] Rose Art's base operation was shut down in New Jersey, and the company moved its stationery and activities division with some key employees to Irvine, California in 2010 under new executive Thomas Prichard, a former executive at Crayola, Pixar and Hasbro. The subsidiary was not sold, and was reintegrated into Mega operations by 2012.[1]

On February 28, 2014, it was announced that toy industry giant Mattel, Inc. would acquire Mega Brands, Inc. for approximately US$450 million.[10] It became a wholly owned subsidiary of Mattel as of April 20, 2014.[11]

Pop culture connections

Mega Bloks were featured in a commercial for the Honda Element, in which countless bricks fell from the sky to assemble the full-sized vehicle. The commercial clearly identifies the bricks as Mega Bloks in the opening moments of the sequence.[12]

Mega Brands currently has the licensing rights for Thomas the Tank Engine, Hello Kitty, the video game franchises Call of Duty, Need for Speed, Halo, World of Warcraft and Skylanders: Giants, Barbie, and Hot Wheels. Mega Brands picked up the license for SpongeBob SquarePants after LEGO discontinued carrying their version of the licensed sets.

Lego lawsuits

Mega Bloks building block (above) and Lego building brick (below)

Mega Brands has won 14 cases regarding its Mega Bloks over competitor Lego.[2]

The Lego Group has filed lawsuits against Mega Bloks, Inc. in courts around the world on the grounds that Mega Bloks' use of the "studs and tubes" interlocking brick system is a violation of trademarks held by Lego. Generally such lawsuits have been unsuccessful, chiefly because the functional design of the basic brick is considered a matter of patent rather than trademark law, and all relevant Lego patents have expired.

On November 17, 2005, the Supreme Court of Canada upheld Mega Bloks' right to continue selling the product in Canada.[13] A similar decision was reached by the European Union's Court of First Instance on November 12, 2008 when it upheld an EU trademark agency decision following an objection by Mega Bloks against a trademark awarded to Lego in 1999.[14]

On September 14, 2010, the European Court of Justice ruled that the 8-peg design of the original Lego brick "merely performs a technical function [and] cannot be registered as a trademark".

References

  1. 1 2 3 4 5 6 7 Delean, Paul (March 31, 2012). "From the Archive: Mega Brands rebuilds its foundation". Montreal Gazette. Postmedia Network Inc. Retrieved February 22, 2016.
  2. 1 2 3 4 Langsworthy, Billy (February 28, 2014). "Mattel acquires Mega Brands for $460m". Toy News. Retrieved February 23, 2016.
  3. 1 2 3 4 5 6 7 8 9 10 11 12 13 "Vol.61". International Directory of Company Histories. St. James Press. 2004. Archived from the original on February 22, 2016. Retrieved February 22, 2016.
  4. ↑ "Trade Mark Case Summary: O/086/99 (Patterns of raised knobs or studs applied to the surfaces of a toy brick)". The Patent Office. 18 March 1999. Archived from the original on 29 May 2006. Retrieved 20 January 2015.
  5. ↑ "Mega Bloks builds on its stationery and activity growth strategy with acquisition of The Board Dudes" (Press release). MONTREAL: Mega Bloks Inc. PRNewswire. January 24, 2006. Retrieved February 23, 2016.
  6. ↑ "Company Overview of MEGA Brands America, Inc.". Bloomberg Business. Bloomberg. Retrieved February 23, 2016.
  7. ↑ "Rosens want to buy RoseArt business back". Toronto Star. March 5, 2008. Retrieved February 23, 2016.
  8. ↑ Marowits, Ross (September 22, 2008). "Suit against Mega Brands officers alleges insider trading". Toronto Star. Canadian Press. Retrieved February 23, 2016.
  9. ↑ "Mega Brands ponders selling craft business". Toronto Star. Canadian Press. March 5, 2008. Retrieved February 23, 2016.
  10. ↑ Horovitz, Bruce (February 28, 2014). "Mattel gets construction toy brand Mega Bloks". USA Today. Retrieved March 12, 2014.
  11. ↑ "Mattel Completes Acquisition of MEGA Brands" (PDF). Mega Brands. 2014-04-30. Retrieved 2016-02-23.
  12. ↑ 27 Oct 2003 (2003-10-27). "Honda Element - Mega Bloks - Purpose (2003) - 0:30 (USA)". adland.tv. Retrieved 2014-03-05.
  13. ↑ "2005 SCC 65". CanLII. Retrieved 2016-02-23.
  14. ↑ "Lego loses trademark ruling in EU". New York Times. 2008-12-12. Retrieved 2016-02-25.
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