Applause Inc. History

Company Perspectives:

Applause Inc. specializes in the design, manufacturing, and distribution of high-quality, innovative plush, collectibles, and novelty gift items for children of all ages, featuring America's favorite licensed and non-licensed brands.

Company History:

Applause Inc. is a leader in design innovation, marketing year-round gift products for consumers of all ages. The company specializes in plush toys, figurines, and collectibles and is known worldwide for its high-quality, emotionally appealing product lines, featuring the most popular classic, promotional, and collectible characters in the marketplace.

Licenses have included characters from Mickey for Kids and Mickey Unlimited; Looney Tunes; Jim Henson's Muppets; Sesame Street; Raggedy Ann and Andy; Peanuts; Precious Moments; Disney's Winnie the Pooh, The Little Mermaid, and Mu-Lan; LucasFilm's Star Wars; Twentieth Century Fox's Anastasia; Nickelodeon's "Rugrats"; New Line Cinema's "Lost in Space"; as well as proprietary plush designs under the Dakin brand name, including new and classic plush, puppets, infant products, and seasonal merchandise, and Dakin's own licenses of Benji; Garfield and Odie; Fido Dido; Chip & Cookie; the Beast from Disney's Beauty and the Beast; Clifford the Big Red Dog; Snoopy; The Pink Panther; The Animaniacs; Cuddles Bear; Lamb Chop; Looney Tunes Lovables; Barney the dinosaur; The Flintstones; Betty Boop; and the 1996 Olympic mascot, Izzy, among others.

Larger competitors have included Hasbro Inc., Tyco/Matchbox, Mattel, Milton Bradley, Kenner, Parker Bros., Playskool, Playmobil, Playmates, and Galoob.

From the Start to the Smurf Boom, 1966-86

The company was founded in 1966 by Wallace Berrie, a successful manufacturer of drugstore novelty items, as The Wallace Berrie Company. Early growth was slow until 1979, when a package arrived containing little blue characters about "three apples tall."

Unaware that other companies had turned down the property, Berrie obtained worldwide rights to the little-known characters otherwise known as The Smurfs, created in 1958 by a European artist named Peyo. "The Smurfs Song" was recorded for Decca in 1977 by the "characters" and Dutch singer Vader Abraham, followed in 1978 by two other singles, "Dippety Day" and "Christmas in Smurfland," all of which became hits in Europe. A Belgian company called IMPS was marketing the little blue characters, including a hit television series, product merchandising, and even a theme park in Lorraine, France.

Berrie's company released the little blue figures in 1979 at $1.50 each, compared to the industry's standard $.29 and $.39 little stuffed figures. By 1982, the diminutive blue Smurfs had joined Steven Spielberg's alien E.T., a fat orange cat named Garfield, a doll named Strawberry Shortcake, everyone's favorite dog Snoopy, and G.I. Joe and Barbie dolls among the best-selling toys of 1982, ultimately going on to become a leader in the licensing industry, selling more than $1 billion in merchandise throughout the world and appearing on everything from apparel and home decor to sleepwear and bedding, from novelties and Halloween costumes to plush toys and lunch pails. By 1983, the company had doubled its sales every year, climbing to $700 million in sales from its nearly 100 licensees, plus another $100 million from its own Smurf products. By 1984, NBC led the network war with "The Smurfs," a reign which continued through 1986.

Sales for the company were bolstered by more recordings featuring songs like "Macarena" and Fool's Garden's "Lemon Tree" on follow-up albums like Smurfenhits (1996) and Smurfenholiday (1997) which featured Smurfs singing tracks by such artists as The Spice Girls and Coolio.

Operations, 1982-95

In a feeding frenzy for finances, a licensing boom occurred in 1982, with everyone marketing every product they possibly could think of, from toys and posters to plushies and figurines, from trading cards and resin kits to models and mugs, from action figures and lunch pails to shot glasses and cigarette lighters. During that year, Berrie acquired the Applause division from Knickerbocker Toys and, with the acquisition, inherited a number of classic licenses such as Disney, Sesame Street, and Raggedy Ann and Andy.

The stuffed animal industry enjoyed slow growth from $740 million in 1984 to $796 million in 1985. In 1986, the company changed its name to Applause Inc. and released The California Raisins items, which went on, like The Smurfs, to become another one of the most incredible licensing success stories in history. In 1987, for toddlers and tiny tots, the company released Bundles, a loveable stork, and was one of the only licensing opportunities featuring a stork.

By 1988, the stuffed toy category plummeted to about $934 million from highs of $1.4 billion in 1986 and $1.6 billion in 1987 as electronic stuffed toys and other fad-oriented stuffed toys--such as Cabbage Patch dolls and the Teddy Ruxpin talking bear&mdash-tered the marketplace.

In 1992, Applause released The Magic Trolls Babies, the first product from the company's newly created Toy Division. Magic Trolls Play Friends and Play Sets accessories came next, soon followed by "The Magic Trolls" animated TV special, which debuted during Thanksgiving week 1992. A second license introduced in 1992 was the Magic Glow Friends line, the first-ever plush products to feature a unique glow-in-the-dark design.

By 1993, the Smurfs and Applause were being pressured by other toys. Hasbro Inc. took the number one position with their Battle Trolls. Sunday morning purple PBS dinosaur Barney brought in second place, primarily with Dakin Inc.'s plushies. Others in the top ten included Mattel, Davis Grabowski's Thomas the Tank Engine line, the Belle doll from Disney's Beauty and the Beast, the EZ Squeeze Mix 'N Spin, and Gak.

In May, however, Design Licensing Group, the North American licensing representative for Viva La Wombat!, signed a multiyear licensing agreement with Applause, allowing the company to use the contemporary artwork on a wide range of decorative accessory products in conjunction with Springs Industries and Terragrafics, who would market novelty bedding and picture frames, respectively, under the Viva La Wombat! label.

In 1994, the company further explored direct marketing, establishing Applause Express, a program which created products in prepackaged sets offered either retail or via phone order.

Merger with Dakin, 1995

Late in 1995, Applause, the gift-market leader in classic and film licensed merchandise, merged with fellow Woodland Hills, California company, Dakin Inc., the most widely recognized brand name in stuffed animals.

By this time, Applause's portfolio included film and television licenses for stuffed toys, candles and figurines featuring classic Looney Tunes and Sesame Street characters, as well as characters from The Lion King, Star Wars, Star Trek, Gargoyles, The Mask, the California Raisins ads, Budweiser's Spuds Mackenzie commercial spots, and "The Smurfs."

Dakin had undergone a tumultuous ride in its long history. Founded in 1955 by Richard Dakin as an import business, the company pioneered the marketing of stuffed animals as impulse gifts during the 1960s. In 1963, Dakin, experiencing an increased market demand for its popular stuffed toy line, contracted Stafford Enterprises Inc. to serve as its East Coast warehousing and distribution arm, and the company was growing rapidly. But, in December 1966, tragedy struck the family and the company as Richard Dakin and his wife, their son Roger, his wife, and four of their five children were killed in an air accident. Harold Nizamian was elected president and Chief Executive Officer, and the company continued to manufacture stuffed animals, puppets, and baby products such as crib decorations and musical gifts.

As the mini-recession of the stuffed animal industry struck in 1988, Dakin Inc. introduced the Garfield "Stuck on You" stuffed toys, which were hot sellers and soon seen in car windows everywhere. By 1989, Dakin was enjoying sales of $200 million. That same year, Korea lost its "duty free" GSP status as a "most favored nation" and, by December 1990, Dakin, who outsourced nearly all of its manufacturing to the Far East, shifted much of its plush business from Korea to Thailand to escape unfavorable exchange rates and rising labor costs. Nonetheless, 1990 sales for the plushie giant dropped to $75 million.

Early in 1990, as competition in the stuffed animal market increased due to department stores and other retailers across the country starting massive give-away programs of stuffed animals as part of their promotions, Kansas City-based Hallmark Cards Inc., long considered one of the best companies in the nation to work for, expressed that it had been interested in purchasing Dakin for over ten years. The two companies signed an agreement in principle for Hallmark to purchase Dakin, which would operate as an independent subsidiary of the $2.5 billion company. The acquisition was called off in April; at the same time other companies, including Applause, expressed interest in purchasing Dakin.

Bob Solomon took over as CEO of Dakin in 1992, instituting a new strategy which balanced stuffed animals, seasonal gifts, and licensed character merchandise. The company also began seeking out new licensing. That year, Dakin launched its spring line with the addition of the Big Top line to its classic, branded plush.

In the plush category, joining licensed characters Benji, Garfield and Odie, Fido Dido, Chip & Cookie, and the Beast from Disney's Beauty and the Beast film, Dakin's Cuddles Bear appeared in six new styles, including Mama & Baby and a Limited Edition Carnival Bear wearing yellow and purple satin, a Mardi Gras mask, ruffled smock, and a commemorative brass medallion. A new 50-inch Garfield was released with especially long arms and legs designed in nylon parachute material and the Garfield Stuck On You Window Decoration reappeared with the message "I'm baa-aack."

In 1993, Patricof & Company bought a 30 percent interest in the primarily plush products giant. The following year, as every other company in the industry was downsizing, Dakin doubled its number of employees early in 1994 when it offered all its independent sales representatives positions as permanent employees.

By the time the merger with Applause occurred in 1995, Dakin had licenses featuring Snoopy, The Pink Panther, The Animaniacs, Cuddles Bear, Lamb Chop, Looney Tunes Lovables, Barney the dinosaur, The Flintstones, Betty Boop, the Coca-Cola polar bears and seals, and the 1996 Olympic mascot, Izzy, among others.

Both lines were maintained separately in the merged company and the sales force grew to 250 people serving more than 50,000 accounts throughout the world. The company would obtain licenses to characters from four popular films of 1995: Pocahontas, Casper, Congo, and Batman Forever.

The merger was in keeping with other consolidations in the industry at the time, including Tyco's purchase of Matchbox. But, since Applause and Dakin both manufactured stuffed animals and children's products sold to the gift retail business, and served mainly upscale retailers such as F.A.O. Schwarz, department stores, and specialty stores like Hallmark card shops, their products, which competed in the children's gift market, were not in direct competition with Mattel and Hasbro toys, distributed mainly through Wal-Mart and Toys "R" Us stores. The merger, however, did accelerate expansion into new and existing markets such as premiums (McDonald's Happy Meal toys, for example) and direct-marketing.

Applause created a Strategic Alliances Group to establish and oversee large, low-margin, food-related, premium-based programs for several major accounts, including Taco Bell, KFC, Kellogg's, General Mills, Pillsbury, and ConAgra's Kid's Cuisine Division, and the company had previously manufactured a Pocahontas locket for a South American firm. The company's revenues for 1995 were estimated at $150 million.

From Dakin On, 1996-Date

In 1996, the company received numerous awards and accolades for its innovative in-store merchandising displays and high-quality product design, including the prestigious Gold Popai Award for a Taco Bell Merchandising Display and the Bronze Popai Award for a Looney Tunes permanent floor unit. The company also received The National Parenting Center's Seal of Approval on the Disney's 101 Dalmatians Barking Body Puppet and the Kermit the Frog Body Puppet. Additionally, Family Fun magazine named Applause's Kermit the Frog Body Puppet a finalist for the 1996 Toy of the Year Award in the Stuffed Animals for Kids Aged 8-10 category. Annual revenue for 1996 was estimated at $280 million.

In September 1997, Applause Enterprises was acquired by a holding company formed by a management group and Frontenac Co., but retained its name. That same year, the company was honored with The President's Award at the annual Warner Bros. Worldwide Licensing Conference for innovation, partnering to grow the business, successful programs, and commitment to Warner Bros. Additionally, Applause received Family Fun's Toy of the Year Award for Sad Sam Huggable Plush, and Applause's Raggedy Ann Dance with Me Doll was included in Parents magazine's Top Toys of 1997 list.

In 1998, the company continued to maintain its classic licenses while picking up new ones, including those for characters from Disney's 1998 animated films A Bug's Life and Mu-Lan. Seemingly assured of an endless succession of such prominent character tie-ins, Applause's future appeared bright indeed.

Principal Subsidiaries: Dakin Inc.; International Tropic-Cal Inc.

Further Reading:

• "Applause, a Novelty Maker, Sold to Management Group," New York Times, September 26, 1997, p. C4(N)/D4(L).
• Bozman, Jean S., "New, Tougher Garfield Emerges," Computerworld, February 17, 1992, p. 53.
• Cuneo, Alice Z., "Hot Raisins; It's Licensed Products That Bring Big Bucks," Advertising Age, May 16, 1988, p. 30.
• "Custom Warehousing, Distributor Services Pay; Dakin, Stafford Make a Winning Combination," Playthings, May 31, 1989, p. 10.
• "Dakin to Nearly Double Employee Count," Playthings, March 1994, p. 6.
• "Design Licensing Group," HFD-The Weekly Home Furnishings Newspaper, May 3, 1993, p. 104.
• Dishman, Phyllis, "E.T., Smurfs Pace Licensing Boom," Playthings, November 1982, p. 23.
• "E.T., Smurfs Top Bestseller List; 60% of Respondents Report Sales Increases Despite Economic Malaise," Playthings, February 1983, p. 86.
• Fix, John, "Snoopy Gives Smurfs a Run for the Money," Playthings, November 1982, p. 22.
• Foreman, Liza, "Teutonic Tykes Tune to Toons," Variety, November 17, 1997, p. 40.
• "Ginny Doll Additions, Mister Rogers Puppets Top Dakin Entries," Playthings, March 1992, p. 42.
• Greene, Richard, and Ellyn Spragins, "Smurfy to the Max," Forbes, November 8, 1982, p. 67.
• Harrison, Joan, "Forming a Power in Toys and Gifts," Mergers & Acquisitions, September/October 1995, p. 43.
• "How They Keep Smurfs Under Control," Sales & Marketing Management, December 5, 1983, p. 63.
• "Licensing Pioneer Applause Is Still Blazing New Trails," Playthings, June 1992, p. 50.
• Maes, Marc, "Smurfs Have the Last Laugh: 'Little Blue Men' Sell 8 Million in Europe," Billboard, October 11, 1997, p. 57.
• "Merger of Applause, Dakin Is Likely As Prelude to IPO," Wall Street Journal, Europe, June 19, 1995, p. 5.
• Muller, E. J., "Santa's (Real) Helpers," Chilton's Distribution, December 1990, p. 32.
• Rakstis, Ted J., "Chicago: Barney, Thomas Are Still Ringing Up Sales," Playthings, March 1993, p. 23.
• Reysen, Frank, Jr., "Retailers Exploit Licensing Boom," Playthings, August 1982, p. 36.
• Roberts, Irving, "G.I. Joe Vies with Smurfs, E.T., Masters," Playthings, December 1982, p. 20.
• Schwimmer, Anne, "Patricof Runs with the Dinosaurs," Pensions & Investments, July 26, 1993, p. 10.
• Shaw, Jan, "Dakin's Sale Allows Family to Diversify," San Francisco Business Times, January 15, 1990, p. 4.
• Shiver, Jube, "Child's Play: NBC Vice President Phyllis Tucker Vinson Employs the Smurfs and Savvy Programming to Push the Network to the Top of the Ratings," Black Enterprise, August 1986, p. 30.
• Storm, Bill, "Smurfs Stand Out in Spotty Market," Playthings, June 1982, p. 26.
• ------, "Smurfs Still Hot in Many Stores," Playthings, December 1982, p. 18.
• ------, "TV Blitz Focuses Attention on Smurfs," Playthings, May 5, 1982, p. 28.
• Tyson, Salinda, "Hallmark Calls Off Purchase of Dakin," San Francisco Business Times, April 9, 1990, p. 13.
• Wanderer, Robert, "San Francisco: Battle Trolls Taking Charge," Playthings, March 1993, p. 20.
• "With Strong Upfront Market Behind Them, ABC and CBS Take Aim at NBC and the Smurfs," Television-Radio Age, August 20, 1984, p. 38.

Source: International Directory of Company Histories, Vol. 24. St. James Press, 1999.

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