Russ Berrie and Company, Inc. History

Company History:

Russ Berrie & Company, Inc. sells a wide variety of gift items, including stuffed animals, mugs, picture frames, figurines, greeting cards, and stationery, through retailers located around the world. The company has grown and prospered by appealing to the impulses of shoppers, seeking always to offer fresh merchandise, which reflects current trends and fads. 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.

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 gift market 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 & 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 work force. 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.

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 & Company to promote its own products, rather than rely on manufacturers' representatives, who carried the goods of a several different firms.

In 1971, as sales passed the $7 million mark, Russ Berrie & 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 & 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 & 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 & 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 & 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 & 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 & 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 off 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 & 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 & 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 & Company also set up agreements with independent distributors in other countries throughout Europe, guaranteeing that its products would achieve wide penetration of this market.

In the early 1980s, Russ Berrie & 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 & 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 & Company hired a large number of new salespeople, doubling the size of its domestic sales force.

By 1983, annual sales of Russ Berrie & 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 & 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 & Company distributors around the world who did not have their own direct sales representative.

In 1984, Russ Berrie & 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 & 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 & 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 & 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 & Company products to over 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 20,00 retailers sold these goods throughout the United States, Canada, and the United Kingdom.

Also in 1987, Russ Berrie & 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 & 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 & 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 & Company reported pre-tax 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 & 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 & 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.

Russ Berrie & Company continued its expansion through the acquisition in the early 1990s. In 1991, the company bought Bright of America, which produced place mats and stationary products sold primarily through big mass marketers, such as Wal-Mart and Kmart. In the wake of this purchase, Russ Berrie & 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 & 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 & 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 Berry & 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 & 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. 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.

Principal Subsidiaries: Amram's Distributing, Limited (Canada); Bright of America, Inc.; Cap Toys, Inc.; Fluf N'Stuf, Inc.; Papel/Freelance, Inc.; Russ Berrie, Limited (UK); Tri Russ International, Limited (Hong Kong).

Further Reading:

• Berrie, Russell, "Concentrate on Doing What You Do Best," Baylor Business Review, Fall 1994, pp. 2-5.
• Toplis, Maggie, "Awakenings," Financial World, July 7, 1992, p. 66.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.