By MATT RICHTELJUNE 8, 2013
ESTHER BERNSTEIN, 6 years old with long blond hair, pulled on a pair of blue slippers with a gray tassel over the toe. She grinned.“Look, Mom! I like these princess slippers!”
“Would you wear them to play dress-up?” her mother asked.
Esther’s 9-year-old sister, Sydelle, grimaced and freely offered that she would not.
“Well, Sydelle, you’re too old for this toy,” her mother said. “You’re not the target market.”
It was a Sunday night, after dinner, at the informal in-home testing lab of Melissa and Doug Bernstein, better known as Melissa & Doug, the toy company and the signature that adorns all their products. This August, their company will turn 25, celebrating a quarter-century of anachronism. In a time when major corporations dominate the industry, making toys with all manner of batteries, digital gimmicks or movie tie-ins, the Bernsteins keep making money in wooden puzzles, coloring pads, blocks, trains and simple costumes (the police officer, the princess, the pirate). They hatch many of their ideas by watching children at play — often among their own brood of six.Photo
They do little public relations and don’t advertise in magazines, or on radio and television. They don’t put coupons in Sunday newspaper inserts. They don’t rely on big hits, industry analysts say, just a steady stream of variations on classic toys mostly for children up to the age of 5. Nonetheless, their business has grown by double digits every year, to an estimated $325 million in revenue this year from $100 million in 2008 (and to 650 employees from 200), according to a toy company executive familiar with the company’s operations. Such figures make theirs a midsize toy business, of which analysts say there are fewer and fewer these days. In this industry, three huge players — Mattel, Hasbro and Lego — account for around $14 billion in sales, or about a third of global toy company revenue.
The Bernsteins have come a long way from the days when they drove a Chevrolet Malibu, owned by Mr. Bernstein’s father, to deliver products. Growing up in Westport, Conn., an affluent community, Mr. Bernstein, now 50, thought himself the poorest kid, living in a 900-square-foot house. Now their home is 36,000 square feet, one of the biggest in the same township, with hand-chiseled stone and antique ceiling beams — not to mention a bowling alley, an indoor full-court gym and a video arcade.
But they are, as Mrs. Bernstein, 47, puts it, restless, very restless — and challenges are upon them in an industry that, like so many others, is being rewritten in the technology age. Overall toy sales have slumped. Some specialty retailers have closed. Low-cost manufacturing has commoditized many items. But Internet sales have soared, meaning that the Bernsteins are having to adapt to online sales and marketing after years of building relationships with specialty stores.
Crucially, the rise of high-tech entertainment has changed how children play. Apps and video games have soared in popularity; on Amazon, you can even buy an iPod stand to accompany a potty trainer. The phenomenon can provoke conflicting feelings in parents. Should they give in to children’s yearnings for a phone app or video game? Or limit the screen time and offer up something simpler and more nostalgic, reminiscent of a childhood real or imagined?
The topic of traditional versus high-technology toys is one that particularly piques Mrs. Bernstein. “When you’re using a computer or an app, it’s giving you all the information you need,” she said. “It’s a completely reactive experience.” But she thinks she knows why that is so appealing. “Parents are so scared of having their kids say, ‘I’m bored.’ It’s synonymous with, ‘I’m a bad parent,’ and so they never allow kids to feel boredom, which equals frustration, and so kids don’t get to the point where they have to dig deeper and figure out what to do.”
Plenty of toy companies have joined Melissa & Doug in this niche, competitors whose simple offerings aim to entertain — but not too much. Companies like Haba, which makes blocks and wooden toys from sustainable woods, or Alex, which makes arts and crafts for “active fun.” But few companies can reach the size of the Melissa & Doug operation without facing a tough decision: Do you keep trying to expand on your own, pushing into larger retailers, or do you sell to a major toy maker?
A few years ago, the Bernsteins sold a majority stake to a private investment group to help them grow. They have long sold their goods in Toys “R” Us but are expanding their presence in other big retailers like Barnes & Noble. Some vendors complain that the company now can behave more like a mass-market vendor, not like a mom-and-pop operation.
Maintaining the ambience of a responsive, small company is one challenge. Another is how to satisfy their ambitions to expand lines of old-fashioned toys in a world filling with touch screens and interactive entertainment.
ONE day in May, the Bernsteins conducted a tour of their home. On the back steps, overlooking an expansive backyard — a tennis court, a pool, a clubhouse for the children — Mr. Bernstein noted an inlaid stone compass that they had asked the contractor to dig up and reinstall twice, first because the directions were off and next because the stones didn’t line up. The pair suffer from acute perfectionism, Mr. Bernstein conceded, talking cheerfully in his usual unbroken clip.
Mrs. Bernstein walked a step behind — arms crossed, brow furrowed, mostly silent. Then we entered the toy room, and her mood suddenly changed. The room, which included a play kitchen, was filled with Melissa & Doug products. Earlier, when she stocked that kitchen with bins of pretend fruits and vegetables, as well as sturdy wooden pots and pans, she saw that there weren’t any good pretend cereal boxes or canned goods.Photo
So she set about making some, and the company recently came out with Melissa & Doug Grocery Cans, with labels like “tomato sauce” and “peas & carrots.” “One of our hottest items is a set of cans,” she exclaimed, her eyes lighting up, worry creases dissolving. “We really nailed that one.”
Her mood lighter, she acknowledged that the tour had made her anxious. The couple have never given a long interview, and Mrs. Bernstein said she worried that the opulence of their house would make them seem greedy or driven by money. More fundamentally, Mrs. Bernstein said she was prone to anxiety and did not like to feel out of control.
As a child, first in Boulder, Colo., then in Westport, she was miserable, she said, the “loneliness too much to bear.” She described herself as a “creative misfit,” anxious and not eating, becoming anorexic in seventh grade. In college, she said, she stopped eating again and dropped to 82 pounds.
To comfort herself, she wrote poetry, sewed clothes for her dolls, worked on arts and crafts and played and wrote music. Creating things “took me out of what could have been,” she said. “I should, by all accounts, be on serious drugs. I could be very depressed.” She added: “When I create it makes me so happy. I’m able to soothe myself.”
Mr. Bernstein was much more cheerful but equally intense. As a child, he did his playing outside — tag and whiffle ball — dawn to dusk. The son of a principal and a guidance counselor, he was a class clown and his high school’s graduation speaker.
Always hard-working and competitive, he campaigned for a student position on the board of the University of Connecticut bookstore — not even the student council — by walking around the dorms handing out fliers and giving stump speeches. Mr. Bernstein said he never so much as tasted alcohol, wanting his wits about him and worrying that he might relish it with the intensity he relished everything else. “It’s hard for me not to overdo things,” he said.
They were set up by their parents when Mr. Bernstein was 22, a recent graduate working at a marketing firm, and Melissa Landau was 20, still a student at Duke. They hit it off immediately.
Ms. Landau became an analyst at Morgan Stanley after college, but she hated it. In June 1988, she and Mr. Bernstein decided during a trip to the Berkshires to start a company. “We said, ‘This is it,’ ” Mr. Bernstein remembered. “We do our own thing or perish and die.”
They spent their savings, $40,000, on their first product, a VHS tape in which they invited children to sing along, dance and play kazoo with song lyrics written and performed by Mrs. Bernstein. Hawking the tape store to store, they learned that selling a product you had to demonstrate was hard work. Their next product was a “fuzzy puzzle” of a farm scene that had texture, like a carpet, aimed at offering a tactile experience. It was the first of what would become quintessentially Melissa & Doug products.
Their roles hardened, his around business and organization, hers around ideas for toys. Each pushed and supported the other’s ferocious work habits. And their philosophy solidified against technology, partly because it was anathema to their bread-and-butter products.Photo
DOMESTIC retail toy sales have fallen 15 percent from 2004, to $21.5 billion in 2012, according to Richard Gottlieb, a veteran toy industry analyst. One reason has been the rise of multimedia entertainment like video games and phone apps. Analysts say it’s nearly impossible to tie a dollar figure to the growth of this kind of entertainment because it spans so many categories. What’s clear is that the time spent with these products is exploding.
That’s true even of Melissa & Doug’s target market, children up to age 5. A2011 study by Common Sense Media, a research group, found that 39 percent of children ages 2 to 4 had used a smartphone, tablet or other device to play games and to watch videos, while 12 percent of that demographic group used a computer daily and 24 percent at least once a week.
The American Academy of Pediatrics recommends that parents limit and monitor screen time for children up to 2 years old, noting that “a child’s brain develops rapidly during these first years, and young children learn best by interacting with people, not screens.” But that recommendation, made in 2011, is less stringent than the organization’s 1999 call for a veritable ban on screen time for children of that age. That call was softened because the organization felt that the ubiquity of screens rendered an outright ban unrealistic.
Technology use by children has a business side effect, too: it creates competition for their time. An “oversupply of play” is what Mr. Gottlieb calls it. There are now so many more options — often relatively inexpensive ones, like 99-cent apps. Over time, he said, traditional toy makers may find sales falling further as parents see their children spending more time with interactive media while their toy pile gathers dust.
“At some point, this is going to catch up in dollars,” Mr. Gottlieb said. “Parents will say: ‘Why does my kid have all these toys?’ “ That would be a problem for Melissa & Doug, he said.
For now, part of Melissa & Doug’s appeal is as an antidote, if not a substitute, for all that screen time. Parents may buy their child a plastic play table with push buttons to play songs or make a miniature light show, but they might also buy an old-fashioned floor puzzle or wooden truck.
Dr. Lindy Fox, a dermatologist shopping recently in the Ambassador Toys store in San Francisco, has this urge. She likes Melissa & Doug toys — the puzzles, in particular — saying they are well-made and could be collector’s items. But they don’t jump out at her 3-year-old son, Zuri, who, she said, considers them a little boring and prefers toys with “bells and whistles.”
“He’s not a kid — I haven’t seen a kid — who goes to the toy store and says: ‘Ooh, let me get that,’ “ she said of Melissa & Doug toys. She said she bought them almost as a “rebellion against digitized toys,” as a good-for-you plaything, akin to buying healthy, organic food.
“The thing about Melissa & Doug toys,” she said, “the problem with them, is they encourage you to be creative, which is great, but they also, speaking of it kind of concretely, are relatively one-dimensional.”Photo
The child has to bring the extra dimension, the creative spark, which is why Nicole Limburg, a stay-at-home mother of four in an Akron, Ohio, suburb, is such a Melissa & Doug fan. “You don’t just hit buttons and hear noises,” she said.
Ms. Limburg’s children have differing tastes: the youngest, who is 4, likes simpler wooden toys; the 7-year-old likes American Girl dolls; and the 10-year-old prefers to play outside. As for the 8-year-old, well, he can’t get enough of the Wii and iPod. She said they all watch more TV than she’d like — they sit in front of it for hours if allowed. And sometimes she lets them if she needs to do laundry or take care of the house.
The Bernsteins talk about these challenges with their own children, four who live at home (ages 5 to 10) and two away at college (ages 18 and 19). For the little ones, the parents put a timer on the computer that kicks them off after an hour. But their house has many flat-panel TVs, including one next to the swimming pool for in-pool viewing. Still, Mrs. Bernstein said, the options don’t stop her children from saying: Mom, we’re bored.
“It’s a lot easier to give up and give in,” she said. Her own childhood taught her that creativity can be a salve. “They’re like: ‘What do I do? What do I do now? They’re almost in a panic because they don’t know how to soothe themselves.”
By definition, toys are means of entertainment, and Melissa & Doug items include many task-specific games and projects, like coloring books with implicit rules or craft kits with everything included. These aren’t toys you have to bring much imagination to.Photo
The Bernsteins say their foremost motivation is building compelling toys, not building an empire. But they have taken aggressive steps to build their market. In the last six years, they have made 22 acquisitions or joint ventures aimed at developing or expanding the market for toys made by smaller companies.
In 2010, they sought out and struck a deal to sell a majority share of their company to Berkshire Partners, a private investment firm. Mr. Bernstein declined to say how much money they received or precisely what percentage was sold. He said they made the move to push into new areas, like a new baby-toy line, and to reproduce their efforts overseas.
Jim Silver, editor in chief ofTimeToPlayMag.com, said the Melissa & Doug story was noteworthy because it showed “that you can take a company out of nowhere and grow it” one toy at a time. “It wasn’t like they came out with Teenage Mutant Turtles or Power Rangers,” he said.
But he also said the company could grow further and faster if it licensed characters or themes. He noted that Lego once eschewed licenses but that it eventually embraced Star Wars and “just exploded.”
“You want to take this thing to the next level, to $400 million or to $500 million,” Mr. Silver said. “You do have to become active and do some things you don’t do. You can’t say: we don’t do promotion; we don’t do licensing.”
But that’s exactly what the Bernsteins have been saying. They won’t use licenses, seeing them as a short-term growth strategy relying on the ephemeral popularity of a given character.
E. J. Whelan, a managing partner at Berkshire Partners, said he “fell in love” with the Melissa & Doug brand partly after realizing how many of his own daughters’ toys were made by the company. He said he and his partners had explored closely whether the toy industry was going in the other direction, toward high tech, and decided that there was ample room for simpler toys.
The Bernsteins could go in that other direction if they wanted. Mr. Bernstein said the company received multiple e-mails each week from major toy companies wanting to collaborate on Melissa & Doug-centric apps, video games or other media.
“That would be selling out,” Mr. Bernstein said.
AT the Melissa & Doug headquarters on a corporate strip in Wilton, Conn., Mrs. Bernstein has an open-air work space, a rectangular area filled with prototypes and other works in progress. As she pointed to the shelves along the wall, another pensive look crossed her face, this one less worried and more wistful than before.Photo
“This,” she said, “is the wall of shame and despair.”
Dozens of toys line those shelves — puzzles, stuffed animals, wooden piggy banks and so on. They have the look and feel of Melissa & Doug products, but they were among the 25 percent of toys that flopped with consumers.
Mrs. Bernstein conceded that some people don’t give the company much credit for innovation. After all, long before Melissa & Doug came along, there were puzzles, sand toys and wooden trains. Even some retailers, who spoke on the condition of anonymity because they didn’t want to upset their relationship with the company, said it often built on others’ successful ideas.
Mrs. Bernstein argued that both things are true: the company does build on successful ideas, and it innovates. The point, she said, is to find “classic play patterns” and “make them more enticing in all kinds of ways.”
She described watching her own children play in the sandbox and pretend to make food using old spice jars; out of that observation came a line of sand baking toys, like the cupcake making set. Costumes, too, have been around forever. The Melissa & Doug innovation was to develop “role-playing sets,” she said, like a movie director’s outfit with a megaphone and scripts. She said she asked herself: “What are things kids really like to do but don’t have the tools to make it a fully engaging activity?”
Some specialty retailers also complain that the widespread distribution of Melissa & Doug cuts into their business, but they nonetheless remain the bulk of the company’s 15,000 distributors.
Other retailers swear by the company.
“People look at what they do as being educational, quality and lasting a long time,” said Sharon DiMinico, chief executive and founder of the Learning Express, a chain of 140 stores where Melissa & Doug has been voted “vendor of the year” in eight of the last 10 years.
Ms. DiMinico, who has worked with the Bernsteins since nearly the beginning, sees how they complement each other. “Doug’s like a big kid,” she said. “Look at that house. It’s got his stamp all over it.” But “Melissa is the driving force; she’s the creative inspiration.”
Mrs. Bernstein has help, of course. The morning after market-testing the princess slippers on her daughter Esther, she came to work with notes. She made a beeline for Donna Thompson, a product manager whose desk was awash in prototypes for crayons, tiaras and costumes.
“I know it’s late in the game,” Mrs. Bernstein said. “But the slippers seem really slippery.” Her daughter Sydelle, she added, “thought they looked like bedroom slippers.”
Ms. Thompson took in her boss’s comments and explained that, in terms of safety, her group had thought that if it put on a sole that was too sticky, it might catch and cause a child to trip.
As for the look of the slippers, Ms. Thompson noted that they had received positive reviews in their usual market-testing: products under development are sent to a network of two dozen families. One was the household of Heather Candullo, a graphic designer at Melissa & Doug. And at this growing company, with about 2,500 products, Ms. Thompson’s next observation seemed to be the conversation-ender:
“Heather’s kids loved them.”