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For Lego, rising wealth means more play - and business

Lego toys are seen on display in the window of Hamleys toy shop in London, December 2, 2011. REUTERS/Luke MacGregor
Lego toys are seen on display in the window of Hamleys toy shop in London, December 2, 2011. REUTERS/Luke MacGregor

By Eveline Danubrata and Laura Philomin

SINGAPORE (Reuters) - The boss of Lego Group carries two business cards - one the usual kind and the other a Lego mini-figure in his likeness, complete with beard and glasses, with contact details on the back.

That kind of playful thinking has helped the Danish company become the world's second-biggest toy maker as it clicks with fast-growing Asia and builds on its popular plastic bricks with video games and theme parks.

"We are seeing a society where the wealthier it becomes, the more room there is for what I call the business of play," Chief Executive Jørgen Vig Knudstorp told Reuters in Singapore.

"In that I will include the role of play in education, the role of play in theme parks and family entertainment, the role of play in adult age."

Video games are big business and Lego Group has "a major role through licensing arrangements" but the digital realm is a complement, not a replacement, for physical play, he said.

"You can say that the fundamental patterns of play are unchanged through generations but the technology and materials are changing," said Knudstorp, who was a management consultant at McKinsey and Co before he joined Lego in 2001 and was named chief executive in 2004.

Lego has a partnership with video game developer TT Games that has resulted in titles such as Lego Star Wars and Lego Batman. Another game, Life of George, combines building physical bricks with apps that can be downloaded on an iPhone.

Lego, whose name is derived from the Danish words "leg godt" meaning "play well", started 81 years ago in the workshop of carpenter Ole Kirk Kristiansen and is now owned by the founder's grandson and his children.

Rides, rollercoasters and replicas of famous landmarks are also part of the strategy to target families.

Kirkbi A/S, the Kristiansen family's investment company, owns about 36 percent of British-based Merlin Entertainments Group, which runs six Legoland theme parks around the world.

Last year, it opened its first Asian theme park in southern Malaysia, a short drive from Singapore. An onsite hotel is nearing completion and is due to open next year.

Lego is banking on people like Vanessa Lee, a Singaporean mother of four children aged 8 to 13 who enjoy playing with sets such as Ninjago and Bionicle.

"It's quite expensive but I don't mind buying it for them," she said. "It takes quite some time to build the sets, especially the big ones, so it helps train their patience."

Driven by China, South Korea and Japan, Lego's revenues were 10.4 billion Danish crowns ($1.9 billion) in the first half of this year - a 13 percent jump from the same period of 2012.

Lego, which has overtaken Hasbro Inc and is now behind only Barbie maker Mattel Inc in terms of sales, also boosted its share of the global toy market to about 8.8 percent from 8.6 percent at the end of 2012.

The company plans to build and operate its own factory in the Chinese city of Jiaxing, near Shanghai, that will supply up to 80 percent of the Lego products sold in Asia by the time it is fully operational in 2017.

"We don't have plans to open other factories in Asia because this factory will be able to handle our volume for the many next years of expansion in the Asia region," Knudstorp said.

($1=5.4887 Danish crowns)

(Editing by John O'Callaghan and Robert Birsel)

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