Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Toy Industry Part 5
Transcript
- Lucas: We've done a bunch of episodes on how falling birth rates reshape specific industries, and the toy industry has come up a few times. But I think we've been looking at it from the wrong angle. Luna: How so? Lucas: We kept focusing on the shrinking number of babies and toddlers, and assuming that means doom for toy companies. But the data tells a different story. The global toy market actually grew about 4 percent last year, to roughly one hundred and ten billion dollars. Luna: Wait, that's counterintuitive. If there are fewer young children, who's buying all those toys? Lucas: Adults. Specifically, adults buying for themselves. The industry calls them 'kidults', and they are now the fastest-growing segment. In markets like the US and UK, adults now account for about a third of all toy sales by value. Lego's 2025 annual report showed that over 40 percent of their revenue came from sets marketed to adults eighteen and up. Luna: That's huge. So Lego is actively targeting grown-ups, not just parents buying for kids? Lucas: Exactly. They have dedicated 'Adults Welcome' lines — complex botanicals, architecture skyline sets, the massive Millennium Falcon. These aren't cheap. A single modular building set can run three hundred dollars. And they're selling out. Lego's overall revenue grew 12 percent last year, and the adult segment grew faster than the children's segment. Luna: So the toy industry isn't dying — it's just changing customer. Lucas: Right. The under-five population in the US has been shrinking for a decade, down about 3 percent since 2016. But the eight-to-fourteen demographic has actually held steady, and the adult population keeps growing. Toy companies are following the money. Luna: I remember seeing Mattel recently launched a line of high-end Masters of the Universe figures aimed at collectors, priced at fifty dollars each. That feels like a direct play for the adult wallet. Lucas: Exactly. Mattel's 'Mattel Creations' platform drops limited-edition collectibles for adults, and they sell out in hours. Their CEO said on the last earnings call that the adult collector market now represents roughly 15 percent of their total revenue, up from single digits five years ago. Luna: But does this actually make up for the loss of infant and toddler sales? Diapers and baby toys are still a big category. Lucas: It doesn't fully replace it, but it offsets the decline. The infant and preschool toy segment has been flat to slightly down. The growth is in action figures, building sets, puzzles, and games — categories that appeal to older kids and adults. Hasbro, for example, has leaned hard into 'Dungeons & Dragons' and 'Magic: The Gathering', which have very adult fan bases. Luna: So the toy aisle at Target is going to look different in a few years. Lucas: It already does. Walk into any big-box store and you'll see more electronics, more collectible blind boxes, more licensed merchandise for Marvel, Star Wars, and anime. The classic wooden block aisle is shrinking. Retailers are reallocating shelf space to higher-margin items that appeal to older buyers. Luna: What about the economic ripple effects? If toy companies shift to adult-focused products, what happens to the factories that made baby rattles? Lucas: That's the interesting part. The manufacturing base is adapting too. Chinese factories that specialized in plastic infant toys are retooling to produce more intricate, higher-detail adult collectibles. The per-unit value is higher, but the volume is lower. So total factory output might not grow much, but revenue per factory could rise. Luna: And the labor force? Fewer workers needed? Lucas: Not necessarily fewer, but different skills. Adult collectibles require more painting, more assembly, more quality control. So the demand shifts from mass-production line workers to more skilled artisans. That's happening in Guangdong province right now, where some toy factories are hiring more painters and fewer injection mold operators. Luna: So the demographic shift is reshaping not just what toys are made, but how they're made and who makes them. Lucas: Exactly. And this isn't just a US or European story. Japan has been dealing with a shrinking child population for decades, and their toy industry has already pivoted. Bandai Namco, for example, makes most of its toy revenue from adult collectors of Gundam models and anime figurines. They've been doing this since the 1990s. Luna: So they're a kind of leading indicator for where the US and Europe are heading. Lucas: I think so. And what's interesting is that the Japanese toy market has actually grown slowly but steadily over the past twenty years, despite having one of the lowest birth rates in the world. Because they figured out how to sell to grown-ups. Luna: That's a powerful lesson. It also makes me wonder about the investment side. Are there publicly traded toy companies that are positioned well for this shift? Lucas: Lego is private, unfortunately. But Mattel and Hasbro are public. Hasbro's stock has performed well over the past year as they've leaned into their 'Wizards of the Coast' division — that's Dungeons & Dragons and Magic — which carries much higher margins than traditional toy lines. Mattel is still restructuring, but their focus on collectibles and licensing is promising. Luna: Any risks? If the adult collector market gets saturated, could that backfire? Lucas: It's possible. Collectors have finite budgets and shelf space. There's a risk of overproduction of 'premium' items that end up discounted. But so far, demand seems robust. The key is scarcity — limited runs that maintain value. That's a very different business model from the old 'sell as many plastic toys as possible' approach. Luna: So the toy industry is undergoing a fundamental business model transformation, driven by demographics. Lucas: Exactly. And I think this is a broader pattern we'll see across many consumer goods industries. When your core customer base shrinks, you don't just shrink with it — you find a new customer. The toy industry is showing us how that's done. Luna: You know, Lucas, this episode really crystallized something for me. Before, I thought falling birth rates were just bad news for toy companies. Now I see it's more about adaptation. Lucas: That's exactly the kind of takeaway we hope for. And if today was useful to you, the way these stay ad-free is listener support. If you'd like to help keep us going, you can find us at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small way to say this content matters. And we appreciate everyone who does. Lucas: So, looking ahead, I'm curious whether the 'kidult' trend will spread to other categories. Will we see adult-focused breakfast cereals? Furniture sized for grown-ups who want a playroom? Luna: I think we already are. There are companies selling 'adulting' board games and nostalgia-themed decor. The line between toy and hobby is blurring. Lucas: That's the real story. Demographics don't dictate destiny — but they do force change. And industries that adapt, survive. The toy industry is adapting in real time.