Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry
Transcript
- Lucas: So, we've spent a bunch of episodes looking at how falling birth rates hit everything from diapers to life insurance. But there's one industry that's arguably more exposed than any of them — toys. Luna: Right, because the customer base literally shrinks. Fewer kids means fewer customers. But what's interesting is that the toy industry isn't just shrinking — it's pivoting. Lucas: Exactly. And the pivot is dramatic. Traditional toy companies like Mattel and Hasbro are seeing their core preschool and baby categories decline. In 2025, total U.S. toy sales were down about 2.3 percent year-over-year, and that's after a couple of years of pandemic-era bumps. The long-term demographic trend is undeniable. Luna: But here's the thing — we keep hearing about 'kidults.' Adults buying toys for themselves. Is that actually offsetting the decline? Lucas: It is, partially. The kidult category — toys marketed to adults — now accounts for roughly 30 percent of total toy industry revenue in the U.S. LEGO is the poster child here. Their botanical collection, for example, sells thousand-piece flower bouquets aimed at adults. No kids involved. Luna: Right, and that's not just a niche. The LEGO botanical sets have been among their top sellers for three years running. They're basically competing with home decor, not just other toys. Lucas: Hasbro has leaned in too. They're doing adult-targeted versions of Monopoly and Clue with premium materials, and they've doubled down on their Wizards of the Coast division — Dungeons & Dragons and Magic: The Gathering. Those are almost entirely adult-driven now. Luna: And Mattel? They've had a tough time because their brand is so tied to Barbie and Fisher-Price. But they're trying. The 'Barbie: The Movie' bump was real, and they're pushing adult collector dolls with higher price points. Lucas: Yeah, the challenge for Mattel is that the preschool side is their bread and butter. Fisher-Price sales have been declining for years. They've tried to reposition some of those brands for older kids, but it's a tough sell when the birth rate keeps dropping. Luna: So what about the traditional toy aisle? The stuff for babies and toddlers? Is that just disappearing? Lucas: Not disappearing, but consolidating. The market is shifting toward higher-quality, more expensive toys that parents buy for fewer children. The 'quality over quantity' mindset. Premium wooden toys, STEM kits, educational toys — those segments are actually growing even as unit sales decline. Luna: Because parents with one or two kids are willing to spend more per child. That's the demographic math: fewer kids, but higher spend per kid. Lucas: Exactly. And that's why we're seeing companies like Lovevery — the subscription-based developmental toy company — explode. They ship age-appropriate, Montessori-style toys to parents. It's a direct to consumer model built entirely on the premium per child thesis. Luna: And Lovevery is profitable now, right? I think they hit profitability in 2024. That's a sign the model works. Lucas: They did. And their success has forced bigger companies to pay attention. Even Fisher-Price has launched a 'Fisher-Price Link' app-connected line that's higher priced and data-driven. The industry is bifurcating: premium and educational on one side, cheap disposables on the other. Luna: But there's also a global angle. Falling birth rates aren't everywhere. India, for example, still has a relatively young population. Are Western toy companies expanding there? Lucas: They are. India's toy market has been growing at about 12 percent annually. LEGO opened 100 stores in India between 2020 and 2025. Mattel is investing heavily in localization — they launched an Indian Barbie line with traditional clothing. The growth markets are South and Southeast Asia, parts of Africa. Luna: So the global toy industry is basically a tale of two worlds. Developed markets pivoting to adults and premium kids, developing markets still playing the volume game. Lucas: Right. And that's why you're seeing more cross-border M&A in toys. Western companies buying local players in Asia. Hasbro bought a majority stake in a Vietnamese toy manufacturer in 2024. It's about access to both production and consumers. Luna: But let's stick with the kidult trend for a second. Is there a risk that the industry becomes too dependent on adults? I mean, adults are fickle. Their spending on collectibles can drop fast in a recession. Lucas: That's a real risk. During the 2022 inflation shock, collectible toy sales softened. But the overall trend has held up because it's tied to a demographic shift that isn't reversing. The average age of a LEGO buyer in the U.S. is now 39. That's not a fad — that's a structural change. Luna: And companies are responding by creating products that bridge generations. LEGO 'Adults Welcome' sets are designed to be built by parents and kids together. That's a smart hedge. Lucas: Yeah, multi-generational play is a big theme. Board games are benefiting too. Hasbro's 'Game Night' marketing explicitly targets families with older children and adults. And then there's the nostalgia play — relaunching '80s and '90s properties for the adults who grew up with them. Luna: Like the Teenage Mutant Ninja Turtles relaunch or the new He-Man toys. That's pure nostalgia targeting millennials. Lucas: Exactly. And it works because those millennials have disposable income and fewer kids to spend on. So they spend on themselves. Luna: But here's a question that keeps coming up in our listener comments: what about the environmental angle? Fewer kids means less plastic waste from toys, right? But the premium toy trend often means more packaging, more shipping. Lucas: It's a mixed bag. On one hand, fewer total toys being produced should reduce waste. On the other hand, premium toys with heavy packaging and international shipping have a higher carbon footprint per unit. Some companies are addressing it — LEGO has committed to bio-based plastics, and Lovevery uses recycled materials in their boxes. But it's not a solved problem. Luna: And the resale market for toys is growing too. ThredUp's 2025 report showed toy resale grew 15 percent year-over-year. Parents are buying used premium toys for their kids. That's another adaptation. Lucas: Right, and that cannibalizes new toy sales but it's a market reality. Overall, the toy industry is in a fascinating transformation. It's not dying — it's evolving. The companies that survive will be the ones that understand their customer isn't just a child anymore. It's a forty-year-old reliving their childhood, or a parent investing in a higher-quality play experience for their one kid. Luna: So if I'm an investor looking at the toy space, what should I watch? What's the key metric? Lucas: I'd watch two things. First, the share of revenue from kids aged 12 and under versus 13 and up plus adult. Companies that are over 50 percent dependent on the under-12 segment are at risk. Second, international exposure — especially in growing markets. Companies with diversified geographic revenue are better positioned. Luna: That's a good framework. And honestly, if this episode made something click for you — maybe you're in the toy business, or just curious about demographics — we want to keep making these deep dives. If it was worth a coffee to you, you can support us at buy me a coffee dot com slash fexingo. No pressure, just helps us keep it ad-free. Lucas: Yeah, listener support really does make a difference. It lets us pick niche topics like this without worrying about ad revenue. So thanks to anyone who chips in. Luna: Alright, back to the toy aisle. One more thing I want to touch on: the role of technology. Are digital toys — apps, video games — stealing share from physical toys? Because that's another demographic shift. Lucas: They are. The line between toy and tech is blurring. But physical toys have held up better than many expected. The key is that physical toys offer a screen-free experience, which parents value more and more. That's actually a tailwind for traditional toys in an age of screen-time guilt. Luna: So the toy industry's future isn't about more kids — it's about changing who buys, why they buy, and what they value. Birth rates are falling, but the industry is finding ways to play the hand it's been dealt. Lucas: Exactly. It's a great case study in demographic adaptation. And we'll keep watching how it unfolds.