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Lego is set to become part of the reshoring, the growth of foreign direct investment in the US | Pro Club Bd

In 2006, Lego A/S closed its US manufacturing facility in Enfield, Conn. and moved production to Monterrey, Mexico.

Now, 16 years later, the company is returning to the United States with a new $1 billion facility in Chesterfield County, Virginia near Richmond.

Why the new manufacturing strategy? Thanks to Lego’s growing popularity, supply chain issues and advanced automation making US manufacturing competitive globally.

“The US is a very important market for the Lego Group. We’ve grown rapidly over the past four years and we expect that demand to continue as we increase availability across the country and attract new builders for Lego games,” Chief Das said operations manager Carsten Rasmussen via email.

Ever since Lego closed its Enfield factory in Billund, Denmark, the company’s Monterrey factory has been supplying the United States primarily with the colorful ABS toy building blocks.

Now Lego is expanding in Monterrey and bringing manufacturing back to the US, with a carbon neutral facility powered by a solar farm and employing 1,760 people.

The 1.7 million square foot facility will help the family business, which is celebrating its 90th anniversary, meet demand for Lego products and meet its goals of making them with greener materials in sustainable factories.

The Virginia factory will be a full scale Lego facility with sculpting, decorating, assembling and packaging on site and mold tooling manufactured in-house, primarily in Denmark.

Company officials ruled out building a second plant in Mexico to stick with their strategy of building their regional presence in large markets.

In Europe, Lego has factories in Denmark, Hungary and the Czech Republic. In Asia, Lego has a factory in China and is building one in Vietnam.

The Virginia project continues a trend of relocation in the form of foreign direct investment (FDI) — if the parent company is based outside of North America — that relocated 80,000 of the 261,000 US jobs in 2021. Forecasts predict another big year for US reshoring and FDI with the proposed Lego jobs among the approximately 400,000 job postings forecast for 2022.

Lego has posted massive gains during the pandemic and again in 2021, with the company’s growth outpacing the toy industry. Sales in 2021 increased by 27 percent compared to the previous year to 8.06 billion US dollars (55.3 billion Danish kroner).

Established in 1932, Lego building sets are an internationally popular toy that appeals to a wide age group with Star Wars and Harry Potter playsets, sets with over 1,000 pieces for adults 18+, botanical collections, mosaic art and more.

“Demand for Lego has been pretty voracious from US consumers, so it makes sense that they’re actually being produced here again,” James Zahn, deputy editor of The toy bookhe said in a phone interview.

While Lego is lopsided from a preschool age, it really does appeal to all ages, including a growing number of older teens, young adults and adults who are kids at heart. You buy Lego Technic sets with working gears, wheels and axles as well as artistic flower and portrait sets from the Lego Art range.

“Lego really focused on that market with more detailed models and more elaborate lines that older kids or adults would enjoy,” Zahn said. “You were an early adopter of ‘kid’ recognition. You don’t have to grow up anymore. It’s very therapeutic to sit down and enjoy the quiet time building something up.”

To meet the demand of Kidults and others, construction of the Virginia facility is planned on a 340-acre project-ready lot in a county-owned industrial park with appropriate zoning, roads, and power, water, and sewer connections, all just to the right wait shop.

Production is scheduled to begin in the second half of 2025.

“The US is the No. 1 toy market, but China is very close and will probably become the No. 1 toy market in the world because there are many families with young children,” said Zahn.

To prepare for these orders, Lego is investing more than $1 billion to build a zero-carbon factory in Vietnam that will employ around 4,000 people over 15 years.

With a growing middle class, demand from Asia is on track to exceed supply from the Chinese plant, Lego officials told Reuters.

When the Vietnam plant opens in 2024, it will be Lego’s second in Asia and sixth overall.

Lego is also expanding plants in China and Europe, with financial guidance calling for growth rates to normalize in 2022 and transition back to single digits.

“Lego has production almost everywhere in the world. It always sets itself up where it is most efficient. It’s about being closer to the customer,” said Zahn.

The goal is to quickly respond to shifts in local consumer demand for hot products, shorten the supply chain, and reduce the environmental impact of long-distance shipping.

“The toy industry speaks of a quick market launch,” said Zahn. “The standard time frame for a toy was 18 months from green light through production to your child’s toy box. Now companies want this to be done as quickly as possible. We’ve seen it shrink to three months for certain items and even faster for other things. “

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