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Minnesotans live in a state of play, a place where imaginative minds created Tonka trucks, Twister, Nerf balls and Cooties.

This Christmas is the last for one of the biggest hits to come out of the state’s toy industry in recent years — the Groovy Girls.

Its maker, Minneapolis-based Manhattan Toy, a few months ago announced that the doll series, which had accumulated more than $141 million in sales since its introduction 21 years ago, was being discontinued.

“It was a tough decision because Groovy Girls is an iconic character for us,” said Nora O’Leary, president of Manhattan Toy. “She isn’t resonating with customers anymore, but we are still focused on our soft dolls.”

Privately held Manhattan Toy remains a small player in the $28 billion toy industry, but it has plenty of other products to offer as Groovy Girls move out of the house.

Manhattan Toy now makes more money from its Wee Baby Stella doll line, its Winkel and Skwish rattle teething products and a collection of plush dinosaurs.

The company makes more than 500 products in 12 main factories in Asia. Soft dolls remain a focus, anchored by the Wee Baby Stella and Baby Stella lines and a new line of washable dolls for girls ages 4 to 6 called Playdate Friends but also baby accessories, books and plush toys. Although most of its line is for infants and toddlers, it has recently added some products up to age 6. None of its toys have batteries or screens, built instead to grab the imagination.

“We are here to build the bond between a child and a caregiver,” O’Leary said. “It’s that moment when you’re down on the floor together, hugging a toy with a child.”

The company was founded in 1978 in New York City by Francis Goldwyn, a descendant of the Goldwyn family of motion picture fame, who found success with a plush dinosaur. Eventually, he sold the company and the new owners moved it to Minneapolis. Its current owner is H Enterprises Inc., a private-holding company. O’Leary said that although the company has fielded offers for buying parts of the firm, the board has not been interested in selling.

It continues to outperform the toy industry. Sales have consistently increased by single digits year over year at a time when NPD, a market research firm, says that toy sales overall and in the infant-toddler category have declined slightly.

Initially, it was a company that sold mostly to independent toy stores. By the early 2000s, Target added a specialty section and now the Minneapolis retail giant sells a large chunk of Manhattan Toy’s products. Both Walmart and Amazon also offer a good selection of Manhattan Toy products on their websites.

“We don’t think we can ignore Amazon,” O’Leary said. “It’s a big player for us, a nice awareness vehicle.”

Even so, Manhattan Toy walks a fine line between satisfying mass-market merchandisers and the mom-and-pop stores that built it.

“Sometimes there’s a backlash from specialty stores when toy makers go into mass markets,” said Sue Warfield, director of member relations at the American Specialty Toy Retailing Association. “One company, Hape Toys, recently reduced its presence in Target stores due to the backlash, but toy makers are learning to compromise. They can make some toys just for discount retailers and others for specialty stores.”

Manhattan reduces the size of some of its toys for a lower price point at discounters and may offer different toys in different colors to independent retailers.

Brad Ruoho added an infant/toddler section in his new Legacy Toys store at Mall of America. “We get a lot of requests for Manhattan’s toys in our stores,” he said. “The Baby Stella toys, the Whoozit and the Winkel — they’re leaders in the toy industry.”

Now it’s dipping its toes into China, as a middle class emerges.

“Buying toys there was considered an extravagance so sometimes we have to teach what the purpose of an item is, whether it’s for grasping, teething or stimulating visual awareness,” O’Leary said. “We can’t just put a product on the shelf and think people will buy it. The Chinese are very involved in social media and because there are so many counterfeits there, you have to convince them the product is real.”

That means hiring local influencers who can talk it up but on a limited budget. “We’re not going to hire a Kardashian. We’re tiny,” O’Leary said.

They continue to build the brand hoping to hit another Groovy Girls gold mine.

Groovy Girls dolls stood out not just because they were popular but how they got that way. When they were first rolled out in 1998, distribution was mostly to specialty toy stores. Target began selling the dolls in 2005 and Walmart and Toys ‘R’ Us followed. Burger King offered bite-sized versions in 2007.

The floppy, multicolored 13-inch dolls represented a preteen bohemian alternative to Barbie and Ken, with hair made of yarn and outfits more suitable for the playground than the runway.

Varying skin tones and hair types for girl and boy dolls gave parents more options to find a doll that looked like their child. What started as a line of four dolls expanded to more than 1,000 pieces, including dolls, clothing, accessories and furniture lines. The dolls were priced in the $10 to $20 range.

Barry Kudrowitz, associate professor of product design at the University of Minnesota, said many toymakers are contending with a gradual decline in the age at which children stop being interested in toys. Research shows some 8-year-olds now view toy stores as a place for “little kids.”

“As long as age compression doesn’t go down too far, Manhattan should be safe,” Kudrowitz said.

One of Manhattan Toy’s newest releases, Musical Lili Llama, was named a finalist in the Toy Association’s Toy of the Year awards in the infant/toddler category with the winner to be announced in February. The colorful wooden toy in the shape of a llama includes a xylophone, clacking saddle blankets, rotating gears, and a tail that doubles as a maraca.

“I’m so glad that Manhattan Toy hasn’t been scooped up by the big boys,” Warfield said. “We don’t want to be left with five mega toy companies that squash innovation.”

Other Minnesota-based toy companies

Beka Inc.: St. Paul-based maker of quality wood looms, toys and furniture for kids.

Cooper & Kid: Minneapolis-based subscription boxes that contain a project for kids 5 and older to play with an adult.

Fairy Finery: Golden Valley-based company that creates dress-up costumes for girls’ and boys’ imaginative play.

Smiling Tree Toys: Lamberton-based husband and wife team make wooden toys for toddlers and preschoolers.

Turing Tumble: Shoreview couple created a marble-powered computer game.

Yoxo: St. Paul-based company that makes build-it-yourself construction sets from recycled materials.