Alex Balzaretti - Olympic dreams

On 21st July 2009, Hornby became only the second company, after the Royal Mint, to agree a licensing agreement with the London organising committee for the 2012 Olympic Games.

Owner of the Scalextric, Corgi and Airfix toy brands, Hornby's agreement with Locog will see the British company produce an extensive range of official London 2012 merchandise including die cast London buses and taxis, collectable die cast figurines and Olympic Stadium and Scalextric velodrome sets amongst others, all of which will come complete in a range of London 2012 livery and branding.

Making sure that Hornby makes the most of its three-year contract surrounding what is undoubtedly a once-in-a-lifetime event, an Olympic Games on home soil, is Hornby general manager Alex Balzaretti who insists that, having taken on a London 2012 contract, the sky’s the limit for the traditional toy-maker.

"The red, white and blue phenomenon in this country is huge, when we get behind something we really go for it, even if we’ve complained for three years previously"

 

 

What’s your professional background and how did you come to work at Hornby?

I’ve been on the marketing side of the toy industry for about 12 years now. Previously I was working on the marketing side of a hosiery and underwear manufacturing company, which is massively different to what I’m doing now.

Following that I spent a couple of years at a company that specialised in outdoor toys and games and then I joined Corgi. It’s a company with a 50-year heritage that predominantly makes toy cars out of diecast models. That company was purchased by Hornby a number of years ago when I was the general manager at Corgi and so I took on that role at Hornby as well and integrated the Corgi business into Hornby’s.

How did Hornby’s licensing agreement with Locog come about?

My move to Hornby was in the middle of 2008 and obviously the closing ceremony of the Beijing Games was in September of that year, at which Boris Johnson took a red London bus as a symbol of London and Britain. It was quite a poignant moment for me because I had been making diecast buses and was responsible for having them sold for a number of years. That was the moment where I thought ‘This is something that we have to do.’

At that stage the London 2012 organising committee was very new so there were very few people responsible for licensing, sponsorship, partnerships etc. I made contact with the organising committee fairly early on and at that time those licensing contracts were open to everybody so every company. It didn’t matter whether you were a tiny company or a multinational, everybody got the chance to pitch for a contract.

At that stage I put a presentation together and we said to Locog, ‘There is nobody else in the world that can do what we can do, and we would like to pitch on that basis.’ That meant we could circumnavigate a lot of procedure that normally we would have to go through. No other company had the brand reach that we have so on in July 2009 we announced a deal for toys, gifts and collectibles with Locog.

We were the first licensing deal behind the Royal Mint. But their deal was slightly different, they have a lot of pre-existing Olympic links so it was almost a rite of passage for them.

What exactly is the structure of the licence?

The way that it works is that you agree a percentage with Locog and for every single item you sell to the retailer Locog receives x percent of that price. To put it into context, they have a billion-pound estimation on London 2012 merchandise, made up of 55 licensees, probably 10,000 products.

The agreement expires December 31st 2012 and then we have a number of months to sell our remaining stock but that period cannot be bigger than the last quarter of the contract period. Essentially we’ve got until March 2013 to be completely clean of all of our stock.

 

 

 

Where will 2012-branded Hornby products be sold?

We’ve split our range into two prongs, one is London 2012 and the other is Team GB. Where we sell what is already well established. Luckily one of the things that we already had was quite a wide range of retail distribution. Owing to agreements with Toys R Us, Tescos, Argos, Sainsburys, Waitrose and The Retail People, the potential reach is something like 60,000 different points of distribution – to get a billion pounds worth of retail you’d have to be that widely spread.

How do you go about making the most of the Games?

There are three distinct opportunities that we have to capitalise on.

The first is pre-games, where you work out what products in your range are your core lines and how it’s going to unravel so that the retailer can get a sense of what they should order and you can get a sense of what you should make. There are lots of licensees who even now haven’t got their product to market. They haven’t had that research and information gathering time which, for an event like this, is a pretty dangerous position to be in.

The second opportunity is Games time. Most retailers that we are working with have forward orders with us that stretch right the way through July and are set up on the basis of the Locog-issue sales curve, which is, you generate 50 per cent of your sales between when you start your agreement to June 2012. Then between June 2012 and September 2012 you do the remaining 50 per cent. But you can’t start making products in June 2012 to supply July, August and September, you have to have stockpiled it. So if you haven’t built up the knowledge and data analysis of your expected sales and you get it wrong then

Our national accounts are massively supporting Team GB because the red, white and blue phenomenon in this country is huge, when we get behind something we really go for it, even if we’ve complained for three years previously. The opportunity to sell Team GB product is the third stage in the overall process. Most of our Team GB sales we expect to happen at the back end of the Games and beyond and we’re well prepared for all eventualities, for example, If we go and win eight gold medals at the track cycling events, we expect our scalectrix velodrome sales to go through the roof.

Are there any additional benefits of becoming a London 2012 licensee?

When you take a London 2012 licence agreement, it’s very, very onerous. The commitments that you make to show responsibility in all sorts of areas, sustainability, inclusion, quality etc. are so high, and you sign a contract saying that you will do everything in your power to meet those expectations, that it draws out the very best performance in any organisation. Lots of companies probably could’ve made the London bus but could they have done it with as much responsibility and due care and attention to sustainability and sourcing etc? I don’t think so.

We will make and sell probably half a million red London buses, we’ve not made half a million of anything, ever, in decades and decades of toy making. Probably the only people to have done those sorts of numbers are the big multinational toy companies like Matel making Hot-Wheels. Previously we’ve made limited edition products, highly valuable, highly collectible, very rare  - maybe 10,000 was a big number.

The word legacy is used a lot, whether it’s by Locog or every other person associated with the Games and it’s something that will definitely affect us once the Games are over. Once we’ve successfully operated on the kind of level that Locog demands, I don’t think there’s any licence in the world that we couldn’t go out and acquire. The confidence and the exposure that a London 2012 licence gives you is phenomenal.

"Once we’ve successfully operated on the kind of level that Locog demands, I don’t think there’s any license in the world that we couldn’t go out and acquire"

 

What are the challenges of holding a London 2012 licence?

One of major challenges of signing a London 2012 contract is that it’s about the Olympic brand, it’s not about Hornby. You have no marketing rights by association at all. So, for example, you can’t plaster your brand on adverts in the consumer press. We’ve worked really hard to cost-effectively communicate what we are doing and be able to have our company talked about on the back of product, that’s the only thing you can talk about. You can’t show your logo or anything else.

One of my tasks is to make sure that everybody who could is interested in what we’re doing at the Olympics, knows what we’ve achieved. We’re now looking at things like the Commonwealth Games, Rugby World Cup, relationships with football clubs etc. We’ve done a brilliant job already in terms of what we’ve made, we’ve yet to complete that job in terms of what we’ve sold but not many people know what we’re capable of doing so hopefully this will give us the springboard to do more.

Will this experience accelerate Hornby’s licence acquisition in the future?

Absolutely. We’ve gone after big brands in our own industry that we would’ve never have gotten before because previously the response has always been, ‘Hornby? Well you make trains don’t you?’

Once you’ve established a capability and you’ve proven your expertise in doing something and doing it well, you don’t have to try so hard to convince anybody. We’re looking at all the opportunities that this has brought to us so that we maintain the status that we’ve got out there, even though it might be with something. The learning process and the information that we’ve been able to glean is huge.

Many London 2012 sponsors report that, after agreeing a deal with Locog, their workforce experiences a morale boost. Has that been the case at Hornby?

Oh yeah, definitely. Sometimes I think it’s just me but I get emails from other members of staff all the time saying, ‘Have you thought about this account’ or pictures of some of our products in Tescos – that doesn’t happen with any other of our products.

This experience has really opened my eyes to just how valuable what we already have is. Hornby are like the best kept secret in the world, we’ve achieved some amazing things in the pas but we’ve never really told anybody. There are only 500 companies in the world that have a contract with London 2012 for procurement of anything. To be one of those, it’s something that we should be really proud.

How will the overall success of the partnership be measured?

Our success will be determined by what we’ve got left, not what we sell. My job is to make sure our products are available everywhere and to everyone. Time will tell.

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