Russ Berrie And Company, Inc. Business Information, Profile, and History

Company Perspectives

Russ Berrie and Company, Inc., creates smiles all over the world. A leader in the gift and juvenile products industry, we design, develop, and distribute innovative products that help people celebrate and commemorate milestones in their lives. From pre-natal to post-grad, infant to senior, the RUSS brand touches people, igniting smiles along the way.

History of Russ Berrie And Company, Inc.

Russ Berrie and Company, Inc., sells a wide variety of gift items, including stuffed animals, mugs, picture frames, figurines, and various home accessories through retailers located around the world. The company's brands include RUSS, Applause, Sassy, and Kids Line. Founded by a New Jersey toy salesman, the company saw its sales escalate dramatically after it went public in the early 1980s and began to acquire other gift makers. This growth through acquisition policy continued into the early years of the new millennium.

Origins

The company that bears Russ Berrie's name was founded in 1963. Berrie himself had always had entrepreneurial leanings. As a child in the East Bronx he worked delivering Sunday newspapers and selling scorecards at baseball games. After attending the University of Florida, Berrie worked as a salesman and as a manufacturer's representative, and in 1963, he decided to strike out on his own. With $500, he rented a garage in Palisades Park, New Jersey, and launched his own firm, named after himself. Berrie intended to design, market, and distribute "impulse" gift items.

Berrie believed that the market for impulse gifts was ripe for expansion. Impulse gifts, items that shoppers did not seek specifically but noticed while in a store and purchased on a whim, were designed to be affordable and evoke an emotional response in the shopper. The classic impulse gift was an object such as a stuffed animal, a mug, or a cute figurine found in a gift and card store. Demand for these items had been growing in the early 1960s, and Berrie believed that they could be sold in all sorts of retail outlets, not just stationery and gift stores.

Berrie also chose this field because he felt that his experience in the toy industry would serve him well. He knew which products sold well and, through the contacts he had made, was able to purchase his merchandise directly from manufacturers. In his first year of business, Berrie himself was Russ Berrie and Company's sole employee. He handled all tasks, from selling products, to putting them in packages, to typing up invoices. At the end of the year, he had racked up $60,000 in sales.

In 1964, Berrie created his first line of manufactured novelty items. Working with a designer, he came up with a line of stuffed animals and dubbed them "Fuzzy Wuzzies." In the following year, he supplemented the Fuzzy Wuzzie franchise with the "Bupkis Family," a group of soft, rubbery dolls. On the basis of the popularity of these products, sales for Russ Berrie and Company continued to grow throughout the company's first two years.

In 1966, Berrie formally incorporated his enterprise. Also that year, the company moved locations, trading up to a larger facility in Palisades Park, New Jersey, and adding to its workforce. In 1968, as the company shifted quarters again, moving to Elmwood Park, New Jersey, Berrie introduced Sillisculpts, small statues with messages inscribed on them, and these, too, became popular sellers.

Expansion

Berrie used the capital generated by sales of his first three product lines to finance further expansion of the company. Among his chief goals was the creation of a national sales force to sell his products to retailers. In 1968, the company hired its first full-time salesperson. This step allowed Russ Berrie and Company to promote its own products, rather than rely on manufacturers' representatives, who carried the goods of several different firms.

In 1971, as sales passed the $7 million mark, Russ Berrie and Company moved again, to a new corporate headquarters facility in Oakland, New Jersey. This location would become the center of the company's worldwide marketing and distribution businesses. In the following year, Russ Berrie and Company opened a second new facility, when a distribution center, in Santa Rosa, California, came on line. This was the first of a planned network of regional centers, each designed to fulfill warehousing, order processing, customer service, credit, and collections functions for accounts in a separate part of the country.

For its first ten years in business, Russ Berrie and Company concentrated on creating and designing its own products, and then contracted with manufacturers in the United States and abroad to produce them. Key to the company's success was the maintenance of a steady flow of ever-changing merchandise. Stores that sold Russ Berrie products needed a constant stream of seasonal, holiday, and everyday items to continually appeal to customers. In order to create these products and ensure that they tapped into current trends, Berrie inaugurated a product development department.

By 1973, however, dealings with manufacturers in Asia had become difficult, and Berrie decided to have his company take over the manufacturing of its products. Over the course of the next two years, the company purchased several manufacturing facilities, adding a stuffed animal factory in California, an injection molding factory in Florida, and another factory in Haiti. In addition, the company established a plastics factory in New Jersey and acquired a second plant in Florida. By 1977, Russ Berrie and Company had become a diversified producer and marketer of novelty goods, with a large number of different operations being run under the company's umbrella.

Such dramatic expansion in Russ Berrie and Company's activities, however, presented problems, as the company had, according to some critics, lost its focus. Berrie's expertise lay in sales and marketing, and he made sure to offer a wide variety of carefully selected products. As a manufacturer, however, Russ Berrie and Company was forced to abandon careful selection of products to market, in favor of keeping the machines in its factories running. As a result of its rapid expansion into manufacturing, Russ Berrie and Company found itself on the brink of bankruptcy. When Berrie realized that what his company did best was come up with ideas for novelty items, and market and sell them, not actually manufacture them, the company decided to withdraw from the production end of its business. In the mid-1970s, it began to shut down and sell its factories.

Following this decision, Berrie flew to the Far East and began to put into place structures for the manufacture of Russ Berrie products by others. In 1977, in Korea, the company set up the first of several satellite offices it would eventually open to facilitate production. Employees in this office were responsible for keeping tabs on items being manufactured for Russ Berrie and Company in the Far East. In this way, by hiring its own direct employees, the company hoped to avoid the difficulties of dealing with agents. Two years later, a second office, in Taiwan, was opened. Workers there oversaw the production of Russ Berrie goods in Taiwan and also took part in product development, helping to produce seasonal catalogues.

Also in 1979, Russ Berrie and Company established a subsidiary in the United Kingdom to serve customers there, as well as in the wider European market. The company set up a distribution center in Southhampton, England, which had a sales and support staff mirroring that of the company's American operations. With time, this facility was replaced with a larger one and distribution was expanded to cover Ireland, Holland, and Belgium. Russ Berrie and Company also set up agreements with independent distributors in other countries throughout Europe, guaranteeing that its products would achieve wide penetration of this market.

Continuing Growth

In the early 1980s, Russ Berrie and Company's sales continued to grow, and the company continued to expand its line of products. In fact, in 1982, the company was listed as one of the 500 fastest growing privately held firms in the United States by Inc. magazine. At this time, Russ Berrie and Company's sales force had grown to include 200 people. In a reorganization of company activities, the firm split its operations into two units: Plush & Stuff, which sold stuffed animals, fabric dolls, and other soft items; and Gift/Expression, which was responsible for figurines, picture frames, greeting cards, magnets, mugs, and holiday ornaments and designs. With this new structure, each retail account was serviced by two salespeople, one from each division. In order to make this possible, Russ Berrie and Company hired a large number of new salespeople, doubling the size of its domestic salesforce.

By 1983, annual sales of Russ Berrie and Company products had exceeded $100 million. To keep track of the increased volume of products, the company installed a new computer system to oversee inventory and sales. Moreover, the company's MIS department was created for providing accurate data to managers, so that they could make decisions about which merchandise to select or discontinue.

Also in 1983, Russ Berrie and Company opened its Tri Russ International office in Hong Kong. Employees at this location were responsible for overseeing manufacturing in Hong Kong and also for providing sales and product support to all Russ Berrie and Company distributors around the world who did not have their own direct sales representative.

In 1984, Russ Berrie and Company sold stock to the public for the first time, as it was listed on the New York Stock Exchange. In the wake of this move, sales of the company's products started to grow rapidly. As a sign of this growth, Russ Berrie and Company opened two new warehouses to distribute its goods. One, in South Brunswick, New Jersey, serviced the eastern part of the United States. Another, in Petaluma, California, was designed to help move products from the Far East to other locations within the country most efficiently. Together, these two new facilities boasted 700,000 square feet of space, making the company's worldwide total of property owned more than 1.5 million square feet of space.

By 1985, Russ Berrie and Company sales had reached $204.6 million, and revenues more than doubled in just two years. At this time, the company embarked upon a program of rapid growth through acquisitions. In that year, Russ Berrie and Company bought Amram's Distributing Limited, which already functioned as the distributor for the company's products in Canada. Under the umbrella of the parent company, Amram's quickly expanded, until it had more than 60 salespeople peddling Russ Berrie and Company products to more than 6,300 retailers.

The following year, the company purchased two more firms in its industry: Freelance, Inc., and the Effanbee Doll Company. In 1987, the company also bought Phil Papel Imports, Inc. The Freelance and Papel operations were amalgamated into one subsidiary, called Papel/Freelance, which was served by more than 100 salespeople. This division of the company distributed seasonal and everyday gifts, and was particularly well known for its beverage mugs. More than 20,000 retailers sold these goods throughout the United States, Canada, and the United Kingdom.

Also in 1987, Russ Berrie and Company entered the retail business for the first time, when it bought Fluf N'Stuf, a chain of 21 gift stores. Fluf N'Stuf outlets were located in regional malls throughout the East Coast of the United States. In this way, Russ Berrie and Company was able not only to sell its own goods, but to get an accurate picture of where demand for gift items was moving.

Also in 1987, Russ Berrie and Company became a licensee of the National Football League, with the right to sell products marked with the insignia of various NFL teams. At the end of the year, the company was given an award for its high sales of NFL products. Later, the company also began to market Major League Baseball merchandise.

As a result of its steady expansion through acquisition, Russ Berrie and Company reported pretax profits of $56 million in 1987. This figure was also enhanced by a boom in the demand for stuffed animals. The following year, however, the market for stuffed animals crashed, as the fad passed, and Russ Berrie and Company's profits plummeted to $23 million. Consequently, the price of the company's stock fell as well.

In the late 1980s, the company opened additional manufacturing supervision offices in Indonesia and Thailand, as these areas became locations of production for the company. In addition, Russ Berrie and Company expanded its distribution to areas of the former Soviet Union after the fall of the Berlin Wall in 1989. In time, its products and dolls were even featured in the Moscow airport gift shop.

New Acquisitions

Russ Berrie and Company continued its expansion through acquisition in the early 1990s. In 1991, the company bought Bright of America, which produced place mats and stationery products sold primarily through big mass marketers, such as Wal-Mart and Kmart. In the wake of this purchase, Russ Berrie and Company began to utilize this company's manufacturing facility, located in West Virginia, to manufacture greeting cards and other paper products. Bright also ran a school fund-raising operation, in which schools purchased gift items for the students to resell in order to earn money for clubs and trips. During this time, Russ Berrie and Company also bought Weaver Werks, another gift producer, which specialized in popular and trendy items, such as cleverly packaged jelly beans and candy. The products of this subsidiary were added to the company's Papel/Freelance division.

In 1992, Russ Berrie and Company's fortunes got a lift, when the popularity of one of its oldest products, Trolls, first introduced in the 1960s, escalated dramatically. Although they had not been a big seller for many years, suddenly the company's trolls--squishy dolls with rubbery faces and hair that stood on end--were experiencing wild demand. To meet this clamor, Russ Berrie and Company's designers began to churn out hundreds of different troll products, and the company's Far Eastern suppliers raced to keep output high. By the end of the year, pushed by the troll fad, the company's earnings had soared to $300 million.

Flush with this success, Russ Berrie and Company expanded its product line even further in 1993, when it purchased Cap Toys, Inc., a Cleveland distributor of toys and candies. With this move, the company hoped to diversify its activities. Cap Toy products included the Stretch Armstrong and Spin Pops candies, which were supported through heavy advertising and were sold through many large retailers. With the addition of these products, the company's product line grew to more than 8,000. In 1994, OddzOn Products Inc. was acquired. With a strong record of success over the previous three decades and a solid franchise in the gift market, the company seemed assured of continued success as it moved into the late 1990s.

1995 and Beyond

With gift item sales on the rise, Russ Berrie and Company decided to sell its Papel/Freelance unit in order to focus on its core business in 1996. It also sold Cap Toys and OddzOn Products the following year. The cash from these sales would allow funding for future acquisitions. The company expanded its foothold in several international markets during this time period as well. Showrooms were opened in Hong Kong and South America and direct sales forces began selling Russ Berrie products in Germany and Spain. In 1999, Russ Australia Pty. Ltd. was formed in Sydney, Australia. That year the company adopted a new advertising slogan--"Make someone happy".

The company made several key purchases in the early years of the new millennium. In 2002, Russ Berrie and Company added Sassy Inc. to its arsenal in a $45 million deal. The addition of Sassy, a Michigan-based designer and manufacturer of baby and juvenile products, was expected to fuel future growth. It also launched its home and garden subsidiary that year. In 2004, the company acquired the rights to use the Applause Inc. trademark. Later that year, it purchased Kids Line L.L.C., a designer and distributor of juvenile bedding products, and sold its Bright of America subsidiary.

In December 2002, founder, chairman, and CEO Russ Berrie died unexpectedly after having a heart attack in his home. Often named by Fortune magazine as one of America's most generous philanthropists, Berrie was just 69 years old when he died. Josh Weston was named chairman and Berrie's widow, Angelica Berrie, took over as CEO. She stepped down in 2004 when former Toys 'R' Us executive Andrew Gatto assumed the position.

At the time of Gatto's arrival, Russ Berrie and Company stood well positioned with no debt and more than $60 million in free cash even as independent gift stores were seeing sales falter amid intense competition from the likes of Wal-Mart, Target, and other large stores. Gatto outlined part of his strategy in a July 2004 Knight-Ridder/Tribune Business News article. "The company will be far more open to externally fueled development. That will come in the form of relationships with the inventing and product development communities as well as the licensing community. That's a major change of direction for this company." In addition, Gatto planned to develop new brands for mass market and upscale department stores. Gatto's first licensing deal was with Wolverine Worldwide to produce its Hush Puppy hound doll.

As sales in the company's core retail gift business continued to falter in 2005, Russ Berrie and Company initiated a restructuring plan that included job cuts and other streamlining efforts to reduce costs. It planned to shutter sales and distribution operations in France, Germany, Belgium, and the Netherlands. Overall, company sales increased in 2005 due mainly to growth in its infant and juvenile division. The company's bottom line was not as positive, as it posted a net loss of $35.1 million for the year. Angelica Berrie, head of The Russell Berrie Foundation, decided to sell the foundation's 42 percent stake in Russ Berrie and Company in August 2006. Private investment firm Prentice Capital Management LP set plans in motion to acquire the stake. Prentice Capital Management would become the company's largest shareholder upon completion of the deal.

Principal Subsidiaries

Russ Berrie U.S. Gift, Inc.; Russ Berrie & Co. (West), Inc.; Russ Berrie and Company Investments, Inc.; Russ Berrie and Company Properties, Inc.; Amram's Distributing Ltd.; Russplus, Inc.; Sassy, Inc.; Kids Line, L.L.C.; Kids Line Australia Pty. Ltd.; Tri Russ International (Hong Kong) Ltd.; Russ Consulting Service (Shenzhen) Co., Ltd.; Russ Berrie (U.K.) Ltd.; Russ Berrie (Holdings) Ltd.; Russ Berrie España, S.L.; Russ Berrie (Deutschland) GmbH; Russ Berrie (Österreich) GmbH; Russ Berrie France S.A.R.L.; Russ Berrie (Benelux) B.V.; Russ Berrie (Ireland) Ltd.; Russ Australia Pty. Ltd.

Principal Competitors

The Boyds Collection Ltd.; Enesco Group Inc.; Ty Inc.

Chronology

• Key Dates
• 1963 The company that bears Russ Berrie's name is founded.
• 1964 Berrie creates his first line of manufactured novelty items--Fuzzy Wuzzies.
• 1966 Berrie incorporates.
• 1968 The company hires its first full-time salesperson.
• 1979 Russ Berrie and Company establishes a subsidiary in the United Kingdom.
• 1984 The company goes public.
• 1985 Amram's Distributing Limited is acquired.
• 1987 Russ Berrie and Company enters the retail business for the first time when it buys the Fluf N'Stuf chain of 21 gift stores.
• 1992 The popularity of Trolls, one of the company's oldest products, escalates dramatically.
• 1996 Papel/Freelance is sold.
• 2002 Founder Russ Berrie dies; Sassy Inc. is acquired.
• 2004 The company purchases the Applause trademark.