The World's Biggest Toy Seller Is a Burger Chain: McDonald's

Most people who buy Happy Meals probably don't know this. What kind of business lies behind it?

If you have been to the Super Brand Mall in Shanghai's Pudong district lately, you may have noticed a themed exhibition called "Toy Factory of Wonders."

McDonald's gathered 2,530 toys from around the world, every one of them a toy it once sold. If they give you a jolt of delight, they may well bring back a piece of your childhood too.

McDonald's, which is working hard to turn around both its image and its results, hopes those memories will turn into some emotional spending.

Counted by sheer number, McDonald's, the burger seller, is in fact the world's largest toy distributor. The first to reach this conclusion were QSR Magazine and The Business of Food: Encyclopedia of the Food and Drink Industries, by Ken Albala and Gary Allen. According to Nutrition Nibbies, McDonald's sends out 1.5 billion toys a year through its 35,000 restaurants worldwide.

How big is 1.5 billion? Take the 2014 financial reports of the two other big toy sellers, Toys "R" Us and Walmart: to ship that many toys, they would have to keep their average toy price to US$8.26 and US$14.28 respectively. At today's toy prices, that is almost impossible.

"Little one, would you like a new toy?" Most Chinese born in the 1980s probably heard this temptation from a McDonald's cashier as children, then stared at the season's toys in the glass cabinet the cashier pointed to while tugging at their mother's sleeve.

Of course, to get a toy you had to order a Happy Meal. For a long time before 2001, the toy came free with it.

1. In 1979, toys joined the Happy Meal, and McDonald's became one of children's favorite restaurants

At least two events led to the birth of the Happy Meal, and both involve Bob Bernstein, founder of Bernstein-Rein Advertising, the agency that worked for McDonald's for many years.

In the mid-1970s, Bob heard about a special menu called "Menu Ronald," created by Yolanda Fernández de Cofiño and her husband, who ran McDonald's in Guatemala. It offered a hamburger, a small ice cream and a small fries, and was aimed mainly at mothers who were struggling over what to feed their children.

The portions looked right, but they didn't seem enough to excite children. When Bob noticed the paper box his son used for breakfast, he thought: why not put everything in one box and let children open it like a present?

That was the earliest form of the Happy Meal. Two years later, a free toy was added to the box. Now complete, the Happy Meal became an important business for McDonald's.

In Fast Food Nation: The Dark Side of the All-American Meal, Eric Schlosser wrote that the heart of American fast food is catching customers young, and McDonald's toys follow that logic. Thanks to the toys, McDonald's became one of American children's favorite restaurants.

A toy that comes with a meal is far more of a surprise than one bought in a shop. And while the menu barely changes, the toys change almost every month, which gives children a ready excuse to have another Happy Meal.

According to a 2009 report by Technomic, 37% of children named McDonald's as their first choice for fast food. Today, Happy Meals bring in about 20% of McDonald's annual revenue.

2. For toys, McDonald's is a first-class sales channel

McDonald's now has 35,000 restaurants in 119 countries. About 62 million people walk in every day, more than the population of the United Kingdom. It sells 75 burgers a second and feeds 68 million people. Its annual revenue of about US$27 billion would make it the world's 90th-largest economy.

This vast network takes McDonald's deep into much of the world, and its restaurants work like a ready-made distribution channel, restocking toys two to three times a week.

In 2008, Disney, a long-time McDonald's partner, announced it would not renew their agreement, saying that a brand that wanted families to love it had to keep its distance from fast food. Until then, toys based on Disney's big franchises, from Mickey Mouse, Bambi and 101 Dalmatians to Finding Nemo and The Lion King, regularly made McDonald's lists of best toys.

101 Dalmatians toys released by McDonald's and Disney in the 1990s

After Disney left, the studios that kept working with McDonald's included DreamWorks, Fox, Universal, Sony and Warner Bros. So Minions, Kung Fu Panda, Shrek, Madagascar and The Peanuts Movie naturally joined McDonald's toy line-up as well.

Tie-ins with films have long been a standard part of McDonald's toy marketing.

As early as 1979, the first character toys in the Happy Meal came from Paramount Pictures' Star Trek: The Motion Picture. The film was a hit, and people were happy to come to McDonald's and spend money to make the excitement last.

Because a film plays in cinemas for only a limited time, McDonald's tie-in toys also became part of the studios' own marketing. This year's Minions boasted of "the biggest and most comprehensive promotion ever." So we saw "Minion Yellow," a new color issued by the color authority Pantone; Amazon delivery boxes carrying the Minions' unmistakable branding; an NBA trailer; a British Vogue cover; and, of course, McDonald's Minions toys.

A set of 12 Minions toys released in 2015

McDonald's has also worked with Mattel, Lego, Hasbro and every other toy giant you can think of. The clever part is that

it can borrow a brand's classic toys with ease, without bearing the risk that they go out of fashion.

In 2012, the Happy Meal toys were Mattel's Barbie dolls

Classic cartoons are another major theme of McDonald's toys. According to McDonald's China, its five best-selling toys in China are, besides the Minions, Hello Kitty, Chibi Maruko-chan, Doraemon and SpongeBob SquarePants. All are classic characters, so they can come back again and again whatever the timing, and they also appeal to nostalgic adults.

Ali, a cartoon fox, is so far the only Chinese-created character McDonald's has worked with.

At the end of 2014, McDonald's released four limited-edition Ali key pouches. McDonald's China explained that it chose Ali because, as one of the most established licensed brands in China, Ali had an experienced team and strong merchandise sales, and fit McDonald's brand image. Even so, the Ali key pouch was only merchandise: you got one by paying an extra ¥18 on top of any purchase in the restaurant. So it doesn't count as a McDonald's toy in our sense.

Becoming a McDonald's toy is a far more complicated process. Eighteen months before a toy goes on sale, McDonald's global toy research lab draws up at least 30 themes, based on suggestions from long-term partners and toy-trend data from market research firms, and sends them to McDonald's markets around the world to choose from. Once the markets have decided, the themes go into production at Creata and TMS, the toy makers that have worked with McDonald's since 1983.

Toy companies, film themes, McDonald's own characters (Ronald McDonald, Birdie the Early Bird, the Hamburglar, Grimace) and classic cartoons have all, without exception, become McDonald's toys. The only thing McDonald's explicitly refuses is violent or gory characters.

3. Among all these toys, two became runaway hits

In 2000, McDonald's Singapore sold a matching pair of figures, Hello Kitty and her boyfriend Daniel, with its meals under the name "Hello Kitty & Dear Daniel Millennium Love." Unlike earlier palm-sized toys, these Hello Kitty figures were about the size of a regular toy, and the full set of eight wore wedding outfits from across Asia, a rare design. Soon after they went on sale, they proved so popular that the scramble to buy them became a public safety incident in which seven people were hurt.

Hello Kitty & Dear Daniel Millennium Love

This year, to mark the 50th anniversary of Singapore's independence, McDonald's released six more limited-edition Hello Kitty figures, and the online store showed "all products sold out" in under five minutes.

McDonald's has also turned an unknown toy into a star: the plush Teenie Beanies.

In 1996, Happy Meals, which normally sold 10 million a week, sold 100 million in a single week. Many adults joined the children buying them, and the toys in the box were Teenie Beanies, plush toys made by the American company Ty.

Teenie Beanies were a smaller McDonald's edition of Ty's flagship toy, Beanie Babies. Unlike ordinary stuffed toys filled with cotton, cloth or synthetic fiber, Beanie Babies are filled mainly with small PVC pellets, so you could also think of them as animal-shaped beanbags.

With McDonald's help, Teenie Beanies sales soared, and by the end of 1996 collecting them had become a craze. They have since returned to McDonald's six times, in 1998, 1999, 2000, 2004, 2009 and 2014. In almost every ranking of McDonald's toy sales, Teenie Beanies come first.

Teenie Beanies

Strictly speaking, McDonald's toys are simple toys. Most are small figures that offer little play, or small cars, stamps and the like that do little,

but in the end McDonald's toys have to draw customers in by being fun, and that takes more variety.

4. McDonald's toys keep up with, and even lead, trends in the toy industry

According to NPD Group, the biggest trend in the toy industry today is the shift from plastic toys to electronic ones. As early as 1998, McDonald's released the electronic pets that were all the rage then. Starting in 2003, it teamed up with the game company Sega for two years running to release 12 handheld games, including ones from the Sonic series.

Six handheld games released with Sega in 2003

In November 2013, McDonald's tried offering e-books in the United States, inviting people to log on to HappyMeal.com for monthly updates. The plan was dropped within six months. In May 2014, McDonald's UK tried again, teaming up with the Canadian e-book company Kobo to put children's e-books in Happy Meals. The first title was from Enid Blyton's "Secret Seven" series.

"If McDonald's hands out e-books with its meals, it will have given away 15 million books by the end of the year, making it the country's largest distributor of children's books," TIME magazine said of the experiment. "Kids today expect things to be digital, so we launched e-books," said Alistair Macrow, chief marketing officer of McDonald's UK.

The trend toward customization and interactivity is also reaching McDonald's. In 2013, its head of IT, Mark Fabes, said it would start a 3D-printed toy program so that staff could make toys to customers' wishes.

This year, McDonald's gave its Minions toys movement and sound. But an American, Bradley Merten, later complained to the media that the Minion in his Happy Meal seemed to say the curse "What the." McDonald's explained that Minionese is a random mix of languages from around the world, means nothing specific and cannot be translated, and that any resemblance to English was pure coincidence. The episode caused McDonald's some trouble, but it also showed how much influence its toys have.

Over 35 years, McDonald's has used toys to build a brand image unlike any other fast-food chain's, to the point that some people feel tied to McDonald's by memories of growing up. That is probably also why so many people sigh over McDonald's poor state today. Toys played a large part in all of this.

For McDonald's, and for its customers, they may be far more than toys. But the reverse is also true: winning back young customers and making the brand fashionable again is no longer something toys alone can do.

Graphics by Lin Yuyao

Images in this article come from:

Nintendolife, YouTube, YouTube, reelgirl, gumtree, popculture, YouTube, Consumerist, brandedinthe80s