Fisher Price Inc. Business Information, Profile, and History

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History of Fisher Price Inc.

Fisher-Price Inc. is the world's largest preschool products company. Fisher-Price has dominated the infant and preschool toy market for over 60 years and has become known for the high quality and durability of its products. Wholly owned by Mattel Inc. since 1993, Fisher-Price consolidated with other divisions of its parent to make up a single, massive marketer of toys principally for children under the age of five. Some of its best-known products include Little People playsets and Power Wheels ride-on toys. It markets several licensed toy lines, such as Sesame Street products and Disney, Winnie the Pooh, Blue's Clues, and Bear in the Big Blue House toys and games. The company makes toys for both boys and girls, with strong sellers in each category. It is also a leading manufacturer of infant furniture and car seats. Fisher-Price has outstanding brand name recognition and customer loyalty. The company operates as an umbrella over several Mattel units: Fisher-Price, based in East Aurora, New York; Tyco Preschool, based in Manhattan; and Mattel's Preschool unit, based in El Segundo, California.

Early Years

Fisher-Price was founded in East Aurora, New York, in 1930, by Herman G. Fisher, Irving L. Price, and Helen M. Schelle. While Price and Schelle had worked in retail businesses that featured toys among their inventory, Fisher brought to the group his experience in the advertising and sale of games. All three proved adept at knowing what children liked and were committed to the idea that the public would appreciate high quality toys. Though the founders knew little about the actual manufacture of toys, they reasoned that popular products would have, according to the company's first catalog, 'intrinsic play value, ingenuity, strong construction, good value for the money and action.' Specifically, they observed, 'children love best the gay, cheerful, friendly toys with amusing action, toys that do something new and surprising and funny!'

Such beliefs proved correct. From a frame and concrete-block house turned manufacturing headquarters in East Aurora, Fisher-Price manufactured 16 different toys during its first year of operation. This line included Granny Doodle and Doctor Doodle, brightly colored wooden ducks that, when pulled, opened their beaks and quacked. During this time, Fisher-Price made its toys out of Ponderosa pine, a splinter-resistant wood. The wooden pieces were then joined by heavy steel parts and decorated with non-toxic lithographs and finishes, resulting in a uniquely durable and appealing product.

Withstanding the effects of the Great Depression, Fisher-Price reported losses during its first four years of business and eventually developed a healthy reputation and customer base. In the early 1950s, Fisher-Price augmented its line of wooden toys by fashioning new products from a popular new material, plastic.

Production After World War II

During the period of increased consumerism following World War II, the toy industry grew and changed dramatically. Herman Fisher retired from his post as president of Fisher-Price in 1966 and was succeeded by Henry Coords, who had been recruited from AT & T's affiliate company Western Electric. Shortly thereafter, the Quaker Oats Company expressed interest in acquiring Fisher-Price, and in 1969, Quaker Oats purchased Herman Fisher's 67.4 percent voting stock and 14.1 percent nonvoting stock, along with Fisher-Price's additional outstanding shares, for $122 per share, the same amount paid Mr. Fisher. At the time of the purchase, Fisher-Price had sales above $30 million.

Also during this time, other cereal companies, including General Mills, General Foods Corp., and Nabisco, acquired toy companies. While some industry analysts speculated that cereal companies were purchasing toy manufacturers that would produce 'premiums'--the small, inexpensive toys offered free inside cereal boxes--one toy company executive told Advertising Age that 'the toy business is not really geared to premium offers. The merchandise is too expensive to be a successful premium item. It can't build business.' Rather, some suggested, cereal and toy companies were merged, in part, to 'piggy-back' toy and cereal commercials. 'It's a natural thing to form marriages of convenience with toys and cereals. They're aimed at the same market,' one adman told Advertising Age.

The ad agency of Waring and LaRosa handled advertising for both Quaker Oats and Fisher-Price, and under Quaker Oats ownership, Fisher-Price's spending on advertising increased. In 1970, in what was then the largest advertising campaign in the company's history, Waring and LaRosa created a campaign emphasizing the quality and sturdiness of Fisher-Price toys. The estimated $1.25 million ad campaign declared Fisher-Price made toys to last a 'whole childhood, and another childhood, and a childhood after that.' Aimed at parents, the print ads ran in Family Circle, Good Housekeeping, Ladies' Home Journal, Parents, and Women's Day.

By 1976, Fisher-Price had diversified into three different businesses. While the majority of its business still lay in preschool products for children 18 months through 4 years, the company also marketed a line of toys for children aged four to nine years and another line for infants. The newest additions to the company's toy lines were the 1974 introduction of dolls, the 1975 introduction of the Adventure Series, which included Adventure People for early grade school children, and the 1976 introduction of the Play Family Hospital for preschoolers.

As Fisher-Price entered new markets, it also expanded the scope of its advertising, offering commercial spots during children's television programming for the first time in 1976. Responding to criticism from such special interest groups as Action for Children's Television (ACT), concerned about advertising's potential for exploiting children, Fisher-Price president Henry Coords maintained that the ads would not exert high pressure and would be moderate in number. Fisher-Price continued advertising its toys on prime and daytime network television, as well as in women's service magazines, but also focused on reminding retailers in trade journals that Fisher-Price now serviced three distinct age groups. Though Fisher-Price consistently increased its ad budget, spending almost $2.15 million on network advertising in 1975, the company spent considerably less than did its top rivals. General Mills Fun Group, for example, spent $8.8 million on network advertising in 1975; Mattel and Hasbro spent $6 million and $4 million, respectively.

Competition in the 1980s

While Fisher-Price had turned its attention to its new markets in the 1970s, significant increases in the birth rate revived the stagnant preschool market, Fisher-Price's mainstay, in the mid-1980s. As toy giants such as Hasbro, Kenner Products, and Mattel expanded their presence in the preschool market, and other companies, including Matchbox Toys Ltd., Panosh Place, and Schaper Mfg. Co., entered the market with new lines ranging from baby exercise tapes to washable vinyl plush toys, Fisher-Price found its leading position in the preschool market threatened.

'In the face of major competition, Fisher-Price has become very aggressive in ad support for all its products,' Fisher-Price's director of advertising Robert Moody told Advertising Age, reaffirming the company's commitment to 'advertising of over 75 of the new and existing toys in its line on a year-round basis.' To support its new plan, Fisher-Price increased its ad budget by 90 percent to $50 million in 1986. The company also afforded significant portions of its account to the advertising firms of J. Walter Thompson USA in Chicago and Backer & Spielvogel in New York. Funding for its new marketing expenditures came through reductions in overhead and controlling manufacturing costs.

With the help of ad support, Fisher-Price's new toy lines made 1986 a profitable year. An integral part of the company's product line during this time was represented by its Gummi Bear merchandise, toys based on a very popular Walt Disney Productions cartoon series featuring magical, medieval bears. Gaining the license to use the trademarked Gummi Bear characters, Fisher-Price produced poseable figures, puzzles, stuffed animals, and other toys based on the cartoon. The Gummi Bear license, according to Advertising Age, was Fisher-Price's most profitable television license since that of the Sesame Street characters, which the company had obtained in the 1970s. Also during this time, Fisher-Price introduced a Toddler Kitchen, a Magic Vac (a toy vacuum cleaner that blew bubbles), and Puffalumps, ultra soft, silky stuffed animals. Puffalumps became the most successful new product in Fisher-Price's history, achieving sales of approximately $25 million in its first year.

As Fisher-Price revived its preschool line in 1986, it also pushed its fastest growing segment, an audiovisual toy division, created in 1982, which produced durable audiovisual products, simple in design, specifically for children. Among the division's most popular products were a phonograph, a tape recorder, and an AM-FM radio with a sing-along microphone. The company planned to increase its advertising support of the division by 40 percent in 1986, in response to an expected increase in the number of older children to whom the products would appeal.

In 1987, the company introduced the first video camcorder for children. Priced at around $200, the PXL 2000 Deluxe Camcorder System was well received at the American International Toy Fair in New York City, the annual showing of new products in the industry, and had sold out at retailers for the calendar year by late spring. Public response to the camcorder was bolstered by an aggressive $3 million ad campaign that featured 30-second television ads on network television and the Nickelodeon cable channel, as well as print ads in Life, Newsweek, People, Sports Illustrated, and Time. Unlike most toy ads, the camcorder print ads targeted men; J. Walter Thompson executive Matt Kurtz explained to Advertising Age that 'most electronics purchases are made by fathers,' and the magazines had been chosen because of their large male readership. The ad headline challenged readers to 'Picture what your kid can do with the new PXL 2000,' offering the camcorder as 'a great way to turn on your kid's imagination.'

While the camcorder met with initial success, Moody asserted in Advertising Age that 'the camcorder shouldn't disguise what Fisher-Price is all about,' which was toys for preschoolers. Nevertheless, Fisher-Price's offerings had expanded to include much more than preschool toys between 1984 and 1989, and the company now encompassed four main operating groups: the Infants Products Group, which included crib and playpen products as well as juvenile furnishings, accounting for 30 percent of the company's U.S. business; the Traditional Products Group, which included preschool toys, accounting for 60 percent of U.S. business; the Promotional Products Group, which included highly publicized toys like the Puffalumps and the PXL 2000 Deluxe Camcorder System, accounting for ten percent of sales; and International Business, which included sales in Canada and Europe, accounting for 25 percent of Fisher-Price's sales in 1987. As the company increased its efforts at expansion, management observed demographic trends indicating that the level of new births would remain static into the early 1990s and the number of older children would increase. Therefore, Fisher-Price's preparations for expansion into non-traditional products and products for older children were on target for future profits.

The company's expansion did not go as planned, however. According to some critics, as Fisher-Price entered the promotional products toy market in 1987, it shortchanged its preschool line, which had helped it grow steadily from 1930 to 1986. Though the first promotional products met with success and brought additional revenues to the company, by 1988 resources had to be shifted from the company's preschool, infant, and juvenile lines to support the failing promotional line, according to Children's Business. In the late 1980s, Fisher-Price began losing money, due largely to the failure of its promotional products (including a battery-powered sports car and a children's video camera), order cancellations because of some late merchandise deliveries, and intensified competition from Hasbro, Rubbermaid, and Mattel in the preschool market.

To combat these difficulties, Fisher-Price discontinued its line for older children and refocused its attention on its preschool line. In addition, newly appointed president Ronald Jackson and his management team began trying to turn the company around by cutting expenses. Toward that end, four of the company's 13 manufacturing plants and two distribution centers were closed, and the workforce was reduced by more than 3,000. Production of some lines were moved overseas, while advertising and selling costs were reduced by $17 million, according to the Business First-Buffalo. The restructuring efforts had returned Fisher-Price to profitability by 1991.

Still, the company continued to struggle with the effects of its unsuccessful bid to market toys and furnishings for older children. Despite Fisher-Price's leading position in the market for preschool toys, industry analyst John G. Taylor suggested in the Buffalo News that 'Fisher-Price is somewhat of an underdog in this competition. Fisher-Price doesn't have the financial resources that the other companies (Little Tikes and Playskool) have--they're owned by people with deep pockets.'

New Ownership in the 1990s

In 1991, Quaker Oats decided to spin off Fisher-Price as an independent company, and, in the summer of that year, Fisher-Price began trading on the New York Stock Exchange. During this time, Mattel expressed an interest in acquiring the steadily improving Fisher-Price, but Quaker Oats had rejected the idea. In December 1993, however, Fisher-Price became a wholly owned subsidiary of Mattel, making Mattel the leading toy company in the United States. Analysts referred to the deal as the most significant acquisition in the toy industry since Hasbro bought Tonka Corp. in 1991, as it allowed Mattel to challenge Hasbro's top position in the $17 billion toy industry.

Mattel and Fisher-Price fit together well. Mattel consolidated Fisher-Price's Mexican production, European sales offices, and media planning and buying with its own to make a 'stronger, more focused entity,' according to the Buffalo News. Journalist Frank Reysen told the paper that Mattel and Fisher-Price succeeded together because 'neither is a hot-item type of company. They look to developing (toy) lines over the long term.' Fisher-Price's infant and preschool lines became Mattel's second largest product category, after Barbie, making up an estimated one-fourth of Mattel's 1994 sales.

After several years of restructuring, Fisher-Price began to expand in 1994 with a new line of outdoor toys. According to the Buffalo News, Fisher-Price saw 'outdoor play yard toys as a means of increasing its sales without the risks associated with diversification outside the infant and preschool toy category.' To support the new line, the company opened two new factories (the first such openings in 20 years), purchased additional equipment, added 300 production plant jobs and 50 white collar jobs, and began considering building a research and development center near its headquarters in East Aurora, New York. 'We are going after market share, and we intend to grow,' Fisher-Price president James A. Eskridge (who succeeded Ronald Jackson after the takeover) told the Buffalo News.

Though the outdoor playthings market was dominated by Rubbermaid subsidiary Little Tikes, Fisher-Price represented a challenge to competitors through lower manufacturing costs and sound merchant relations. Responding to the move, Little Tikes executive Kevin G. Curran remarked, 'I wish them success, but Little Tikes invented this category 20 years ago, and we are going to defend it aggressively.'

Fisher-Price's efficient operations and quality products garnered awards in the industry, including the title of 1993 Vendor of the Year, awarded by Discount Store News. Fisher-Price was the first toy manufacturer to ever win the vendor category award, the top award given manufacturers by the discount retailing chains. In addition, Fisher-Price ranked fifth in Total Research Corp.'s 1993 Equitrend survey of brand quality. Indeed, according to one stock analyst quoted in the Buffalo News, 'the goodwill the toy maker has developed with consumers ... was instrumental in the firm's rapid recovery after it suffered record losses in 1990 and early 1991.'

Fisher-Price remained the leader in the $1 billion infant and preschool plaything market and was achieving sales records into the mid-1990s. The company's Little People playsets, Corn Popper, Bubble Mower, and other toys proved invaluable to parent Mattel, and the outdoor play toys also met with initial success. In addition, Fisher-Price was taking advantage of Mattel's global distribution and marketing network to bolster sales in Mexico, Italy, Germany, and Spain.

To increase exposure on retail shelves, Fisher-Price entered three new markets in 1994: games, dolls, and electronic learning toys. Unlike its expansion under Quaker Oats, Fisher-Price remained committed to marketing toward the age range with which it had its greatest success. 'We aren't getting outside of what we do best: toys for children zero to five years of age,' Fisher-Price president James A. Eskridge told the Buffalo News.

Yet the company continued to open creative new outlets for itself. In January 1996 Fisher-Price announced it was embarking on an expensive joint venture with Compaq Computer Corporation to develop home computers for young children. The companies planned to spend as much as $15 million to make educational and fun computer toys and software. Products included large-sized computer keyboards designed for young hands, software that came with a steering wheel attachment that let children 'drive' through a game landscape on the computer screen, and other game and adventure software programs. Fisher-Price's entry into this segment came as other companies too were pouring resources into educational and entertainment software. Sales of electronic learning toys of all types grew at over 25 percent in the mid-1990s. Yet competition in the toy industry was intense, and sales slumped at Fisher-Price, dropping almost 20 percent from 1996 through 1997.

Despite difficult conditions, which affected the entire toy industry, Fisher-Price had some strong sellers. One was its line of Power Wheels ride-on toys. These were sturdy motorized cars and motorcycles that children could ride in or out of the house. They moved at about five miles per hour, and retailed for around $70 to several hundred dollars for the top of the line models. By 1998, the company had sold approximately ten million of the battery-powered cars, which were popular among both boys and girls and ran to nearly 100 different models. But gradual recognition of complaints from consumers that the vehicles had ignited and caused fires led to a huge recall of Power Wheels in 1998. The U.S. Consumer Products Safety Commission began receiving reports from fire departments in late 1996 that the vehicles had caught fire, and in November 1998, the agency spurred Fisher-Price to issue a massive recall. Its recall of the estimated ten million vehicles made this one of the largest toy recalls in the history of the industry. Though Fisher-Price maintained that the fires were in virtually every case caused by consumers tinkering with the engines, the company nevertheless spent approximately $30 million (through parent Mattel) to recall and repair all its Power Wheels.

The recall contributed to a slight decrease in sales at Fisher-Price for 1998. In the fall of that year, the company took the first step in a major reorganization. At that time, the company began to put its 'F-P' trademark on some of the preschool toys made by other Mattel-owned companies. Then in the spring of 1999, the company announced that Fisher-Price Inc. would encompass both Mattel's preschool line and the Tyco Preschool brand. Tyco was based in New York City and was best known for its licensed products. These included Blue's Clues, a late 1990s hit, and Sesame Street character toys, longstanding veterans that continued to sell well. Mattel's preschool unit, based at Mattel's home base in El Segundo, California, also featured a host of licensed products, including Disney characters and Winnie the Pooh. Licensing was proving to be the hottest area in toy sales, and Fisher-Price had lacked any licensed products. By putting its well-known brand name on the other divisions' licensed toys, the company hoped to get in on the licensing magic. The company was operated within Mattel as Fisher-Price Brands, with Fisher-Price Inc.'s president, Neil Friedman, traveling continuously between East Aurora, Manhattan, and El Segundo. The company had no plans to consolidate physically, but marketing and management for the three companies now operated together. This consolidation made Fisher-Price the number one preschool toy company in the world.

Principal Subsidiaries: Fisher-Price House (U.K.); Fisher-Price Spielwaren GmbH (Germany).

Principal Operating Units: Tyco Toys; Mattel Preschool.

Principal Competitors: Hasbro, Inc.

Chronology

• Key Dates:

• 1930: Founded by Fisher, Price, and Schelle.
• 1969: Quaker Oats acquires company.
• 1976: Company begins promoting its products through television ads.
• 1982: Creates audiovisual toy division.
• 1991: Fisher-Price trades on New York Stock Exchange as independent company.
• 1993: Company acquired by Matttel.