Ninety percent of children’s toys are made in China. The Russian toy market is also flooded with imported brands. But Moscow’s International Toy Fair proved something is changing as the Russian toy industry gradually builds its own reputation.

Today, Russian kids are used to playing with Disney and Hollywood characters made in China. Russian producers have about 12% of the domestic toy market, though even most of them manufacture toys in Asia. Market players say even the scandal which forced Mattel to withdraw Chinese-made toys has not changed anything.

“The story didn’t affect the toy industry. Global producers have no better place to produce than China,” says Oleg Sokhatsky, the head of toy wholesaler, Alisa.

Analysts say Russian producers will find it easier to compete with Chinese products when their currency, the Yuan, rises. Also, the Chinese use a lot of manual labour, giving an advantage to companies that use high-tech equipment.

But industry insiders say the real weakness of Russia’s toy market is not the presence of Chinese products, but the absence of strong Russian brands.

“Asian animation is popular now in Russia. We have our own characters born in old Soviet cartoons, but they are not that popular, as they were never meant to be turned into a brand,”  explains Anton Prokshin, financial director of Smeshariki, Moscow.

The merchandise of toys based on Star Wars universe brought brand holders $US 12 billion over 30 years. And it’s not the only case where the sales of related products make more money than the cartoon or movie themselves.

Smeshariki is the first Russian cartoon series that became a large-scale brand. The characters were created with merchandise in mind. Now the company sells its own Smeshariki toys and earns up to 25% of royalties from licensing the characters across a range of products.

Producers say $US 20 million worth of investment is now paying off, as Smeshariki appear on board games, bicycles, school stationary, food and clothing. Smeshariki’s owners say they are the first, but not the last Russian name on the market for branded toys.

Their experience suggests, with Russian incomes rising, demand for higher quality toys is growing. And businesses working with branded and licensed toys are likely to be the most profitable.