Nick Mowbray is working from home, a 12-bedroom mansion in Coatesville, New Zealand. It’s the former abode of cyber-renegade Kim Dotcom, and it’s here that Dotcom was arrested by heavily armed police in 2012. Life is quieter for Mowbray, 34, and the sun is shining on his 2,000-bottle-a-year vineyard as he explains what affords him this lifestyle: a fast-growing toy company called Zuru that he runs with his siblings Mat, 38, and Anna, 36. “My philosophy is always work with scale,” he says, strolling the library of the 48,000-square-foot estate, which boasts a hedge maze and an indoor lap pool.
Zuru, founded in 2003, specializes in making inexpensive toys, like Bunch O Balloons, a gadget that fills 100 water balloons in 60 seconds. It sells those playthings in 120 countries, including every major U.S. retailer, and generates more than $400 million in annual sales. The company is based in Hong Kong, where Mat and Anna live. Domiciling the business there provides Zuru access to low tax rates, and the siblings have invested heavily in automation to further save on costs.
Zuru is debt-free, and it has never taken outside funding, save for an initial $20,000 loan from the Mowbrays’ parents, an engineer and a teacher. The business is worth more than $1 billion, and the siblings own it themselves. It could be worth a lot more in the future if the trio’s plans come to fruition. Toys are just Phase 1. Up next is a line of consumer goods, like diapers and pet food.
“We would do everything in our business to make it more and more and more profitable, which to me is the whole reason of building a business,” says Nick, who serves as co-CEO with his brother Mat. Their sister Anna is more circumspect. “Being Kiwis, we’re quite humble,” she says. “But it’s definitely been an amazing journey.”
Zuru began as a pet project. At 12, Mat designed a model hot-air balloon kit that won a national science fair in New Zealand. He and Nick peddled the kits door-to-door, and at 19 years old Mat dropped out of college and set up a small factory on their parents’ farm in Tokoroa, a rural town on New Zealand’s north island. Soon after, when Nick was 18, he dropped out too, and they moved to China to turn their hobby into a real business. The road ahead proved to be unglamorous. “The first night we slept in the bushes outside Hong Kong airport,” Nick recalls. From there, the brothers rented an eighth-story walkup in the city of Shantou for $20 a month. Anna joined them roughly a year later.
The siblings picked up early momentum by swiping other companies’ designs. The knockoffs: a money bank and a light-up frisbee made by two small toy manufacturers. “We found these two products online, and we basically copied them,” Nick admits. Zuru brought the toys to the New York Toy Fair—into the lion’s den, one of the industry’s biggest events of the year—and sold the designs to a distributor. But before the convention ended, the toys’ original creators discovered the knockoffs, and the maker of the frisbee sued Zuru. (The case ultimately settled.)
Following the upheaval, the Mowbrays began paying to distribute toys to international markets, like spinning rubber discs and a helicopter-shaped boomerang from a Hong Kong company, Zing. Eventually, in search of bigger paydays, they refocused on producing toys of their own. More turbulence followed.
In 2005, the siblings partnered with a Chinese manufacturer and paid $1 million for the rights to a handheld video game player in which users could play as the soccer star David Beckham. The manufacturer financed the deal on the basis of a $29 million purchase order from Walmart for 2.2 million devices. As production began, Walmart’s excitement waned, and the retailer moved to cancel more than 80% of the order, which would have put Zuru in the red. “I was flying back and forth basically pleading with Walmart,” Nick says. Begrudgingly, Walmart agreed to pay for 800,000 devices.
When the toys hit the market, “it was an absolute disaster,” Nick says. “It just would not sell. It was like concrete on the shelf.” Zuru wound up blackballed by Walmart for years.
The Mowbrays got back to work, and over time they strung together financial successes, like Bunch O Balloons, Zuru’s best-known product, which does $200 million in annual retail sales, and Robo Alive, a line of battery-propelled plastic animals that generates $60 million.
Still, some of the company’s products bear an eerie resemblance to those of competitors. Zuru’s Dart Blasters, of which it ships 35 million per year, look a lot like Nerf’s guns. There’s also Metal Machines, which challenges Hot Wheels, and a line of plastic figurines similar to Legos. Last December Lego filed a lawsuit alleging that Zuru’s figures “are confusingly, strikingly and substantially similar.” The litigation is ongoing.
Nick sees things differently. “We are not in the business of imitation, but innovation,” he says. As for the lawsuit: “Lego is highly protective of their space, but they don’t own it. It’s like saying, ‘Ford was first to make the motor car.’ No one else can make a car?”
The designs of Zuru’s toys (in the blue circles) have drawn the ire of its biggest competitors (like the Lego, Mattel and Hasbro products in the yellow ones) for being copycatish.
Things are less contentious elsewhere in the business. On a sticky July afternoon, Nick has journeyed Stateside, seating himself at the bar inside Soho House, a trendy Manhattan power spot. It’s been a whirlwind few weeks. He lounged at Novak Djokovic’s rented house just before Wimbledon, and just this morning he met with billionaire hedge funder Bill Ackman. Up next is a multi-city sweep—Cincinnati, Toronto, Minneapolis—where he’ll pitch retailers like Target on Zuru’s next endeavor: consumer goods, such as pet food and detergent. Nick, wearing capri pants, striped socks and pointed leather shoes, calls this new project “Zuru Edge.”
“The toy company is great, and it’s gotten us to a certain point,” he says. “It’s one of the hardest business in the world to do well. … Kids’ tastes change every six months.” Zuru Edge’s first offering, a line of diapers called Rascals & Friends, will generate more than $60 million in sales this year, Nick estimates. Next: laundry detergent (One Pods), vitamins (Health by Habit) and more. “We’re effectively taking our core competencies in toys—automation and manufacturing and consumer [products]—and applying that to more stable, long-term categories.”
By now, Nick has slipped fully into his most comfortable role, the ever-selling salesman. “What we’re building is going to be unreal,” he says. “It’s truly insane.