Challenges & Opportunities Prepared by Rajesh Padmanabhan Managing Director-Prowl Germany

Demographics Germany– By Population Germany is not only the most populous country in Europe but also the strongest economy in European Union.

Germany Demographics Nürnberg the headquarters of European toy industry Population of 81 Million

Overview Figure 1: Baby & Children Care Market (Billion US$), Source: DT & P International

Overview Baby CareCosmeticsFoodDiaper Baby & Children Care ApparelFootwear Toys & Accessories Figure 2: Baby & Children Care Market by Segment Toys constitute 30 % of the children care market

Overview Germany is the backbone of European Economy. Middle class with high percapita income constitutes the most of the population which makes the buying power of the Nation, the highest in EU. China as in the global market are the forefront runners of toy exports into Germany. India has not been in the focus of toy importers yet in the German market

Overview Indian toy manufacturers have not been able to penetrate the European market yet. As in the global scenario, the Chinese has gone leaps and bounds in successfully establishing their sales channels in Europe. Here we intend to talk about the major challenges and also the opportunities which are ahead in successfully establising a brand in Europe.

Key Challenges &Opportunities to enter European market Gaining market faith: - Challenge First step to be sucessful in entering the EU market is to change the business model & approach. Forming a company in Germany would give a competitive edge in performing business in the region. This cushions a German company to enter deal with a foreign company under the German law with a local presence.

Key Challenges &Opportunities to enter European market EU Quality certifications - Challenge In EU, child safety is rated very highly and certifications hence it is recommended to obtain relavant certifications beforehand. Examples of popular test certifications are TÜV & OKO which is very highly rated by the public.

Key Challenges &Opportunities to enter European market EN71 - The EN71 Toy Safety Standard has been harmonised by the EC as the default standard which toys must meet. If a toy is found to be unsafe (by breaching one of the specified standards, or by a manifest risk of injury not specified in standards) then the producer (the manufacturer, or the first importer into the EU of the product unit in question) is held to be guilty of an offence under the Toys (Safety) Regulations (or equivalent EU state law). The unsafe toy is withdrawn from the EU market, with all member states' authorities being notified by means of the RAPEX alert system.

Opportunities Entering the biggest EU economy, gives opportunities for distribution to spread to the other 27 countries. Mega chains with 1000 plus outlets in Germany, and throughout Europe. Exceptional Infastructure – distribution nationalwide of product is easily achieved. The distribution network is much shorter than in India. Modern Trade is a very popular business model. Disposable income is at its highest level. High per capita income. EUR – INR Hit Year High in June 2013 of 79.85INR. All EU countries have the EUR for currency, apart from Great Britain. Consumer buys on quality basis of the product. Origin is not a main constrain

Key Challenges to enter European market CE Marking. The letters "CE" are the abbreviation of French phrase "Conformité Européene" which literally means "European Conformity". CE Marking on a product is a manufacturer's declaration that the product complies with the essential requirements of the relevant European health, safety and environmental protection legislation, in practice by many of the so- called Product Directives.

Key Challenges to enter European market CE Marking on a product indicates to governmental officials that the product may be legally placed on the market in their country. CE Marking on a product ensures the free movement of the product within the EFTA & European Union (EU) single market (total 28 countries), and CE Marking on a product permits the withdrawal of the non-conforming products by customs and enforcement/vigilance authorities. Along with more directives' becoming effective, more and more products are required to bear the CE Marking for gaining access to the EFTA & European Union market. Many non-EU exporters are still unaware of or unsure about this fact and its impact on their business.

The way forward- Recommended model for Indian toy manufacturers Consultant Company Incorporation In Europe Obtain certifications

Conclusion Europe being a total untapped market for the Indian toy manufacturers, offering high quality products which meets the required standards along with proper planing & implementation strategies, the potential to succeed is very high.