The Lego factory
This week iconic toymaker Lego announced its plan to build a new 1.7 million square-foot factory in Virginia, creating up to 1,800 jobs once complete. The Danish company plans to spend $1bn on the factory, which is an enormous investment for any company, let alone one that produces such a simple product.
But selling a simple product, and doing it really, really well, has been the cornerstone of Lego's remarkable business model. Sales last year jumped 27%, a number that some cash-burning tech companies would have been happy with.
All told Lego sold ~55bn Danish Kroner worth of plastic bricks in 2021, squeezing out a 31% margin on those sales thanks to the company's iconic brand and build quality, with a reported manufacturing error rate of just 18-in-a-million.
In USD Lego sales work out to around $7.8bn — suggesting that its factory investment, which will presumably be spread over 3 years, will only cost around ~4% of Lego's sales over that period. Lego is betting big that playing with plastic bricks is here to stay. They're probably right.
