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Toy companies tighten screws after recalls. |
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After the recent string of embarrassing toy recalls by Mattel Inc. (MAT), entertainment companies and major retailers are taking extra precautions to protect their brand names from the negative fallout. |
Wal-Mart Stores Inc. (WMT) says it's asking its suppliers to resubmit documentation on toy tests, and has hired independent laboratories to perform complementary tests. Meanwhile, Viacom Inc.'s (VIA) Nickelodeon cable channel said it's developing a third-party review system as an extra safety measure after toys based on its characters were among the millions of toys recalled by Mattel.
The swift moves come as the toy industry gears up for the crucial holiday season, when it reaps the vast majority of its sales and profits. At risk is the confidence of shoppers like 27-year-old Kerry Ludlam of Decatur, Ga., who will be shopping for her four-month-old daughter. At the moment, Ludlam says she'll still consider purchasing toys from Mattel and Fisher Price despite recent headlines. But before she buys, Ludlam says she's "going to look twice," checking first online for any concerns that have surfaced.
"My daughter's at that stage where she's putting everything in her mouth, and she doesn't really understand 'No,'" Ludlam says.
Entertainment companies have said little publicly about the recent toy recalls. But all of them are "looking harder at what kinds of standards they need to have in place" for the toys they license to manufacturers, as well as potential lapses in existing contracts, says Martin Brochstein, executive editor of The Licensing Letter, a trade publication.
"Everybody is concerned that their brand is going to be harmed in some way," Brochstein says.
Mattel and the Consumer Product Safety Commission issued its third recall Wednesday involving around 775,000 toys believed to contain unsafe levels of lead paint. This time most of the affected toys, produced by Chinese vendors, involve accessories associated with the company's flagship Barbie brand.
Gary Foster, a spokesman for Disney Consumer Products, said the company's safety products division requires that all of its licensees test products and submit the results before the products are shipped.
Nonetheless, he said Disney was "currently looking at ways to increase the enforcement of this, and to have a higher level of confidence that these products will be (in compliance) with all safety laws."
Last month, Mattel recalled a quarter-million "Sarge" toy cars from Walt Disney's (DIS) movie "Cars" that are believed to contain dangerous levels of lead paint.
Toy recalls, as with manufacturing, are largely out of the control of licensors like Disney, forcing them to largely trust their brands with the manufacturers they do business with, says Brochstein. "This strikes at the heart of any licensing relationship," he says. "You have a level of trust that everyone is doing what they are supposed to do."
For instance, when toy maker RC2 Corp. (RCRC) voluntarily recalled more than one million wooden railroad toys and set parts from its Thomas & Friends Wooden Railway line in June "for the public at large, it was all about Thomas & Friends. Few people knew who RC2" was, Brochstein said. He added that since Mattel is a formidable brand, entertainment properties are largely secondary players in this situation.
Meanwhile, Wal-Mart said it will focus its safety measures first on toys for children up to the age of three, including toys with surface coatings or magnets that could end up in a child's mouth.
"Wal-Mart will ensure the results of its tests are shared with the whole industry - retailers and manufacturers," the company said in a written statement.
Wal-Mart added that it "stands ready to help leaders in China" develop new testing procedures, and that it will work with manufacturers worldwide "on finding new toy products for its shelves and providing parents with greater choice."
Mattel shares recently traded down 3 cents to $21.94 on volume of 5.2 million compared with average daily volume of 3.9 million.
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