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The Australian: Toy Giant

MANNY AND THE BEANSTALK

By RICKY FRENCH
FROM THE WEEKEND AUSTRALIAN MAGAZINE
July 29th, 2017

Make them bright. Give them a name, a face and a grin. Give them a soul. A moulded blob of plastic broccoli with two eyes and a smiley mouth. A milkshake cup with heart-shaped lips. A pizza base with a tomato paste quiff. When is a frying pan not a frying pan? When it’s a one-inch-tall Shopkin, the tiny, anthropomorphic, collectable toy sensation that has propelled a Melbourne family-run toy company to phenomenal heights. With more than 900 million Shopkins finding their way into children’s bedrooms in more than 100 countries, it’s all there in the tagline: Once you shop … you can’t stop!

Manny Stul was going to stop. He really shouldn’t be here, sitting at a desk at Moose Toys next to Bagel Billy, Cindy Bon and Edgar Eggcup, presiding over one of the most successful and extraordinary Australian companies you’ve never heard of. He shouldn’t have seen Moose survive what happened 10 years ago. No toy company should survive a crisis where the words “children” and “date-rape drug” are used in the same sentence. At 68 he shouldn’t be gliding across the floor without making a sound; shouldn’t move light as air, with sportsman’s grace and businessman’s intent. A family-run Melbourne business doesn’t crack the United States, the world’s biggest toy market. The concept is absurd.

Moose Toys finished 2016 as the fifth-biggest toy manufacturer in both Australia and the US, behind Lego, Mattel, Hasbro and Spin Master, ­having sold more than half a billion dollars worth of toys in that financial year. Shopkins was the top-ranked toy in the US in 2015, both in terms of units sold and monetary value, beating Barbie, Lego and My Little Pony. It won US Girls’ Toy of the Year in 2015 and 2016. Since Stul took over in 2000 he’s grown the business by 8500 per cent with no shareholder pressure and no borrowings. Last year he became the first Australian to win the Ernst & Young World Entrepreneur of the Year award, beating nominees from 55 other countries.

He wanted to win. He’s competitive but hates the limelight; doesn’t like talking about himself or his extraordinary life. He was born in a refugee camp in Germany, to parents who had suffered unspeakable tragedy. Now the boy who started life with nothing is one of the richest people in ­Australia, debuting on the Forbes Rich List this year with an estimated worth of $1.42 ­billion. It’s a list he says he wants no part of and a ­figure that makes him laugh.

But if Stul’s actual wealth is the elephant in the room it’s certainly a gentle beast. He used his speech at the Entrepreneur of the Year awards to call upon business leaders and those with money to give back to those less fortunate. He gives 10 per cent of his money to charity through the Moose Foundation and via substantial personal donations (always anonymously), making him one of ­Australia’s biggest philanthropists. He arrived at the 10 per cent figure through the teachings of the recurring guiding forces in his life: the ones he calls the enlightened, or spiritual masters. “It’s of greater benefit to give anonymously, for your own spiritual growth,” he says. “Once you have your name up in lights your ego gets involved. If you do something good but you’re doing it for your own feeling of importance, you’re in what’s called a golden cage.” His hero is Andrew Carnegie, the 19th-century US steel baron and one of the richest men in history, who gave away nearly all his money to charity. “He was very righteous in his belief that if you were smart enough to make all this money you had a moral obligation to distribute it back to the people. You’re a caretaker.”

But home comforts are not neglected either, with Stul buying a $25 million Gold Coast beach house last year (“a place where my family, friends are I can enjoy downtime and the sunny weather”) to complement his home in Melbourne’s Caulfield, which includes a personal gym that “leaves people gobsmacked”, and two organic farms.

Stul’s office at Moose’s extraordinary HQ in Cheltenham, southeast Melbourne, is modest and decorated with toys and awards. He takes a walk past the massive fairytale beanstalk that curls its way from reception up to the first floor where a tree house nestles in its leaves. Past the restored fuselage of the DC-3 plane (a throwback to his early love for Biggles), where Skype calls to Hong Kong, Europe and the US are made from the cockpit. Past the gym, the vegie garden, the yoga floor, the conference room where guest speakers impart their knowledge and ­inspiration. You’re never too old or too good to learn new tricks. Stul doesn’t stalk the corridors like a feared boss; no one puts on an act when he passes. There’s a casual creativeness that wafts through the building and puts everyone at ease.

He springs his thin, 65kg frame out of his chair and slips over to his computer, hand instinctively gripping the mouse the moment his backside hits the chair, eyes already focused. It’s the way he is. Instinctive. Decisive. Heavy eyelids and a slight stoop are the only sign of the years of work he’s put in to get to where he is now.

He knows his own mind; he’s spent decades turning it inside out, digging as deep as any man can go. He talks about living a righteous life, but acknowledges talk is cheap. “Your behaviour is the best exemplifier of who you are. Go through any of the enlightened masters and you’ll see there’s a way to live, and a way not to live.”

Family business: Paul Solomon, Jacqui Tobias and Manny Stul.
Family business: Paul Solomon, Jacqui Tobias and Manny Stul.

That he got to live at all was a miracle. He was a golden child. Not in the sense of favouritism but in survival. His parents, Charlie and Dora, were Polish Jews during the worst time in history to be Polish Jews. Exactly what they went through was never talked about afterwards; it was too horrendous. Each had a previous spouse and children, all of whom were killed when Germany invaded. Charlie and Dora never discussed their wartime lives with their son; to this day he doesn’t know how many half-siblings he had or how they died. Charlie fought with the Polish army, then the ­Russian army when Germany turned on Russia. Stul says family research has shown it was possible his father may have been part of the Polish resistance group portrayed in the 2008 film Defiance. “My father was religious before the war but became an atheist afterwards. He said that if there was a god he didn’t believe he would have allowed to happen what he saw happen.”

Stul was born in 1949 in a displaced persons camp near Munich, a new start for a mother and father who had lost everything. The family was accepted to Australia in 1950, and lived in a converted army camp in Northam, Western Australia, for a couple of years before moving to Perth.

Stul grew up with Yiddish as his first language but today he sounds as Australian as John Howard or Paul Hogan. “My parents were very warm, very family-focused, because of their history,” he says. “They were very protective and nurturing of me. I was the child that neither expected to have.” He never had toys of his own. It wasn’t through ­poverty; Charlie worked hard as a cabinet maker, and Dora in a packing factory. There just wasn’t a need. After school, kids played barefooted outside until it was dark. Doors were never locked and the streets had little traffic. At night he devoured books, hiding under the covers with a torch when his parents thought he was asleep and reading most of the night. BigglesThe Famous Five, adventure books, anything he could get his hands on. He inherited his father’s strong will and keen sense of right and wrong. “My father was a very righteous man … [but] as I grew older I became more rebellious and had my own views. I was as strong-willed as him, but we had a different value system.”

The rigid structure of school clashed with his personality. He got top marks but couldn’t wait to leave, which he did after year 12. In his early 20s he travelled through Europe, sleeping on trains to save money. In ­Scandinavia his wide eyes scanned the horizon and came to rest unexpectedly but pivotally on a cutlery set. “I liked the clean lines, the design, the concept, everything about it.”

Stul returned to Australia with an ambition: he would start a business importing Scandinavian products. To raise the capital he moved north to ­Dampier to work on a construction site, returning to Perth when he’d saved $10,000. He founded the giftware business Skansen at age 25. “I had no idea what I was doing. I was typing letters from an old typewriter … I’d go to retailers and speak to owners, build relationships, get feedback, learn price points, do my own deliveries. I was the new kid on the block, so I had to win everyone’s trust. If you lose someone’s trust it’s almost impossible to get it back. So I learnt the importance of operating with honesty and integrity.”

Being based in Perth was a disadvantage for a firm importing from overseas and distributing Australia-wide, and makes about as much sense as basing a major toy company in Melbourne instead of the US. “I learnt I had to do unusual stuff, be ­different. It became part of my DNA, and it’s permeated the whole culture here at Moose.”

Stul married, had two children and watched Skansen grow into the biggest gift company in Australia. In 1993 he floated it on the ASX and sold his share for $17 million to George Snow, the owner of the maxi yacht Brindabella. “I didn’t have to work again. And I wasn’t intending to. I wanted to settle down and have an organic farm and a rural retreat.” But his dad had died in 1992 during a botched operation; the sadness and hurt of that will always live with his son. Then his mother developed Alzheimer’s and Stul spent the last five years of her life caring for her. And then he went soul searching. His journey took him through the pages of more than 300 books on spirituality. It took him to India, following a miracle man who he hoped would deliver true enlightenment. He didn’t, but the teachings of other spiritual masters — including Jesus and Buddha — formed the basis of his personal philosophy.

In 2000, Stul was looking for start-up opportunities when he got a tip-off that Moose Toys was for sale. Instinct kicked in. He moved to Melbourne and overhauled the entire company, taking it from a small firm employing 10 people “ostensibly ­creating toys” to a business that employs more than 400 people globally, 150 of them in Melbourne. One of the Melbourne employees was Jacqui Tobias, who he’d first met in 1980. She would become his second wife and one of the ­directors. Stul says Tobias has an uncanny ability to know what ­people want. Few could argue — Shopkins was her idea. The original idea of ­making small, colourful toys themed around supermarket shopping items was initially rejected because of the risk that kids would try to eat them, so she came up with the idea of putting faces on them.

Tobias’s son Paul Solomon became the third director and co-CEO with Manny. To Solomon, Stul is more than a business partner. He’s a father figure and a grandad to his three children. When the kids hear Stul’s voice at the front door, they rush to see who can hug him first.

Gangbusters: Shopkins are sold in more than 100 countries.
Gangbusters: Shopkins are sold in more than 100 countries.

Stul doesn’t take credit for dreaming up the ideas but he creates the environment to allow it to happen. He sets the rules: there are no rules. “This line of work is about creating something people want.” It’s not just Shopkins, either. Little Live Pets, Cutie Cars, Qixels 3D Maker and Grossery Gang all went gangbusters last year. Before that it was Trashies. The team keeps the range turning over fast, at least twice a year from idea to design to production.

Surrounding yourself with the right people is essential, but Moose wouldn’t exist if it ­weren’t for kids like eight-year-old Courtney Scanlan, who lives in Melbourne’s working-class west. She’s a cub scout and has just earned her ­collector badge for her formidable Shopkins ­collection. She tips a bucket onto her bed and a Shopkin tsunami washes over her doona. “I think I’ve got a thousand and eight!” Not quite. But 324 is a very respectable number, representing about a third of the world’s Shopkins subspecies. A pack of two Shopkins from the new “World Vacation” series costs $2.95. It’s play imitating commerce imitating life.

Her mum, Bridget, doesn’t quite know how it’s happened. Courtney’s explanation goes like this: “I saw them on TV and I was like, ‘I’m getting them!’ They had faces. My friends had them and I thought, ‘I have to have them!’”

The simplicity of it reminds analysts that even though you’re dealing in child’s play, the science behind it is anything but. What drives the compulsion to drop a couple of Shopkins into the supermarket trolley? Courtney interjects and drops a bombshell: “Mum sometimes hides the Shopkins and keeps them for herself.”

Each Shopkins season (eight, so far) features a limited ­number of rare characters, produced only in their hundreds. A one-off Shopkin named Gemma Stone was made for charity auction and sold for $US21,500 in 2015. Anything from season one is now a rare, prized item, snapped up by collectors. Season one, it’s worth noting, only came out in 2014. “Two and a half years is a long time in toy life,” says Moose marketing director Belinda Gruebner. “Season one was a small run, because we didn’t know if it was going to work or not. When each season finishes that’s it, no more are produced.” There’s also a YouTube channel with Shopkins webisodes and videos celebrating Moose office life, as well as a licenced range of merchandise: clothes, doona covers, school bags, even hand sanitiser and toothpaste.

The breakthrough toy for Moose was Mighty Beanz — small, bean-shaped objects that rolled and wobbled along your hand or down racetracks. The key feature was they had faces. It made them instantly appealing and individual, and most importantly, collectable. But it was ­Bindeez that really took the ­company to dizzying heights, then just as quickly brought it to its knees.

Audacious battle plan: lawyer Leon Zwier. Picture: Aaron Francis
Audacious battle plan: lawyer Leon Zwier. Picture: Aaron Francis

Bindeez was based around a revolutionary ­formula to make beads stick together without using heat. Children could lay out the ­colourful beads on a template into any shape, then spray it with water. The beads would bond and you could lift out your creation. Bindeez: Bind with ease. In 2007 Bindeez won toy of the year in Australia and the UK and generated almost 90 per cent of Moose’s turnover. “It was a breakout product,” says Stul. “Just amazing.” Then disaster struck. It was Melbourne Cup Day 2007 and Stul was holidaying in Perth when the phone call came. A two-year-old boy in NSW had become dangerously sick after swallowing some of the beads. Soon afterwards, a 10-year-old girl was ­hospitalised with seizures. In the US, a toddler who ingested the supposedly non-toxic Bindeez started vomiting and losing consciousness. The beads were examined at The Children’s Hospital at Westmead in ­Sydney and were found to contain a chemical that, when mixed with saliva, metabolised into the drug gamma-hydroxybutyric acid, otherwise known as the date-rape drug GHB.

“It was like being hit by a truck,” says Stul. He boarded a plane to Melbourne and arrived home to a deepening crisis. More children were getting sick. Two children in the US went into comas; seven others required hospitalisation. Unknown to Moose Toys, the Chinese manufacturers had replaced a non-toxic ingredient with a much cheaper one, with disastrous consequences.

Moose Toys immediately issued a voluntary recall of Bindeez. Health ministers in every state and territory put a ban on the toy. Moose’s star product was removed from every shelf around the world. But it wasn’t even close to rock bottom for the company. Stul was advised to shut up shop, file for liquidation and not even bother trying to fight his way out.

Moose had to overcome seemingly impossible hurdles in order to survive, and when put together the permutations became almost infinite. “We had to get the health authorities to lift the ban. We had to reformulate the product to an edible standard. We had distributors around the world issuing claims against us for their loss. We had class actions from American lawyers. The Chinese government had banned our factories from exporting any products. It was like this monstrous wave about to wash over you.” But giving up wasn’t an option. “I’ve never run from anything in my life and I wasn’t about to,” he says. “We had an obligation to our customers, to our staff, to our distributors. We decided we’d do everything in our power to survive.” Stul called in Leon Zwier from ­Melbourne commercial law firm Arnold Bloch Leibler. A war council was convened.

Paul Solomon remembers the meeting in ­Zwier’s office on a Friday afternoon and listening as the lawyer laid out a near-impossible scenario. Moose would have to negotiate separate deals with 34 distributors, all of whom had suffered huge losses thanks to the recall. Every distributor would need to sign up. If even one baulked, the deal was off and Moose would fold. “Basically, if it failed we’d be filing for bankruptcy,” says Solomon. “Things really sunk in then.” Solomon and Stul drove home together from that meeting resolving to give it everything they had. “We were saying to each other, ‘We’re going to fight this and we’re going to make it through and everything’s going to be OK.’ And we needed to believe that.”

Zwier came up with the idea to hit the Hong Kong Toys & Games Fair. Everyone in the industry would be there. The trio flew out to Hong Kong with the future of Moose hanging on the outcome of the 34 separate meetings.

Zwier says their high-risk, high-reward approach was not expected by the distributors and disarmed them. “They were expecting that we would come along arguing a very technical position, saying it was all the Chinese manufacturer’s fault and not ours. But Manny and Paul didn’t want to play it that way. They wanted to approach the discussion with candour and transparency and an admission of liability. They said they were sorry. That really changed the dynamic in the room. Traditionally lawyers never allow clients to admit liability. So it was a very unusual tactic.”

For Stul, the approach was a perfect mix of his core values: honesty, ethics and smart business. He was never going to do it any other way. The deal went like this: if Moose went down, the distributors would get three cents in the dollar. If they allowed Moose to survive they’d get 15 cents in the dollar, based on analysis from independent financial advisory firm Ferrier Hodgson. Moose would also offer a 10 per cent discount on all products for three years. “We took the wind out of their sails, agreed with everything they had to say about the recall, then gave them the facts so they could make an objective business decision,” says Stul.

“This negotiation was extremely complex with a real likelihood of failure,” says Zwier. “We were dealing with laws of many different international jurisdictions, with counterparties from different cultures across the globe. We had a product that was the subject of a global recall and we were attempting a highly complex informal restructure of an Australian corporation without the benefit of any one formal global restructuring process. A lot of advisers looking at what we faced would have said it’s too big, you can’t achieve it, don’t even try.”

Achieve it they did, with all 34 distributors signing up to the deal. But Moose still had to convince the health authorities to lift the ban — which it did by convincing them to separate the product from the bad ingredient — and deal with the lawsuits from US insurance companies. Stul was hauled in front of US lawyers and grilled for seven hours in a courtroom in ­Melbourne. “They were looking for some way of proving we had prior knowledge [of the switch] so they could avoid paying out their insurance claims. They subpoenaed our staff, did a forensic search of our computers, hard drives and phones, and found nothing. We were completely exonerated.” To add to the relief, all of the children who ingested the contaminated Bindeez made a full recovery.

Zwier still considers the case one of the most memorable of his career: “Manny has a steely focus and an ability to see through projects. He analysed the problem and never took his eye off the solution. He’s taken Moose from the depths of financial ruin to the incredible heights it’s at now.”

“It was a nightmare,” says Stul. “I haven’t been able to talk about it for a long time. It’s all very well when things are going well, but you find out what you’re made of when things go bad.”

When it was over, Stul presented Zwier with a gift that still hangs on the wall of the office where their audacious battle plan was hatched on that Friday afternoon 10 years ago. It’s a framed mosaic of the famous Moose Toys emblem, made entirely from a batch of the contaminated Bindeez beads.

Reflection comes from within, sometimes deep within. Manny Stul’s heavy eyelids curtain the ­windows to a kind soul; compassion borne out of cruelty. The cruellest thing of all is that his father is not around to see him now. “Given our history and where we came from, I’m sure he would be comfortable with what I’ve achieved, what I’ve become, and who I am.” He pauses and allows the statement more rein. “I would be ecstatic if he were here to see this. And I’m not so sure he isn’t aware, either.”

- Ricky French, The Australian

http://www.theaustralian.com.au/life/weekend-australian-magazine/how-manny-stul-created-the-moose-toys-empire/news-story/76d05b78b7f2a1bb4bbc90cb14a4ff50?login=1