Lego CEO plots course for 100% sustainable materials by 2032

Lego may be bigger than ever as the construction toy brand was able to gain market share in the toy category in 2023, a somewhat tumultuous year for the industry. The Lego Group CEO Niels B. Christiansen sits down with Yahoo Finance Executive Editor Brian Sozzi to talk about a slew of topics, from store expansions and the toy brand's presence in China to sustainability innovations in its trademark Lego bricks.

"For us, opening stores, getting closer to consumers, and really allow them [consumers] to get into stores is really working well. We have as many people in stores now, as much traffic as we had prior to the pandemic," Christiansen explains. "Yes, people went online, but they clearly come back. If you're in any city, you'll often see a cue outside the Lego store because that experience is just a nice one."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

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BRIAN SOZZI: All right, LEGO Group out with its latest earnings. Let's get right to a LEGO Group CEO, Niels B. Christiansen. Niels, great to see you. Thanks for always making time for Yahoo Finance. So what caught my attention was in a down year for toys, LEGO is out here saying it gained market share and it grew sales. How did you make it happen?

NIELS B. CHRISTIANSEN: Well, it's been-- we're very satisfied with that, of course. And really, I think it is showing the relevance and the coolness we have. The brand stands super, super strong with kids and consumers all over. We have a fantastic portfolio, 780 products. Of which half are actually new. And they've been resonating really, really well.

So you're right, it was probably the most negative market we've seen for 15 years. But we grew and we took market share, as we've done in a couple of years, but really took market share throughout '23. And was happy with the result.

BRIAN SOZZI: There's been a lot of pressure in the toy industry over the past 12 months. A lot of your competitors, they're writing down assets, warning on sales and profits. But again, your quarter really-- your year, actually, really stood out. When you diagnose the state of the toy industry-- and let's focus on the US-- what's wrong right now in the toy industry? And when does it correct?

NIELS B. CHRISTIANSEN: Now, I'm not sure that's so much wrong in the sense that-- there's also been really good years in the toy industry. And every time we look over a three- or five-year period, it's actually quite a stable toy industry. So in that sense, I'm also expecting that it will actually-- it will better as an industry. Again, that's what I'm anticipating.

I think we, as players, in the industry also have a role to play by bringing innovation, bringing exciting things out there that kids really like, and bringing these innovative and new products. I think we had a good chunk of those in our portfolio and I think it works. So hopefully, between all players, we can lift that level again. And we can be even more competitive, even more creative going forward.

BRIAN SOZZI: Is it that kids are just playing more with digital experiences?

NIELS B. CHRISTIANSEN: Now, I think that tendency is not a new one, that kids actually at a certain age start to play more and more digital. I think-- I mean, we are active digitally. We launched LEGO Fortnite last year. We have a lot of kids and also some adults actually playing our games. We are relevant there. So I don't think we can kind of blame that. I think it's just natural.

But we need to be relevant and cool where they are. So if they're playing digitally, we want to be there. We want to get them into the LEGO universe also in the digital side. And guess what, when they come to Christmas, we are on the wish list or they're diving into some of our digital experiences. So I wouldn't say that's the problem. I think that's something for us to embrace and really deliver innovative experiences around.

BRIAN SOZZI: Last time I talked to you, you mentioned that you would finish-- I guess last year-- just passed the 1,000 store mark. It looks like you did, 1,031 stores. That's-- I really do think a lot of folks are surprised by how many stores you have open around the world. Over the next 12 months, how many more will you open?

NIELS B. CHRISTIANSEN: Add at least another 100. And it's interesting because I guess, behind your question is also, yeah, aren't there people also closing stores for us? Opening stores, getting closer to consumers, and really allow them to get into stores is working really well. We have as many people in stores now, as much traffic as we had prior to the pandemic.

So in that sense, yes, people went online, but they clearly come back. And if you're in any city, you will often see a queue outside the LEGO store, because that experience is just a nice one. And that's how we look at it.

BRIAN SOZZI: Within that 100, how many will be in China? Because you have made a big push in the China-- but the China market itself, not just for LEGO, I mean for retail more broadly has been pretty soft.

NIELS B. CHRISTIANSEN: Yeah, no, we're still opening in China, but we're opening at a lower pace. So my reckon would be 40 of those 100 or 100-some would be in China. So still a reasonably good chunk. It's still important in China to get to the lower tier cities. By the way, you still have one, or two, or three million people in them to open stores to build the brand. But a good chunk now, more than half will be outside China in bigger cities and in Americas and Europe.

BRIAN SOZZI: And I know a big focus as well for the company is on sustainability. Really a big investment over the past 12 months in sustainability. When it comes to making a LEGO brick, why is it hard to make it out of more sustainable materials? To the layperson, explain this to us. How important is this for parents out there?

NIELS B. CHRISTIANSEN: Yeah, it's super important for parents, it's super important for kids. We probably get 1,000 letters a year with kids saying, LEGO, why don't you just make sure you make those bricks out of sustainable or renewable materials? And we're working it really, really hard.

We've tested 600 materials. And there are no materials there that you can just take and you can plug it in, and then it solves. So what we're doing now is really pushing forward on what we call certified mass balance materials. So materials that are a combination of still some fossil fuel-based materials in them, but a big chunk of it actually being recycled or renewable, sustainable materials.

And already last year, we moved to acquiring 18% of our resin or our plastic material being certified mass balance. So you can say, last year on average, 12% of the LEGO brick was actually made on recycled or renewable materials. That's 12% here in 2023. That number is going up in '24. And we're making a push this way to also drive, we believe, and accelerate the industry to provide the right type of materials.

Our ambition is that by 2032, we will be entirely on sustainably based materials. Now they're not here today. When we make surveys, it's like 96% of bricks are kept in play, and families are given unto families. So, very few bricks actually have the risk of going into waste.

So, of course, we need to do something about those with our Replay programs. But it's super important that we make the other 96% or the 100% out of sustainable materials. And that's a big, big quest for us. And it's quite expensive at this point in time.

BRIAN SOZZI: Lastly, top of mind, at least today is a lot of focus on the Oscars. And "Barbie" just blew up. But because of that "Barbie" movie, really, I don't think people realize it was the "LEGO Movie" that set the groundwork or laid that foundation for a movie like "Barbie" to have success. When is that next "LEGO Movie?"

NIELS B. CHRISTIANSEN: Yeah, I cannot give you the exact date of the next "LEGO Movie," but it's definitely coming. It was good to see it was a great success, I think, for Mattel that movie. And good to see innovation also in our industry here. So I think that's all positive. And you're probably right. I think we paved the way for those movies back then, and we're definitely going to also look more into that area. It's back to staying relevant and cool as a brand. And we'll do everything we can to do that.