Hallmark Cards, Inc. Business Information, Profile, and History

Company Perspectives:

This Is Hallmark: We believe: That our products and services must enrich people's lives and enhance their relationships. That creativity and quality-in our concepts, products and services&ndashe essential to our success. That the people of Hallmark are our company's most valuable resource. That distinguished financial performance is a must, not as an end in itself, but as a means to accomplish our broader mission. That our private ownership must be preserved.

The values that guide us are: Excellence in all we do. Ethical and moral conduct at all times and in all our relationships. Innovation in all areas of our business as a means of attaining and sustaining leadership. Corporate social responsibility to Kansas City and to each community in which we operate. These beliefs and values guide our business strategies, our corporate behavior, and our relationships with suppliers, customers, communities and each other.

History of Hallmark Cards, Inc.

Hallmark Cards, Inc. is the world's largest greeting card company, creating 30,000 different designs and related products each year in more than 30 languages, and distributing them in more than 100 countries. In addition to the Hallmark flagship, the company also markets cards under the Ambassador and Expressions from Hallmark brand names. The company's products are sold in Hallmark retail outlets, through mass merchandise stores, and via the hallmark.com web site. Over the years, Hallmark has branched out into other products and services that use creativity and emotion to help people connect, including stationery, party goods, gift wrap, photo albums, cut flower arrangements, home decor, collectibles, books, and Christmas ornaments. In the late 1990s, the company acquired several specialized greeting card companies that operate as wholly owned subsidiaries, including DaySpring Cards, Inc., the leader in Christian personal expression products; InterArt Holding Corporation, maker of high-quality greeting cards and related products including the Mary Engelbreit and Holly Pond Hill lines; and William Arthur, Inc., which offers customized holiday cards, wedding invitations, fine stationery, and other high-end products. Hallmark's Binney & Smith Inc. subsidiary specializes in personal skill development products, including Crayola crayons, Magic Markers, modeling material, creativity software, model kits, and art supplies for professionals and students. Hallmark also creates family-oriented television programming through its Hallmark Entertainment, Inc. subsidiary. Hallmark Entertainment holds a controlling majority stake in Crown Media Holdings, Inc., operator and distributor of two cable television channels: the Hallmark Channel and the Kermit Channel. Yet another wholly owned subsidiary is The Picture People, operator of more than 250 mall-based portrait studios in 26 states. Even with the firm's diversification, the greeting card remains Hallmark's mainstay--so much so that Hallmark has often been mistakenly credited with inventing it.

Early History

Hallmark was founded by Joyce C. Hall, a native of Norfolk, Nebraska, who as a teenager ran a postcard company with his older brothers. In 1910 Hall, still only 18, left the family business he had founded after a traveling salesman convinced him that Kansas City, Missouri, would serve him better as a wholesaling and distribution center. Almost immediately after arriving in Kansas City, Hall set up a mail-order postcard company in a small room at the Young Men's Christian Association, where he remained until his landlord complained about the volume of mail Hall was receiving. The new company was named Hall Brothers, a name justified the following year when Rollie Hall came to Kansas City to join his brother in the business.

At that time, picture postcards were all the rage in the United States, with the best ones imported from Europe. Very early on, however, Joyce Hall came to believe that the postcard's appeal was quite limited. They were novelty items rather than a means of communication; with the leisure time required to write long letters diminishing, and the long-distance telephone call still a rare phenomenon, people would need a shorthand way of reaching each other by mail. Greeting cards suggested themselves as a viable alternative, so in 1912 Hall Brothers added them to its product line.

The outbreak of World War I bore out Hall's contention. The supply of postcards from Europe dried up, but domestic products were of inferior quality and their popularity waned. Greeting cards stepped into the breach. In 1914 Hall Brothers bought a small press and began publishing its own line of Christmas cards. In 1915 a fire destroyed the company's entire inventory, putting it $17,000 in debt, but Joyce and Rollie Hall rebuilt the business. In 1921 they were joined by their brother William Hall. By 1922 Hall Brothers had recovered to the point where it was employing 120 people, including salespeople in all 48 states. Also that year, it diversified for the first time and started selling decorative gift wrap.

In 1923 the company formally incorporated under the name Hall Brothers, Inc., and two years later the Hallmark brand name appeared on the company's products for the first time. Over the next two decades, the company would attack its market aggressively through advertising. In 1928 Hall Brothers became the first greeting card company to advertise nationally when it took out an ad in Ladies Home Journal. In 1936, with the national economy emerging from the worst of the Great Depression, Hall Brothers went on the attack again, introducing an open display fixture for greeting cards that Joyce Hall had developed with the help of an architect. Previously, cards had always been kept under store counters, out of customers' sight and usually in a disorganized state. In 1938 Hall Brothers advertised in the broadcast medium for the first time when it began sponsoring "Tony Won's Radio Scrapbook" on WMAQ radio in Chicago. Meantime, the company's first licensing deal was concluded in 1932, when it gained the right to use Walt Disney characters on its products.

When the United States entered World War II, the company pitched an appeal to friends and loved ones of military personnel with the slogan "Keep 'em happy with mail." Hall Brothers would find its most famous and enduring slogan in 1944, however, when it started using the tagline "When you care enough to send the very best," which had been suggested a few years earlier by Sales and Advertising Manager Ed Goodman. After the war, a staff artist created the company's logo, consisting of a five-pointed crown and the Hallmark name in script letters. Hall Brothers trademarked the logo in 1950.

1950s and 1960s: Hallmark Hall of Fame, Retail Shops, Ambassador Cards

The company established another landmark in advertising on Christmas Eve 1951, when it sponsored a television production of Gian Carlo Menotti's opera Amahl and the Night Visitors. This was the first of the famous Hallmark Hall of Fame series, which two years later presented a production of Hamlet starring the noted British Shakespearean actor Maurice Evans. That broadcast marked the first time the entire play had ever been seen on U.S. television. As Joyce Hall himself once said, "Good taste is good business."

Also in the early 1950s, Hall Brothers began opening the first of thousands of retail shops specializing in Hallmark cards. In 1954 the company changed its name to Hallmark Cards, Inc., having already used Hallmark as a brand name for 31 years. In 1959 the company introduced its Ambassador Cards line to tap into the lucrative market presented by shoppers at mass merchandisers such as supermarkets, discount stores, and drugstores. The next year Hallmark introduced its own line of party decorations and began featuring characters from Charles M. Schulz's "Peanuts" comic strip on its products.

In 1966 Joyce Hall retired as president and CEO of the company he had founded. Handing the reins to his son, Donald Hall, Joyce Hall nevertheless remained active in company affairs as chairman until his death in 1982. Joyce Hall was not only a wealthy and successful businessman when he died, but also a member of the French Legion of Honor and a commander of the British Empire. He had been friends with British Prime Minister Winston Churchill and with U.S. Presidents Harry Truman and Dwight Eisenhower. For the latter Hall Brothers custom-designed an official presidential Christmas card in 1953.

Among Donald Hall's first important moves as CEO of Hallmark were the 1966 establishment of Hallmark International to further expand the company abroad and the 1967 acquisition of Springbok Editions, maker of jigsaw puzzles. The next year, the company broke ground on the Crown Center, a $500 million retail, commercial, and residential complex intended to revitalize an area near downtown Kansas City and financed entirely with company funds. Hallmark created a new subsidiary, Crown Center Redevelopment Corporation, to oversee it.

1980s Acquisitions

In 1979 Hallmark acquired Georgia-based lithographer Litho-Krome Corporation. In 1981 the company formed a division, Hallmark Properties, to create and administer licensing projects. This division went on to create Hallmark's Rainbow Brite, Purr-Tenders, and Timeless Tales character merchandise, and also oversaw the company's licenses for Peanuts and Garfield cartoon characters. Later still, this division would be renamed Hallmark Licensing (in 1992) and its licensed properties would include Harry Potter, Dr. Suess, Barbie, Winnie the Pooh, Looney Tunes, Blue's Clues, and Batman.

The Crown Center development suffered a disaster in 1981 when two suspended walkways at the center's Hyatt Regency hotel collapsed, killing 114 people and injuring 225. After his father's death in 1982, Donald Hall added the chairmanship to his duties as CEO. In 1984 Hallmark acquired Binney & Smith, the Pennsylvania-based maker of Crayola crayons and Liquitex art materials. In 1986 Donald Hall retired as CEO and handed the post to the company president, Irvine O. Hockaday, Jr.

In 1987 Hallmark, after being a prominent advertiser in the broadcast media for many years, became an owner as well when it acquired a group of Spanish-language television stations from Spanish International Communication. The next year, it added another station purchased from Bahia de San Francisco Television. Also in 1988, Hallmark acquired a Spanish-language network, Univision, and amalgamated all of its holdings in a subsidiary, Univision Holdings. Based in New York, the subsidiary ran the nine full-power stations under the name Univision Station Group.

During the mid-1980s small greeting card companies began competing for Hallmark's market position with a diverse array of cards that became favorites. In the mid-1980s Hallmark fought back with its Personal Touch and Shoebox Greetings series (the latter debuting in 1986). Many of these cards, however, bore a resemblance to rival designs that some found too striking. In 1986 Blue Mountain Arts, Inc., which produced non-occasion cards featuring poetry and pastel illustrations to produce a concentrated emotional effect, sued Hallmark for copyright and trade infringement and unfair competition. The initial decision went against Hallmark, which appealed ultimately to the Supreme Court. When the Supreme Court refused to hear the case in 1988, Hallmark agreed to discontinue its Personal Touch line. Financial terms of the settlement were not disclosed.

1990s into the 21st Century: Diversifying in the Face of Increasing Competition

Hallmark's biggest challenge during the early 1990s was confronting its continuing loss of market share to the number two and three companies in the greeting card industry, American Greetings Corporation and Gibson Greetings, Inc., respectively. From 1990 to 1995, it was estimated that Hallmark's market share fell from 50 to 45 percent. In the mid-1990s, some industry experts were even suggesting that American Greetings would overtake Hallmark sometime between 1999 and 2004.

The reason for Hallmark's decline rested in the very backbone of its empire--the specialty card and gift shops that sold the Hallmark brand, which by the early 1990s numbered more than 10,000. Over a long period, these shops had fallen victim to changing buying patterns in particular among women, who still bought 90 percent of all cards sold. Pressed for time, more and more consumers were opting to purchase cards at one-stop shopping outlets--supermarkets, drugstore chains, and large discounters--such as Wal-Mart. In the early 1970s more than half of all cards were sold in specialty shops; by the early 1990s only about 30 percent were. American Greetings and Gibson, which did not have such extensive ties to the card shops, were able to recognize the trend and shift to accommodate it. Hallmark, however, was in a bind. Continuing to rely so heavily on specialty shops would do nothing to halt its market share decline, but it could not simply abandon the shops, for doing so would bankrupt many of them, not something a company as paternalistic as Hallmark could seriously consider.

One strategy was to diversify away from greeting cards even further. In 1990 Hallmark acquired Willitts Designs, a maker of collectibles, but then sold the company only three years later. Likewise, Hallmark's venture into Spanish-language television was abandoned in 1992 at a loss of $10 million when Univision was sold to Grupo Televisa. Cable television was Hallmark's next foray with the 1991 formation of a Crown Media Inc. subsidiary to which was added Cenom Cable in St. Louis, through the purchase of a controlling interest for $1 billion. In 1994 this venture too was cast aside when Hallmark sold Crown Media to Charter Communications Inc. for $900 million.

During this period Hallmark also updated its product line, offering a more high-tech approach to card purchasing. In 1991 the "Personalize it!" in-store kiosk was introduced (later called Touch-Screen Greetings), through which customers were able to create computer-generated personalized greeting cards. The following year Hallmark filed suit for infringement of its kiosk patent against American Greetings and its Creata-Card kiosk. The suit was settled in 1995 with each company receiving a worldwide, nonexclusive license to use the technology; no other details on the settlement were provided at that time.

Moreover, in 1994, Hallmark developed recordable greeting cards in partnership with Information Storage Devices. Initially retailing for $7.95 each, these cards allowed the sender to record his personal message, which would then play back each time the card was opened. Also in 1994 came the debut of the Hallmark Gold Crown Card, a frequent-buyer reward program for customers at selected Hallmark retail stores. Two years later, the Hallmark stores participating in the reward program were rebranded under the Hallmark Gold Crown name through a $100 million remodeling program in which the stores were also provided with a fresh look. In addition to the frequent-buyer program, the Gold Crown stores differed from regular Hallmark stores in several respects; they had their own lines of cards and exclusive merchandise, and they were all owned by individuals and were not franchises.

In the face of declining profits brought on by declining market share, Hallmark went through a series of reengineering and restructuring efforts in the early 1990s in an attempt to hold costs down. U.S. and Canadian operations were consolidated, and a 1995 restructuring brought together for each Hallmark card brand its administrative, marketing, and product development functions.

Additional diversification moves in the area of entertainment were made in the mid-1990s. In 1994 Hallmark acquired RHI Entertainment Inc. for $365 million. RHI was the television production company responsible for Hallmark's Hall of Fame productions. Hallmark thus acquired the world's leading producer of family-oriented entertainment, which it promptly renamed Hallmark Entertainment, Inc. and set up as a subsidiary of Hallmark Cards. Then in 1995, Hallmark purchased a 9.9 percent stake in European broadcaster Flextech for $80 million. Flextech and Hallmark created a family-oriented international cable television network, the Hallmark Entertainment Network, which commenced operations in Ireland and the United Kingdom in 1996. Next, Hallmark Entertainment, Inc. teamed up with the Jim Henson Company in 1998 to launch the Kermit Channel, a pay television channel featuring general family entertainment fare. Also in 1998, Hallmark purchased a significant stake in the Odyssey channel, a cable network that had been launched in 1988 as a religious channel and that was in the process of being transformed into a family-oriented entertainment channel.

Given the uneven success of Hallmark's other ventures, greeting cards remained the company's most important endeavor. New promotions of Hallmark cards in the mid-1990s included a "sneak-a-peek" advertising campaign, comprising a series of commercials in which people were caught looking at the backs of the cards they had received, just to make sure they were Hallmarks. Continuing to seek ways to reverse the decline in its share of the greeting card market, the Hallmark brand was introduced into the mass merchandiser market for the first time with the 1997 launch of Expressions from Hallmark. The cards featured the Hallmark logo on the back and were initially marketed though more than 5,000 discounters, supermarkets, and drugstores. This move angered many owners of Hallmark retail stores, who feared that their sales would suffer. In 1999 came the debut of yet another new line called Warm Wishes, which featured cards priced at 99 cents and aimed at increasingly value-conscious consumers. The Warm Wishes line debuted in more than 17,000 retail outlets across the United States. The new initiatives appeared to be working, as Hallmark reported that its share of greeting card sales in the U.S. retail market increased from 47 percent in 1997 to 51 percent in 1998 to 52 percent in 1999.

Although the company had been involved in the online world in various ways since the mid-1980s, Hallmark's first serious move into the Internet came in 1996 with the launch of its corporate web site, hallmark.com. Primarily offering corporate news and product information, the site did offer some early versions of free electronic greeting cards (or e-cards). In November 1997 an overhauled hallmark.com went live with a much more extensive selection of free e-cards, some e-cards that sold for $1.50, and new e-commerce features, such as the online retailing of gift products, including jewelry, flowers, and stuffed animals. In late 1999 Hallmark began offering all of its e-cards free of charge.

The pace of acquisitions quickened in the late 1990s as Hallmark continued to diversify. In 1997 the company purchased William Arthur, Inc., a West Kennebunk, Maine-based maker of customized and prepackaged stationery products. Overseas growth was pursued as well in response to U.S. greeting card sales being flat for several years. Hallmark in 1998 acquired Creative Publishing plc, a leading U.K. maker of boxed and seasonal cards, for about $310 million. Creative was merged into the company's existing U.K. business, which was renamed Hallmark Cards (Holdings) UK. The purchase of Creative increased Hallmark's share of the U.K. greeting card market to nearly 30 percent, making it the number one player there. Hallmark similarly expanded in France in 1998 through the purchase of Editions DALIX. Two more acquisitions were completed in the United States in 1998: Bloomington, Indiana-based InterArt Holding Corporation, maker of high-quality greeting cards and related products whose product line included items designed by artist Mary Engelbreit; and Tapper Candies, a maker of candy, toys, and party favors based in Cleveland. During 1999 Hallmark acquired DaySpring Cards, Inc., the leading creator of Christian personal expression products. Adding the Siloam Springs, Arkansas-based DaySpring provided Hallmark with increased access to the fast-growing Christian card market. A second acquisition in 1999 brought The Picture People into the Hallmark fold. Based in Foster City, California, The Picture People operated a national chain of mall-based portrait studios.

In mid-1999 Hallmark launched an ambitious ten-year strategic plan, aiming to triple revenues by 2010, to $12 billion. The company planned to remain centered around its core greeting card business, but would also pursue growth and expansion in five additional business platforms: "caring gift solutions, memories, life celebrations, personal development, and family entertainment." Subsequent developments in greeting cards included the launch of Hallmark en Español, a line of more than 1,000 Spanish-language greeting cards; the introduction of Hallmark Fresh Ink, a line of hipper, sometimes risque cards aimed at women between the ages of 18 and 39; and the signing of Maya Angelou to a licensing deal to develop cards and specialty gifts featuring newly written poetry and sentiments from the poet laureate. As the 21st century began, Hallmark had to contend with an enlarged competitor in the form of American Greetings, which purchased the number three card company, Gibson Greetings, in 2000. According to Ashlea Ebeling writing in Forbes, the market share battle had now grown even tighter, with Hallmark holding 45 percent of the U.S. card market and American controlling 40 percent.

In the area of family entertainment, meantime, Hallmark in May 2000 made a partial offering of stock in Crown Media Holdings Inc., a subsidiary of Hallmark Entertainment that operated and distributed the Hallmark Entertainment Network, the Kermit Channel, and the Odyssey channel. Hallmark retained a 49.1 percent stake in Crown Media and 90 percent of its voting rights. In 2001 Odyssey's name was changed to the Hallmark Channel, and the network began stepping up its showings of Hallmark Hall of Fame productions. Crown Media also began rebranding its Hallmark Entertainment Network outlets located outside the United States under the Hallmark Channel name.

Principal Subsidiaries: Binney & Smith Inc.; Crown Center Redevelopment Corporation; DaySpring Cards, Inc.; Gift Certificate Center; Hallmark Entertainment, Inc.; Hallmark International; Halls Merchandising, Inc.; InterArt Holding Corporation; Irresistible Ink; Litho-Krome Company; The Picture People; Tapper Candies; William Arthur, Inc.; Hallmark Cards Australia Ltd.; Binney & Smith Ltd. (Canada); Hallmark Cards Canada; Hallmark Group France, S.A.; Hallmark Mexicana, S. de R.I. de C.V. (Mexico); Hallmark Cards Nederland B.V. (Netherlands); Uitgeverij Spanjersberg B.V. (Netherlands); Verkerke Reprodukties, N.V. (Netherlands); Hallmark Cards New Zealand Ltd.; Hallmark Cards Iberica, S.A. (Spain); Hallmark Cards (Holdings) UK.

Principal Competitors: American Greetings Corporation; CSS Industries, Inc.; Amscan Holdings, Inc.; Factory Card Outlet Corp.; Thomas Nelson, Inc.; Blue Mountain Arts, Inc.

Chronology

• Key Dates:

• 1910: Joyce C. Hall sets up a mail-order postcard company in Kansas City, Missouri.
• 1911: Hall's company begins operating under the name Hall Brothers.
• 1912: Greeting cards are added to the product line.
• 1923: Company is incorporated as Hall Brothers, Inc.
• 1925: The Hallmark brand name is used for the first time.
• 1928: Hall Brothers becomes first greeting card company to advertise nationally with an ad in Ladies Home Journal.
• 1938: First radio advertising through sponsorship of "Tony Won's Radio Scrapbook" on Chicago's WMAQ.
• 1944: First use of the slogan "When you care enough to send the very best."
• 1950: Company trademarks its famous logo, consisting of a five-pointed crown and the Hallmark name in script letters.
• 1951: Hallmark Hall of Fame series is launched with the company's sponsorship of a television production of the opera Amahl and the Night Visitors.
• Early 1950s:First retail shop specializing in Hallmark cards opens.
• 1954: Company changes its name to Hallmark Cards, Inc.
• 1959: The Ambassador Cards line is launched to serve shoppers at mass merchandisers.
• 1967: Springbok Editions, maker of jigsaw puzzles, is acquired.
• 1984: Binney & Smith, maker of Crayola crayons and other art products, is acquired.
• 1986: Shoebox Greetings line of nontraditional cards is launched.
• 1994: RHI Entertainment, Inc. is acquired and is later renamed Hallmark Entertainment, Inc.; the Hallmark Gold Crown Card, a frequent-buyer reward program for customers of selected Hallmark retail stores, is introduced.
• 1997: Expressions from Hallmark is launched, marking the debut of the Hallmark brand in the mass merchandising market; William Arthur, Inc., maker of customized and prepackaged stationery products, is acquired; company web site adds e-commerce features.
• 1998: Hallmark completes several acquisitions: U.K.-based Creative Publishing, Editions DALIX of France, and InterArt Holding and Tapper Candies, both U.S.-based; a significant stake in the Odyssey channel is acquired.
• 1999: A line of 99-cent greeting cards is introduced under the Warm Wishes brand; DaySpring Cards and The Picture People are acquired; company launches a ten-year strategic plan, aiming to triple revenues by 2010, to $12 billion.
• 2000: A partial offering of stock in Crown Media Holdings Inc. is completed.
• 2001: The Odyssey channel is relaunched as the Hallmark Channel.