Ms. Rachel, Paw Patrol to fuel Spin Master sales as it faces fraught holiday season

Spin Master CEO Max Rangel poses with toys after a press conference in Toronto on October 11, 2023. THE CANADIAN PRESS/Chris Young

Max Rangel can't help but crack a smile when he hears a sing-songy "hello" emanate from an overall-and-pink T-shirt clad doll sitting on a table covered in toys in his Toronto office.

Many people have told the CEO of Canada's top toy company that they find the plush plaything with her overly cheery voice and predilection for peek-a-boo "annoying," but Rangel knows better.

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"You have to look at the world through the baby's eyes ... or the toddler's eyes," says Rangel, head of Spin Master Corp.

If you did that, you'd know this doll — the Ms. Rachel Speak and Sing doll, modelled after U.S. preschool teacher-turned-YouTube star Rachel Griffin Accurso — is topping holiday wish lists this year.

The doll, and its related line of wooden blocks, bunny rattles and teething rings, became the most successful toy presale Walmart had ever seen in September, Rangel said. When he told people he met in China that the doll was headed for Hong Kong, someone screamed in excitement.

That reception is exactly what Spin Master needs as it stares down a holiday season where inflation is easing but consumers aren't on a spending spree just yet. When they are opening their wallets, they're being a lot more cautious — and that's if they can get their hands on what they want to buy at all.

November port strikes in British Columbia and Montreal temporarily stymied the flow of merchandise to some stores and a Canada Post strike has cast doubt over whether holiday orders will make it to customers on time. Black Friday falling later than usual in the year also shaved five key shopping days from the run up to Christmas Eve.

Spin Master can't ignore these problems. The holidays are the company's busiest time of year, so no matter what's going on economically, it has to nail December.

Rangel, who has been global president of Spin Master for four years now, is up for the challenge. "We planned for it and we're ready for it," he said of the holiday season.

That planning process has been years in the making and involves everything from price tweaks to inventory checks, but at the heart of it is the arsenal of household names made by the 30-year-old Toronto company.

Spin Master is now the maker of toy royalty: the Rubik's cube, Etch-a-sketch, Kinetic Sand and Tech Decks. It is also behind Hatchimals, Paw Patrol, Bakugan, Gabby's Dollhouse and Monster Jam.

But even with such big brands in its portfolio, Jaime Katz, a senior equity analyst at Morningstar, said in an interview that Spin Master is not immune to the economic headwinds swirling before the holidays.

"I don't feel like a) they are killing it or b) they're dying," Katz said.

"They're just sort of trucking along as fast as possible given the uncertainty that exists right now."

To confront that uncertainty, Spin Master is leaning heavily on its holiday releases, which include an electronic pet version of its popular Hatchimals and a fluorescent green gekko from Hex Bots that scales walls.

There's also a set of linkable wooden blocks from Melissa & Doug, a Connecticut toy firm Spin Master bought for US$950 million in January.

While this holiday season is Spin Master's first owning Melissa & Doug, Katz doesn't have high expectations because she thinks innovation slowed when the companies were plotting their marriage.

"I'm not sure that the Melissa & Doug team was going full steam ahead as they were negotiating all of the final decisions on the purchase price and all those things," she said.

By the time the deal was sealed, there was little time for Spin Master to influence Melissa & Doug's holiday releases like the Sticker Wow!, a hand-held stamper-like device doling out stickers.

"With one year of ownership, you can only do so much to affect the innovation," said Rangel, who imagines the Sticker Wow! eventually having Paw Patrol or Disney iterations.

Spin Master toys take between one and three years to develop and planning for the holiday season happens 15 to 18 months in advance. The company has to work so far ahead that it has already locked in its product launches for next fall.

Predicting what will generate delight and not fall out of favour with fickle children by next year means Spin Master relies on its kid lab, where everyone from tykes to teens experiment with toys.

Not everything works out. Spin Master's Toronto office has a wall of failures featuring the long-gone Liv dolls from 2009 and preschooler brand Pop on Pals from 2010.

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"It's perfectly imperfect," Rangel says of the toy development process. "Things come out of nowhere and trends happen and you have new moms, you have the digital age ... and they happen very quickly and we have to react."

His best example of this? Ms. Rachel.

"That doll was not in the plan 11 months ago," Rangel said.

A Spin Master employee on maternity leave discovered Ms. Rachel about a year and a half ago. Her son and his friends couldn't get enough of the YouTube sensation who started her channel to help her child with a speech delay.

Spin Master investigated her reach and then approached Ms. Rachel with a pitch for licensing rights.

"If you want to hit next holiday season, we have to get this thing done pretty quickly," Rangel recalls telling her. "Then you go to town to innovate the items, you got to find suppliers and you go through all sorts of lenses to make it happen."

As soon as Ms. Rachel toys got to store shelves, so did knock-offs. Some reportedly yelled at buyers in Japanese. Others had stretched out facial features or lacked the ability to sing "Icky Sticky" and "Hop Little Bunny."

Ms. Rachel had to post a warning about the fakes, urging people to return them because she couldn't guarantee they'd be safe. Spin Master then released a shopping guide teaching buyers how to spot a counterfeit and reminding them her toys aren't being sold on Temu, Shein or eBay.

The fakes haven't put a damper on sales. Out of the top 10 fastest-selling toys for infants, toddlers and preschoolers in September in the U.S., data firm Circana said three were from Ms. Rachel's line.

Just as many came from Spin Master's crown jewel: Paw Patrol.

The search and rescue pup brand has spawned toys, TV shows and two movies since it was created by Spin Master in 2013 and quickly became a juggernaut with the preschool crowd.

While the brand remains popular, newer rivals are ready to steal away attention. The cartoon "Bluey" has been a hit for several years and Squishmallow plushies and slime are hot-ticket items, too.

Rangel keeps an eye on all of them but doesn't let them distract him from his goal to make the 11-year-old Paw Patrol so enduring it's "a rite of passage."

"Put it this way, you can't expect that the first generation of Paw Patrol lovers are having kids, right?" Rangel said.

"So we always think of ourselves as having another 10 to 20 years that we have to get through to have multi-generational, evergreen longevity."

Katz thinks it's a smart strategy for a brand targeting a demographic so young that it will always "wind up with new kids going into it and old kids aging out of it."

"It doesn't have to be that it's a particular growth engine as much as it is a cash cow," she said.

Some of the decisions that will determine how long Spin Master can hold onto that cash cow status are being made in "a daily war room" Rangel uses to navigate the holiday season.

Chief among the room's priorities is ensuring the prices of Spin Master toys don't turn off customers already feeling financially stretched.

"Something that would have been $100 is now going to be $70, something that would have been $79 is trying to be now $59, $49," Rangel said, noting advances in technology are making savings possible.

While it's harder to increase prices when people are being cautious with spending, Spin Master has the benefit of playing in a sector where "the price points are much more digestible" and brand recognition carry a lot of weight, Katz said.

"If you want ... some sort of Paw Patrol character, you don't want a generic dog," she said.

Rangel and his team will work to capitalize on such sentiments as Canada gets deeper into a holiday season he calls "a race to the end."

As much of that race will be spent generating demand with marketing as it is on making sure stores are "replenishing really obsessively" because Spin Master knows the ultimate determiner of holiday success is not price nor what you saw on TikTok, but whether the Ms. Rachels of the world make it under your tree.

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"You can always sell it next year, but it's not about next year," Rangel said.

"A parent doesn't want to wait till next year because their child is going to be disappointed."

This report by The Canadian Press was first published Dec. 1, 2024.