Dive Brief:

• The CEOs of Hasbro and Mattel credited their supply chain teams for minimizing the effects of ocean shipping disruptions, like port congestion, high rates and container shortages during Q2 2021.
• "We are able through an immense amount of work on behalf of the supply chain team to add ports, to add tactics and strategies, to add new ocean carriers" and in doing so, continue to drive growth for the company, Hasbro CEO Brian Goldner said on the company's Q2 earnings call Thursday.
• Mattel CEO Ynon Kreiz said Friday "our supply chain is a competitive advantage." Asked to clarify how, Kreiz noted the team's work in the past years to close plants, cut SKUs, work with third-party suppliers, and "overall turned our supply chain to be a real driver" to the company's top line.

Dive Insight:

Toymakers have faced an array of supply chain challenges in 2021, as their reliance on imports from Asia left both Mattel and Hasbro vulnerable to disruptions in ocean shipping.

"We're seeing [ocean shipping] costs are over four times higher than what we had been experiencing," Hasbro CFO Deb Thomas said on last week's earnings call.

For Mattel, the increased costs were a function of a series of disruptions in the ocean market, CFO Anthony DiSilvestro said Friday.

"During the quarter, we did experience supply chain disruptions, including shipping container shortages that were exacerbated by a temporary port shutdown in China and temporary plant shutdowns in Asia related to COVID-19 restrictions," DiSilvestro said.

Executives at both Hasbro and Mattel said they expect shipping costs to remain elevated in the second half of this year. And supply chain managers at large seem to agree with the assessment. After all, the challenges in freight transportation have not yet eased, and new strains of COVID-19 could cause further economic shocks.

Hasbro did not disclose how much supply chain disruptions cost the company in the first half of 2021. At Mattel, the challenges "did not have a material impact on our results," DiSilvestro said.

Mattel's ocean imports were up 26% YoY in Q1 and 20% compared to the same period in 2019. Hasbro's imports rose 10% YoY and 2% compared to 2019, according to figures from S&P Global Market Intelligence's Panjiva.

Both companies said they would raise prices in the second half of the year to counter the logistics costs.

"Early on we saw a necessity to raise prices as we saw the steps the team was needing to take in supply chain and logistics in order to execute our year," Goldner said.

And Mattel's executives noted they expected costs to continue increasing in the next few months.

"We now expect a slightly higher negative impact from cost inflation than we previously guided, and that's due to ocean freight," Mattel COO Richard Dickson said Friday. "And also, we expect that inflation to impact our second half results much more than the first half."

DiSilvestro, as CFO, said raising prices should help partly offset the increase in costs.

During the previous quarter's earnings call in April, DiSilvestor had put the challenge of the ocean freight cost increases in context for investors. Resins and ocean transport together represent just 15% of cost of goods sold for Mattel, but in the first quarter, each product faced a 35% inflation rate. (Inflation in the U.S. was 3.1% in April.)

A quarter later, resins and ocean transport continued to be a challenge. But it was the resilience to these challenges that led Kreiz to call Mattel's supply chain a competitive advantage.

"In spite of the disruption in the second quarter, and there were disruptions, we had no material impact on our results," Kreiz said. "And this is because of our capabilities, our scale, and how we run our supply chain."

"On the whole, we view supply chain as a business partner," Kreiz added. "It's not a cost center, it's not a service center. It's a business partner to the rest of the organization and is really making a difference and a positive impact on the overall enterprise."