Hasbro, Inc. History

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Company History:

Truly successful toy companies do not just make toys; they manufacture popular culture. Hasbro, Inc., which is the second-largest toymaker in the world, behind only Mattel Inc., certainly fits that description. From America's Action Hero to a plastic anthropomorphized potato to vehicles that transform into robots to the largest bird in the world, Hasbro toys are instantly recognized by millions of Americans. Hasbro makes G.I. Joe, Mr. Potato Head, and Transformers, and owns licenses for Sesame Street characters. Thanks to numerous acquisitions in the 1980s and 1990s, it also makes Playskool and Romper Room preschool toys, Tonka trucks, Kenner's Nerf toys, and Cabbage Patch Kids (by way of Coleco); and has become dominant in the area of board games and puzzles through its ownership of Milton Bradley (maker of Scrabble and Parcheesi) and Parker Brothers (maker of Monopoly).

Early History

Hasbro traces its origin to an enterprise founded in Providence, Rhode Island, in 1923 by Henry, Hilal, and Herman Hassenfeld, brothers who had emigrated to the United States from Poland. The Hassenfeld brothers engaged in the textile remnant business, selling cloth leftovers. By the mid-1920s they were using them to make hat liners and pencil-box covers. Soon, with eight employees--all family members--they began making the boxes themselves, after realizing their popularity. In 1926 the company incorporated under the name Hassenfeld Brothers Incorporated.

Hilal Hassenfeld became involved in other textile ventures, and Henry took control of the new company. Although a paternalistic employer, Henry Hassenfeld was also a tough and shrewd businessman. During the Great Depression--with 150 employees in 1929 and 200 employees in 1930--Hassenfeld Brothers commanded annual sales of $500,000 from sales of pencil boxes and cloth zipper pouches filled with school supplies. At that point, however, the company's pencil supplier decided to raise its prices and sell its own boxes at prices lower than Hassenfeld's. Henry Hassenfeld responded with a vow to enter the pencil business himself, and in 1935 Hassenfeld Brothers began manufacturing pencils. This product line would provide the company with a steady source of revenue for the next 45 years.

Start of Toy Manufacturing in 1930s

During the late 1930s the Hassenfeld Brothers began to manufacture toys, an extension of the company's line of school supplies. Initial offerings included medical sets for junior nurses and doctors and modeling clay. During World War II Henry's younger son, Merrill Hassenfeld, acted on a customer's suggestion to make and market a junior air-raid warden kit, which came complete with flashlights and toy gas masks.

By 1942, as demand for school supplies tapered off, the company had become primarily a toy company, although it continued its large, profitable pencil business. Hilal Hassenfeld died in 1943, at which point Henry Hassenfeld became CEO and his son, Merrill Hassenfeld, became president. Also during World War II, the company ventured into plastics, to support its toy-making, and was forced, due to labor shortages, to reduce employment to 75.

After the war Merrill Hassenfeld began marketing a girls makeup kit after seeing his four-year-old daughter play with candy as though it were lipstick and rouge. In 1952, the company introduced its still-classic Mr. Potato Head, the first toy to be advertised on television. In 1954 Hassenfeld became a major licensee for Disney characters. By 1960, revenues hit $12 million, and Hassenfeld Brothers had become one of the largest private toy companies in the nation.

Turbulent Times in the 1960s and 1970s

Henry Hassenfeld died in 1960. Merrill Hassenfeld then assumed full control of the parent company, while his older brother Harold Hassenfeld, continued to run the pencil-making operations. Merrill Hassenfeld's succession was logical given his interest and expertise in the toy business, but it also marked the beginning of an intramural rivalry between the two sides of the company; Harold Hassenfeld would come to resent the fact that the pencil business received a lower percentage of capital investment even though it was a steadier performer and accounted for a higher percentage of profits than toys.

In 1961 Hassenfeld Brothers (Canada) Ltd., now Hasbro Canada Inc., was founded. Hassenfeld Brothers seemed to defy the vagaries of the toy business in the early 1960s, when it introduced what would become one of its most famous and successful product lines. According to author Marvin Kaye in A Toy is Born, the company conceived G.I. Joe in 1963 when a licensing agent suggested a merchandise tie-in with a television program about the U.S. Marine Corps called "The Lieutenant." The company liked the idea of a military doll, but did not want to pin its fate on a TV show that might prove short-lived; so it went ahead and created its own concept, and in 1964 Hassenfeld unleashed G.I. Joe, a foot-high "action figure" with articulated joints. In its first two years, G.I. Joe brought in between $35 and $40 million and accounted for nearly two-thirds of the company's total sales.

The company changed its name to Hasbro Industries in 1968--it had sold its toys under the Hasbro trade name for some time--and went public. Only a small portion of Hasbro stock went on the open market, however; the majority stake remained in the hands of the Hassenfeld family. At the same time, Hasbro decided that it could no longer ignore the public's growing disapproval of war toys, which was fueled by disillusionment with the Vietnam War. In 1969 G.I. Joe, still the company's leading moneymaker, was repackaged in a less militaristic "adventure" motif, with a different range of accessories. Also in 1969, the company acquired Burt Claster Enterprises, the Baltimore, Maryland-based television production company responsible for the popular "Romper Room" show for preschoolers. Burt Claster Enterprises had also begun to manufacture a line of "Romper Room" toys. Nevertheless, a month-long Teamsters strike and troubles with Far Eastern suppliers hurt Hasbro in 1969, and the company posted a $1 million loss for the year.

The 1960s ended on a turbulent note for Hasbro, providing a foretaste of the decade to come. In 1970 Hasbro decided that it had to diversify, and it opened a chain of nursery schools franchised under the "Romper Room" name. The company hoped to take advantage of President Richard M. Nixon's Family Assistance Plan, which subsidized day care for working mothers. Running the preschools was a very big mistake. Merrill Hassenfeld's son, Alan Hassenfeld, told The Wall Street Journal, December 13, 1984: "We'd get phone calls saying, 'We can't find one of the kids.' The whole company would stop." Within five years Hasbro had left the day-care business. Another ill-fated diversification move was Hasbro's line of Galloping Gourmet cookware, which sought to capitalize on a contemporary television cooking show of the same name. That venture literally fell apart when termites ate salad bowls stacked in a warehouse.

In addition, two products from Hasbro's 1970 line turned into public relations disasters: Javelin Darts were declared unsafe by the government, and Hypo-Squirt, a water gun shaped like a hypodermic needle, was dubbed by the press a "junior junkie" kit. Both products were promptly removed from the market. The continuing success of "Romper Room" and its related toy line proved to be a bright spot for Hasbro, although the company came under fire from the citizens group Action for Children's Television, which accused the program of becoming an advertising vehicle for toys.

In 1974 Merrill Hassenfeld became CEO of Hasbro, while his son, Stephen D. Hassenfeld, became president. Hasbro regained its profitability but floundered once again later in the decade. Poor cash flow accounted for some of the problem, but the company's underlying mistake was casting its net too far and too wide in an effort to compensate for G.I. Joe's declining popularity. Hasbro discontinued G.I. Joe in 1975 because of the rising price of plastic, which was caused by rising crude oil prices. By 1977--the year Hasbro acquired Peanuts cartoon characters licensing rights--the company suffered $2.5 million in losses and carried a heavy debt. The financial situation became serious enough that Hasbro's bankers forced it to suspend dividend payments in early 1979. The toy division's poor performance fueled Harold Hassenfeld's resentment that the Empire Pencil subsidiary continued to receive a smaller proportion of capital spending to profits than did the toy division. The dam threatened to burst in 1979, when Merrill Hassenfeld died at age 61. Stephen Hassenfeld was chairman Merrill Hassenfeld's heir apparent, but Harold Hassenfeld refused to recognize Stephen Hassenfeld's authority.

The feud was resolved in 1980, when Hasbro spun off Empire Pencil, which had become the nation's largest pencil maker, and Harold exchanged his Hasbro shares for shares of the new company. At the same time, Stephen Hassenfeld became the toy company's CEO and chairman of the board, and dedicated himself to turning Hasbro around. Where it had once been overextended, the company slashed its product line by one-third between 1978 and 1981, while its annual number of new products was cut by one-half. Hasbro also refocused on simpler toys, such as Mr. Potato Head&mdash′oducts that were inexpensive to make, could be sold at lower prices, and had longer life cycles. This conservative philosophy precluded Hasbro from entering the hot new field of electronic games, as did the fact that it could not spare the cash to develop such toys. The decision to stay out of the market was vindicated in the early 1980s, when the electronics boom turned bust and shook out many competitors.

Perhaps the most important event in Hasbro's revival was the 1982 return of G.I. Joe. The U.S. political climate at the time made military toys popular again, and G.I. Joe was reintroduced as an antiterrorist commando, complete with a cast of comrades and exotic villains, whose personalities were sculpted with the help of Marvel Comics. Two years later, Hasbro introduced its highly successful Transformers line&mdashøy vehicles and guns that could be reconfigured into toy robots. Transformers were tied into a children's animated TV series and proved so popular that People magazine asked Stephen Hassenfeld to pose with them for a cover photo.

1980s Acquisitions

In 1983 Hasbro acquired GLENCO Infant Items, a manufacturer of infant products and the world's largest bib producer. Hasbro also sold about 37 percent of its own stock to Warner Communications in exchange for cash and Warner's struggling Knickerbocker Toy Company subsidiary, which made Raggedy Ann and Raggedy Andy dolls. The new Warner holdings did not threaten the company's autonomy, however; the shares were put into a voting trust controlled by the Hassenfeld brothers and other Hasbro executives. In 1984 Stephen Hassenfeld turned over the position of president to his brother, Alan, while remaining CEO and chairman.

In the early 1980s Hasbro was the nation's sixth-best-selling toymaker, with revenues of $225.4 million and $15.2 million in profit. Flush with newfound strength, in 1984 it acquired Milton Bradley, the nation's fifth bestselling toymaker, and second only to General Mills's Parker Brothers subsidiary in production of boardgames and puzzles. Milton Bradley had been founded by a Springfield, Massachusetts, lithographer who set up shop in 1860 and immediately turned out a popular reproduction of a portrait of presidential candidate Abraham Lincoln. Bradley's portrait, however, showed Lincoln clean-shaven, so when Lincoln grew his beard, sales fell off. Looking for a way to stay in business, Bradley invented and produced a boardgame called The Checkered Game of Life, a distant precursor of a popular Milton Bradley game, The Game of Life, which was introduced in 1960. The game's success convinced Bradley to stay in the game business. During the Civil War he produced a lightweight packet of boardgames for the amusement of Union troops. The company had incorporated in 1882.

During the late 19th century, Milton Bradley (MB) relied mostly on such favorites as chess and checkers and traditional European games. During the 20th century, however, the company designed and marketed more original games, sometimes with great success. During the Depression, a Milton Bradley financial game called Easy Money became popular. In the 1950s, Milton Bradley pioneered games with tie-ins to television shows--Concentration was an early favorite. In 1968 MB acquired Chicago-based Playskool Manufacturing, which was noted for its preschool toys. Among Milton Bradley's later successes was the "body action" classic Twister, which was published in 1971 and became a popular prop with talk show hosts for a while after Johnny Carson challenged Eva Gabor to a go-around on "The Tonight Show."

In 1984, however, Milton Bradley had found itself in an uncertain financial position after fending off a hostile takeover from British conglomerate Hanson Trust. In the wake of that failed bid, several unidentified parties bought up large blocks of MB stock, fueling speculation that another takeover attempt was imminent. Finally, in May 1984, MB agreed to be acquired by Hasbro for $360 million. MB's strength in boardgames and puzzles complemented Hasbro's plastic toys and stuffed animals. Milton Bradley's Playskool subsidiary provided a solid preschool line including classics such as Lincoln Logs and ABC blocks. The new Hasbro Bradley Incorporated immediately challenged Mattel's position as the nation's leading toymaker. In 1985 Hasbro Bradley became Hasbro, Inc.

If Hasbro's and Milton Bradley's product lines merged well, their chief executives did not. Stephen Hassenfeld became president and CEO of Hasbro Bradley, with Milton Bradley chief James Shea Jr. becoming chairman. After only a few months, however, Shea resigned. Stephen himself became chairman, with brother Alan Hassenfeld replacing him as president.

Hasbro surpassed Mattel to become the largest toy company in the world in the mid-1980s. Having done so, it then attempted to dethrone Mattel's Barbie, queen of the fashion doll market. In 1986 Hasbro introduced Jem, a fashion doll given the dual identity of business woman/record producer and purple-haired rock musician. While Jem posted strong initial sales, her popularity quickly faded and she was retired the following year. In 1988 the company brought out Maxie, a blonde doll scaled to match Barbie in size so that she could wear Barbie clothing and accessories. Maxie lasted twice as long as Jem and was discontinued in 1990.

In 1989 Hasbro acquired bankrupt rival Coleco Industries for $85 million, just four years after a Toy and Hobby World survey declared that Transformers had passed Coleco's Cabbage Patch Kids as the best-selling toy in the United States. In addition to the Cabbage Patch dolls, which had fallen from their peak of popularity during the 1985 Christmas season, Coleco also owned the rights to the classic board games Scrabble and Parcheesi. The Coleco acquisition proved to be Stephen Hassenfeld's final business triumph. In 1989, he died at age 47, having converted the relatively modest toy company that his grandfather had founded into a juggernaut at the top of its industry with 1989 sales of $1.41 billion, a huge increase over the $104 million figure of the year he took over.

1990s and Beyond

A new and more challenging era began when 41-year-old Alan Hassenfeld became chairman and CEO of Hasbro. The younger Hassenfeld continued the acquisition trend of the 1980s, as Hasbro acquired Tonka Corp. in 1991 for $486 million. With the deal, Hasbro added not only the Tonka line of toy trucks but also Tonka's Parker Brothers unit, the maker of Monopoly, and Kenner Products, which featured Batman figures and the Strawberry Shortcake doll. The Parker Brothers unit was merged into Hasbro's already strong Milton Bradley division. Hasbro took a $59 million charge in 1991 to cover costs of consolidating the Tonka acquisition and restructuring overall operations.

In the late 1980s, Alan Hassenfeld had spearheaded an effort to increase Hasbro's international sales, primarily by taking toys that failed in the U.S. market and remarketing them overseas at prices as high as four times their original prices. He had helped increase international sales from $268 million in 1985 to $433 million in 1988. So it was not surprising that as chairman he would push to increase Hasbro's international presence. He did just that in 1991, establishing operations in Greece, Hungary, and Mexico.

It was the Far East, however, which Hassenfeld saw as a critical market for Hasbro to develop. He gained two more distribution channels there in 1992 by purchasing Nomura Toys Ltd., based in Japan, and buying a majority stake in Palmyra, a Southeast Asian toy distributor. Thanks to these efforts, by 1995, Hasbro's international sales had reached $1.28 billion, which represented almost 45 percent of total sales, a significant increase over the 22 percent figure of 1985. More than 46 percent of the company's operating profit was attributable to operations outside the United States in 1995. One international setback came in 1993 when Hasbro lost out to arch-rival Mattel in a bid for J.W. Spear, a U.K.-based maker of games.

While international results were improving, Hasbro began to show some weaknesses on the domestic front. Much of the growth since 1980 had come from the company's various acquisitions, along with Hasbro's largely successful efforts to leverage the new assets it gained through the deals. Many new product development activities, on the other hand, were not as successful, with the exception of product lines developed to tie-in with the movie Jurassic Park and the popular children's television show Barney. As a result, domestic sales stagnated in the early 1990s, and actually fell from $1.67 billion in 1993 to $1.58 billion in 1995. And worldwide sales showed much slower growth as well. From 1991, the year of the Tonka acquisition, to 1995, sales increased only 33.5 percent, with half of the increase occurring in 1992 alone. To help improve the company's domestic performance, a reorganization was completed in 1994 that merged the Hasbro Toy, Playskool, Playskool Baby, Kenner, and Kid Dimension units into a new Hasbro Toy Group. Meanwhile, Mattel in 1993 acquired Fisher-Price and soon thereafter regained the number one spot in the toy industry.

Also contributing to Hasbro's challenges in the 1990s was its belated struggle to enter the market for electronic games. Eventually, in 1992, the company began development of a mass-market virtual reality game system. Although such a system was successfully developed, it was judged too expensive for the mass market and the project was abandoned in 1995, resulting in a charge of $31.1 million. In 1993, Hasbro bought a 15 percent stake in Virgin Interactive Entertainment, a producer of game software for Sega and Nintendo systems, with the intention of developing software based on Hasbro toys and games. Two years later, however, Hasbro dissolved the partnership and sold its stake.

A more promising venture began in 1995 with the establishment of Hasbro Interactive and the release of its first product that same year, a CD-ROM version of Monopoly. More than 180,000 units were sold in the first eight weeks following its release. Additional titles to be released in 1996 included Risk, Battleship, and Playskool-brand games.

In 1995, Mattel approached Hasbro about a possible merger of the two largest toy companies in the world. Negotiations took place in secret over the course of several months until the Hasbro board early in 1996 unanimously turned down a $5.2 billion merger proposal that would have given Hasbro stockholders a 73 percent premium over the then-current selling price. Hasbro officials expressed doubts that the merger could pass antitrust challenges and wanted a large upfront payment to help the company's performance during what would have likely been a lengthy antitrust review and to protect itself against the possibility that the merger would collapse. Mattel officials, on the other hand, maintained that the merger would have had little difficulty gaining approval, but backed away--and did not initiate a hostile takeover--when Hasbro waged a vigorous media campaign emphasizing the possible negative ramifications of such a mega-merger. Also clouding the deal was an ongoing Federal Trade Commission investigation into alleged exclusionary policies between toy manufacturers and toy retailers, involving most notably the Toys "R" Us chain.

Having maintained its independence, Hasbro adopted a multipronged strategy for reinvigorating its performance as the turn of the century approached. Its strategies included leveraging its well-known brands in new ways; stepping up efforts to market electronic versions of established games, particularly through the Hasbro Interactive initiative; continuing to grow internationally; and bolstering new product development primarily through media tie-ins. Already planned for 1997 were several promising film tie-in prospects, including the movies Jurassic Park 2, Batman and Robin, and Barney, as well as the theatrical rerelease of Star Wars.

Principal Subsidiaries: Hasbro Foreign Sales Corp.; Hasbro International, Inc.; Milton Bradley Company; Playskool, Inc.; Romper Room Enterprises, Inc.; Tonka Corporation; Kenner Parker (Australia) Ltd.; Milton Bradley Australia Pty. Ltd.; Tonka Corp. Pty. Ltd. (Australia); Hasbro-MB S.A. (Belgium); Hasbro Canada Inc.; Kenner Parker Canada; Kenner Products (Canada) Limited (50%); Hasbro S.A. (France); Kenner Parker Toys (France; 70%); MB France S.A.; Kenner Parker Toys International (Germany); Milton Bradley GmbH (Germany); Hasbro Bradley Far East (1987) Ltd. (Hong Kong); Kenner Parker (H.K.) Ltd. (Hong Kong); Tonka Far East Limited (Hong Kong); MB Ireland; MB Italy S.r.l.; Tonka Italia S.p.A. (Italy); Nomura Toys Ltd. (Japan); Tonka Corp. (Mexico); Kenner Parker Toys (Netherlands); MB International B.V. (Netherlands); Kenner Parker (N.Z.) Ltd. (New Zealand); Milton Bradley (N.Z.) Ltd. (New Zealand); MB Espana, S.A. (Spain); MB (Switzerland) AG; Hasbro Bradley UK Limited; Hasbro Europe UK Limited; Kenner Parker Europe (U.K.); Tonka Europe, Limited (U.K.).

Principal Operating Units: Hasbro Games Group; Hasbro Toy Group.

Further Reading:

• "America's Toy Industry: Nightmare," Economist, December 16, 1995, pp. 58, 62.
• Hammonds, Keith H., "'Has-Beens' Have Been Very Good to Hasbro," Business Week, August 5, 1991, pp. 76-77.
• "Hasbro, Inc.: Company History," Pawtucket, R.I.: Hasbro, corporate typescript, 1990.
• Jereski, Laura, "It's Kid Brother's Turn to Keep Hasbro Hot," Business Week, June 26, 1989, pp. 152, 155.
• Kaye, Marvin, A Toy is Born, New York: Stein and Day, 1973, 190 p.
• Kimelman, John, "No Babe in Toyland," Financial World, January 4, 1994, pp. 34-36.
• "Not Toying Around," Forbes, January 3, 1994, p. 131.
• Pasztor, Andy, and Joseph Pereira, "Hasbro Remains Interested in a Merger with Mattel," Wall Street Journal, January 29, 1996, pp. A3, A6.
• Pasztor, Andy, Joseph Pereira, and Steven Lipin, "Hasbro Faces New Struggles Post-Mattel, Wall Street Journal, February 5, 1996, pp. A3, A4.
• Sansweet, Stephen J., "Toy Story: Mattel Offers $5 Billion in Unsolicited Bid for Rival Hasbro," Wall Street Journal, January 25, 1996, pp. A3, A10.

Source: International Directory of Company Histories, Vol. 16. St. James Press, 1997.