At 18, Nick Mowbray dropped out of college in his native New Zealand and moved to China with his older brother, Mat. The pair spoke no Chinese and had few contacts and little business experience.

But they had an idea: open a factory near Guangzhou, a fast-growing port city in the country’s south, where they would make toys. With a NZ$20,000 ($11,553) loan from their parents, they bought an injection molding machine and got to work.

“We lived on like a dollar a day,” the younger Mowbray, co-founder of what is now the Zuru Group, said in an interview. “We ate just rice and vegetables.”

More than two decades and several factories later, Zuru has grown into an off-priced toy heavyweight. Its plastic dart “blasters” compete with Hasbro’s Nerf on the shelves of Walmart and Target. A range of blind box collectibles — small-dollar toys with unknown prizes inside — generate repeat customers. Water balloon kits promise easy, affordable fun for hot summer days.

The success has turned Nick and Mat Mowbray into billionaires, according to the Bloomberg Billionaires Index. And their fortune may soon swell.

Stale categories

Zuru’s strategy rests on finding stale consumer goods categories, especially ones dominated by a small number of players, and elbowing its way in. In toys, that has meant taking on incumbents like Mattel Inc. and Hasbro. Zuru then uses a low-cost supply chain — it makes everything in China and owns all of its factories — to undercut competitors on price.

The tactic has, so far, been a winner.

“Their playbook is really that you can make a lesser quality toy, much cheaper,” said UBS analyst Arpine Kocharyan. “That playbook has worked very well for them — they’ve grown exponentially.”

The maneuver has also drawn criticism from rivals. Lego, for example, sued Zuru for infringing its trademark by saying its own plastic brick toys are compatible with sets from the better-known competitor. Lego won the initial hearing. Zuru appealed, and the case is still winding its way through New Zealand courts.

Zuru, based in Hong Kong, now employs more than 5,000 in more than 30 global locations. The company set its sights beyond toys six years ago and expanded into products like shampoo and dog food. Its diaper brands — Millie Moon and Rascals — are fighting for market share with the likes of Kimberly-Clark’s Huggies and Procter & Gamble’s Pampers. The expansion is possible, Nick Mowbray said, thanks to Zuru’s tight supply-chain control and focus on automation.

But that strength could become its biggest weakness in a hurry. Most of the company’s sales come from the US, where President-elect Donald Trump has pledged tariffs on Chinese goods. He has also vowed to impose an additional duty if Beijing doesn’t help stem the flow of fentanyl across the country’s southern border.

“Obviously tariffs don’t benefit us,” 39-year-old Nick, who lives with his wife in a mansion outside of Auckland, said. “But China’s supply chain is still unbeatable, even with tariffs. We cannot beat it for efficiency.”

Early days

Back in the late 1990s, the elder Mowbray fashioned a miniature hot-air balloon from a soda can and a plastic bag, a feat that earned first place in New Zealand’s national science fair. With their father’s help, Mat and Nick parlayed the crude children’s toy into a small business. The duo made duplicates at home, stuffing cans with methylated spirits and cotton balls.

“We’d make them in the garage at home and then sell them door-to-door,” Nick said. “We’d fly these basically burning plastic bags.”

Their parents later let them set up a basic factory in the barn on their dairy farm in Tokoroa, a rural town near the center of New Zealand’s North Island. In exchange, the pair sprayed weeds and milked cows once a week.

Mat was the first to drop out of university to concentrate on the business. Nick soon followed.