Great ResignationInflationSupply ChainsLeadership

Lego is building a new factory in the U.S. to avoid supply-chain problems

June 16, 2022, 5:40 PM UTC

Danish toymaker Lego said it would invest $1 billion and create 1,760 jobs over 10 years with a new factory in Virginia, in a bid to shorten its supply chain and avoid problems delivering to the key U.S. market, the company announced this week.

Lego expects construction of its factory in Chesterfield County, Va., to begin in fall 2022, and plans to launch production in 2025, according to a statement from the company. The new factory is Lego’s second in North America, and its only manufacturing facility in the U.S., one of its biggest markets. The company previously had a factory in Connecticut, which it closed in 2006

Companies worldwide have faced issues with global supply chains over the past year, in part because of a sudden increase in demand after some companies cut back on production during the pandemic. Labor shortages, rising prices for shipping, and lockdowns and COVID restrictions in China, where many products are manufactured, have also caused further disruption.

Lego says the new U.S. factory will allow it to meet demand in the country, and help the company avoid supply-chain issues.

Future entrance to Lego factory in Virginia
Courtesy of the Lego Group

“Our strategy to be close to our core markets has only been confirmed recently,” chief operations officer Carsten Rasmussen told Reuters.

The U.S. market is currently supplied by a factory in Mexico, which the company said it will also expand and upgrade.

“Our new factory in the U.S. and expanded capacity at our existing site in Mexico means we will be able to best support long-term growth in the Americas,” Rasmussen said in a statement. “We are fortunate to find a location where we can begin construction quickly and create temporary capacity in under two years.”

A spokesperson for Lego directed Fortune to the company’s press release and did not provide further comment.

More than 3 billion toys are sold in the country annually, supporting an estimated half a million jobs and contributing $102.4 billion in economic impact, according to the Toy Association

While demand fluctuates in the toy industry, it is most concentrated around the winter holidays, which caused problems last year as supply-chain issues made it harder to find some popular products

The new factory will also be carbon neutral, a step toward the company’s recent push to reduce CO2 emissions from production of its toy bricks. The company has pledged to use only recycled or renewable materials in its packaging by 2025. By the end of the decade, it wants to make all of its core Lego products from sustainable materials, instead of oil-based plastics. 
The Lego Group saw a jump in demand for its products in 2021, with consumer sales increasing 22% compared with 2020, according to its full year financial results from March. The company’s revenue also grew 27% from the year prior to 55.3 billion Danish kroner ($7.8 billion). The company has 2,600 employees in the U.S. including at its head U.S. office in Enfield, Conn., and in 100 stores across the country.

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