How Spin Master conquered the lucrative international toy market

The hitmaking company has had a good thing going for years. But to really lead the market, they had to up their game.

 
Growth 500: Canada’s Fastest-Growing Companies

(L-R) Ronnen Harary, Ben Gadbois, and Anton Rabie CEOs of toy company Spin Master. (Photography by May Truong)

In 2012 Ben Gadbois was living in Chicago, working as the global president at Newell Rubbermaid. The Montreal-bred CPA had spent two decades rising through corporate ranks in the U.S., and had no plans of coming home to Canada. And then his phone rang. On the line was Spin Master co-founder Anton Rabie, who wanted to talk about a job opportunity. Gadbois wasn’t initially interested in working at a comparatively small Canadian toy company, but Rabie was persistent. “The joke is that I told my wife, ‘I’ve got to go to meet this guy, otherwise he’s going to show up at our door,’” says Gadbois, seated at (spoiler alert) his office in Spin Master’s global HQ in downtown Toronto, where he now holds the titles of director, global president and COO.

The company recently relocated to a seven-floor space on King Street West that includes an interactive video wall and treadmill desks. The new digs are a sign of continued success, propelled by out-of-the-park wins like PAW Patrol and Hatchimals (if you’ve never heard of them, consult the nearest four-year-old). Today, Spin Master is a darling of the TSX (three-plus years after its IPO), a platinum-level Canada’s Best Managed Companies honouree and, now, a Growth 500 winner, riding a five-year sales spike of 271% to land at No. 247 on the 2018 ranking.

But things weren’t so bright when Gadbois first sat down with Rabie and Spin Master’s other co-founders, Ronnen Harary and Ben Varadi. After almost 20 years of wins, the company was in crisis following the huge success—and then huge failure—of Bakugan. Initially the line of collectible plastic balls that pop into action figures brought the firm massive returns, but a failure to manage growth and the resulting overhead had left it on the brink. “It was a disaster,” says Harary. But it was also an opportunity.

“Bakugan was the best thing that ever happened,” says Gadbois. “Up until then, the company was succeeding based on sheer willpower and passion.”

It’s a mix that drives the success of a lot of entrepreneur-run businesses in the early growth stages, but, as all involved at Spin Master had come to realize, it was neither sustainable nor scalable. “You see a lot of fast-growth businesses almost growing their way to bankruptcy,” says Peter Brown, a senior partner at Deloitte Private and co-lead of the Canada’s Best Managed Companies program. In Gadbois, Brown observes, the partners found the operational yin to their visionary yang: “You have to have that creative spark, and yet you have to be able to execute in a world-class fashion—they found that ideal balance.”

First though, the founding partners had to relinquish a certain degree of control. “Most entrepreneurs don’t want to do that,” admits Rabie. But he and his co-founders saw in Gadbois a taskmaster who understood the crucial role of innovation in the firm’s success.

It’s what the company was founded on, back in 1994, when Harary first approached his childhood friend Rabie with an idea to mass-produce a tchotchke that his mom had brought home from her trip to Israel. (Varadi joined them six months later). The result was Earth Buddy, a low-fi Chia Pet-esque novelty that became a massive success. A second defining victory came with Air Hogs, a line of air-powered, radio controlled toy aircraft, which scored industry accolades and holiday “it” gift status. By the time Gadbois came on board, Spin Master had won hundreds of awards and started a global expansion strategy. But from an operational standpoint, it was still pretty green.

“They started this company right after school, so they hadn’t gone through the typical stages of growth—learning the checks and balances, financial rigors, operating rhythms,” says Gadbois. So, his first job after joining was to conduct a thorough review of operations, where he identified three crucial deficiencies: a clear chain of command, a forecasting tool for predicting sales years out and an effective global expansion model.

As Gadbois saw it, the key was in controlling the chaos. Take the company’s R&D work—key to any toymaker’s success. Gadbois determined which parts of the process needed a free-flowing environment (e.g. product development) and which needed structure: “Once you pick an idea and decide to move forward, how do you maximize that?” The result is a 36-month brand innovation pipeline, which brings a predictable rhythm to the firm’s growth.

This kind of rigour has been key to really cracking—and dominating—markets outside of North America. In recent years Spin Master has expanded operations in Asia, Europe, Mexico and Australia, with plans to open outposts in Russia, Switzerland, Austria and Greece in 2019. The goal is to generate 40% of sales outside of North America.

Having Gadbois managing the day-to-day has also allowed Rabie, Harary and Varadi to focus on the things that they’re best at. For Varadi, it’s product innovation. For Rabie, it’s acquisitions. Recently, Spin Master bought Gund—makers of super-soft stuffies popularized in the ’80s and ’90s—for $79.1 million, a move meant to capitalize on nostalgia and to help Spin Master get into plush, one of the few toy supercategories in which it isn’t already a major player.

Harary is focused on building out a hugely successful entertainment division, which has five shows in production. The success of PAW Patrol (which launched in 2014) is a good example of a shift toward developing enduring brands. Its licensing alone has brought in millions: clothing, lunch boxes, Band Aids, umbrellas, underwear and live events. It was the top licence across all ages and categories for the 2017 holiday season, according to marketing researchers NPD Canada.

Still there are no plans to rest on PAW Patrol’s runaway success, Gadbois says: “Relying on one or two products just increases the risk. Our priority is growth,” he says. “We want a diverse portfolio for the future.”

Diversity, he says, is also the secret weapon of the top executives: “With a normal company, you have one CEO and that person decides on the idea,” Gadbois says. “For us, all four of us sit down and debate it.” It means ideas rarely come out the way they came in, which could also be said about Gadbois himself. Today the former “suit” is in jeans, an open-collar shirt and a hairstyle best described as a peroxided demi-pompador. He wears a watch on each wrist. The first is standard exec fare: flashy, stylish. The second is for tracking his workouts, steps, sleep and heart rate. “What can I say?” he says. “I’m obsessed with metrics.”

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