The Vermont Teddy Bear Co., Inc. History

Company Perspectives:

Rooted in the enduring Vermont values of hard work and quality craftsmanship, The Vermont Teddy Bear Company earns the confidence and trust of its customers with friendly, reliable service and the best Bears in the universe. Our Bears are alive with personality, attitude, and a touch of the unexpected to bring people together in a totally different and fun way. We, the Bear Crew, are people who are passionate about our work, are willing to take risks, reinvent constantly, and above all ... we love Teddy Bears. Key Dates:

Key Dates:

1981:

John Sortino sews his first teddy bear.

1983:

Sortino founds The Vermont Teddy Bear Co., Inc. (The Vermont Teddy Bear Company).

1990:

Vermont Teddy Bear introduces the 'Bear-Gram.'

1993:

The company holds its initial public offering.

1994:

The company builds a $6 million factory which doubles as a tourist attraction.

1995:

R. Patrick Burns replaces John Sortino as chief executive officer.

1996:

The company opens its first store on Madison Avenue in New York City.

1997:

Elisabeth B. Robert becomes the company's chief executive officer.

1998:

The company closes all retail outlets.

1999:

The company partners with Zany Brainy, Inc. to place Make-A-Friend-For-Life kiosks in toy stores.

Company History:

The Vermont Teddy Bear Co., Inc. (doing business as The Vermont Teddy Bear Company) provides a new twist on the classic plush toy that originated in 1903 and was named after President Theodore Roosevelt. It is the leading manufacturer of hand-crafted teddy bears in the United States. Its Vermont-made 'Bear-Gram' gift service, pioneered in 1990, delivers personalized teddy bears dressed in one of more than 100 different costumes. Bears are shipped in boxes with airholes and accompanying hand-written notes from 'Bear Counselors.' The company has positioned its products as a gift alternative to flowers and candy and advertises its Bear-Grams through live reads with radio personalities in all 50 states.

Launching a One-Man Business: 1981

The Vermont Teddy Bear Company was created in 1981 when 30-year-old John Sortino began sewing cloth bears on his wife's sewing machine for his newborn son. His first creation was named Bearcho because its thick black eyebrows and mustache resembled those of Groucho Marx. Later bears were machine washable and dryable with movable arms and legs and were cuddly and safe for children. They had, according to Sortino, personality.

Teddy bear lore is fuzzy on the question of who made the first stuffed bear. The Steiff Co. of Germany displayed its stuffed toy at a fair in Leipzig in 1903, but credit generally goes to Thomas Michtom of Brooklyn, New York, for naming his creation after President Theodore Roosevelt, who had refused to shoot a bear cub on a hunting expedition in Mississippi. Sortino, whose son's many stuffed animals were manufactured in countries other than the United States, was determined that 'there should be a teddy bear made in America.' He saw himself and his company as 'stewards of a uniquely American tradition based on the best American virtues: compassion, generosity, friendship and a zesty sense of whimsy and fun,' according to a 1996 article in the Daily Telegraph.

Sortino had moved to Vermont from New York state, where he held a series of jobs after graduation from Plattsburgh College with a degree in mathematics: He was a scrimshaw artist, a United Parcel Service driver, and worked for the Boy Scouts of America. In 1981, Sortino sold 50 bears. That number increased to about 200 in 1982. In 1983, Sortino gave up his two part-time jobs to start peddling his bears on Burlington's Church Street Mall. 'Everyone thought I completely lost my mind,' Sortino was later quoted in a 1992 Montreal Gazette article, but while standing behind his pushcart, he dreamed of 'getting big.' With a small network of home workers, he began buying equipment and finding U.S. suppliers for materials. He recycled plastic from the wholesale ice cream tubs used by Ben & Jerry's, a Waterbury, Vermont. ice cream maker, for his teddy bears' joints. 'I wanted to be part of the re-industrialization of America,' he explained to the Washington Post in 1994.

Sortino's company lumbered along for its first six years. In 1987, a private investor put $1 million into the fledgling company, most of which the company had lost by 1989. At this point, the bears were marketed principally through wholesalers and the company's own retail outlets in several northeastern locations. In 1989, with sales of $351,000, Sortino was faced with either going out of business or making a drastic change in operations. The company's own president and chief operating officer, Spencer Putnam, recommended declaring bankruptcy. Instead, Sortino chose to break out of the Burlington area and begin promoting his bears directly in the New York market. 'I took what was practically the last of our money and went to New York and began a radio campaign two weeks before Valentine's Day of 1990,' Sortino recalled in the Washington Post. Well-known radio personalities, such as Don Imus, Rush Limbaugh, and Howard Stern, were enlisted to ad-lib pitches to sell the teddies. A toll free number in New York City was set up to receive calls.

Sudden and Spectacular Growth in the Early 1990s

Immediately the sales started rolling in. In two weeks, the company payroll increased from ten employees to 50. By the end of 1990, sales were up fivefold to $1.75 million as a result of the 'Bear-Gram,' the company's new telephone gift service. By 1993, sales had reached $17 million (91 percent of which were due to phone orders), and the company was named national winner of the 'Best of America' awards sponsored by Dunn & Bradstreet Small Business Services and the National Federation of Independent Businesses Foundation. Inc. Magazine ranked it 21st among America's fastest-growing public companies. The company went public in December 1993, reaping $10 million in paper profits. With its old-fashioned-looking bears, complete with movable limbs and lifetime warrantee, The Vermont Teddy Bear Company had made its mark in a market dominated by Gund, Dakin, and more established bear makers. In 1994, the Smithsonian offered two Vermont mohair teddies, Smithson T. and Alice R. Bear, for sale in its catalogue. According to the Smithsonian's spokeswoman, in a 1994 article in the Washington Post, the Vermont teddy bears recalled one of the original bears in the museum's collection.

At The Vermont Teddy Bear complex, business was moving right along. In a maze-like building whose departments were separated by picket fences, workers sewed and stuffed new teddies. There was a one-of-a-kind department with bears dressed in custom-made clothing--Charlie Chaplin garb, a Vermont state trooper's uniform, a scuba diving outfit--and a bear hospital, where bears sporting casts, crutches, and arm slings sat side by side customers' ailing bears waiting to be repaired. On the other side of the building, 'Bear Counselors' answered telephones and took orders--Bear-Grams--from customers who, absent this alternative, might have sent flowers. The atmosphere was laid back, with Frank Sinatra music pumped in through loudspeakers, an employee pinball machine, and mobile massage service. The company's factory and retail store became one of the hottest tourist spots in the state, attracting 80,000 visitors in 1994.

In fact, while the teddy bear remained a staple childhood companion, about 80 percent of all Bear-Gram recipients were adults. According to Putnam, in a 1994 Washington Post, the success of The Vermont Teddy Bear Company occurred because the company redefined the teddy bear as a gift item appropriate to all ages and occasions. 'We married a cuddly, appealing creature with the concept of an impulse purchase,' he was quoted as saying. Where once a husband might have sent flowers or chocolates to his wife for Valentine's Day, he now sent a teddy bear. Women, who were by far the company's greatest repeat customers, sent teddy bears to friends and family to commemorate personal occasions throughout the year.

The success of the Bear-Gram stimulated another growth period for the company. In 1994, bears, which sold for $60 to $250, began to be marketed in high-end retail outlets such as FAO Schwarz, Bloomingdale's, Henri Bendel's, and 250 smaller gift stores across the country, as well as in catalogues such as Spiegel. Television and billboard advertisements complemented the company's own catalogue, which went out to a mailing list of one million and featured other Vermont-made products such as children's books and toys to accompany specific bears. Down the road from the original factory, the company began construction on its new 62,000-square-foot, $7.5 million headquarters on a 57-acre parcel of land, complete with giant beanie hat and whirring propeller atop garishly painted farm-style buildings. Sortino, projecting a continued rise in sales, stockpiled somewhere between $3.5 and $4 million worth of bears and accessories. In 1995, the company moved into its new complex, set up a warehouse and fulfilment center in Livingston, England, and was on its way toward launching a manufacturing plant in the United Kingdom.

Losses Lead to New Leadership in the Mid-1990s

However, all did not follow happily ever after for the fairy tale-like business. While the company had grown more than expected in 1994, expansion was at times chaotic and even precipitous. Marketing by radio to the New York, Boston, and Chicago markets was expensive--30 percent of the company's revenue in 1994--and resulted in a $54,000 loss for that year, despite sales of $20.6 million. The attempt to break into the overseas market was aborted shortly after Vermont Teddy Bear began marketing its bears in Britain in 1995. The company was left with a huge excess of bears. In August 1995, the company's board of directors, disturbed about losses of $330,000 per month and the company's $2 million debt, asked John Sortino to step down as chief executive officer. R. Patrick Burns, who had been a marketing executive at L.L. Bean and Disney Direct Marketing, took over the company.

Burns's agenda focused on reducing advertising and manufacturing costs, while relying more heavily on catalogue sales and sales at company stores, which he planned to open in New England and New York. At his initiative, the company signed a licensing agreement with Tyco Toys Inc. to make lower-priced miniature replicas of the company's hand-made toy bears to be sold at Wal-Mart and Toys `R' Us stores. Under his stewardship, Vermont Teddy Bear also fired 16 percent of its 200-employee workforce to offset continued losses in 1995 of more than $2 million.

In 1996, the $17 million company opened its first outlet on Madison Avenue. A second store followed in Freeport, Maine. Neither of these stores proved very successful, however, and after losses of $2 million in 1997, both stores closed in 1998. The company also put more of its marketing dollars into its catalog operations, increasing circulation and expanding its offerings beyond teddy bears to everything from snowglobes to t-shirts and knapsacks.

However, the improvement in sales was only slight, and Elisabeth B. Robert, the company's chief financial officer since 1995, who replaced Burns as chief executive officer after he resigned in 1997, redirected The Vermont Teddy Bear Company to focus its efforts once again on Bear-Grams and radio advertising. Robert had prior experience in finance, manufacturing, legal affairs, and systems management. Since earning a graduate degree in business from the University of Vermont in 1984, she had worked as an executive for Vermont Gas, as a campaign manager, and for a fledgling high-tech firm. 'Radio ads are great for encouraging impulse buys,' Robert told the Boston Globe in a May 2000 article. Complementing the company's decision to return to its roots was its web site, where potential customers could view what they would get for their $85 Bear-Gram. By 1998, although stock prices were still at a low of 31 cents, Vermont Teddy Bear produced 195,000 stuffed bears and tallied sales of $17.2 million. To keep up with growing demand, the company added a second sewing shift and, in 1999, a second manufacturing facility in Newport, Vermont.

The company sewed 260,000 bears to produce revenues of $21.6 million in 1999, surpassing its prior peak in sales of $20.5 million set in 1994. Driving the expansion, according to Roberts in her annual letter to stockholders, was the company's radio advertising campaign in new markets across the country, backed by the company's web site, which received 25 percent of total orders by June 1999. The company also closed its remaining satellite stores in 1999 and entered into its first wholesale partnership with leading toy retailer Zany Brainy, Inc. to market its Make-A-Friend-For-Life concept via kiosks in toy stores nationally. The plan called for Vermont Teddy Bear to supply Zany Brainy with the necessary bear components, outfits, and accessories so that customers might construct customized teddy bears onsite.

By 2000, Vermont Teddy Bear was well on its ways to implementing the five-year plan it established in 1999, expanding and diversifying its markets, distribution channels, and product lines. In April, it reported 50 to 60 percent growth for the year to date and announced plans to lease a new 60,000-square-foot facility next to its Shelburne factory. In 1999, it had expanded its product line to include lower cost, imported teddy bears designed and manufactured for corporate customers. It also debuted its PreFUR'd Member service, offering discounts to repeat customers to coincide with slower business periods. The strategy seemed to be successful. While Valentine's Day (followed by Christmas and Mother's Day) remained the company's busiest holiday, online purchases, boosted by Yahoo's decision to feature the Bear-Gram on its new Internet mall, began to account for about 30 percent of total Vermont Teddy Bear sales. The company was now advertising on more than 500 radio stations and was aiming for a 'hipper, edgier' product.

Principal Competitors: Dakin; Gund; 1-800-FLOWERS.COM; Applause Enterprises.

Further Reading:

• Auerbach, Jon, 'Struggling in a Bear Market,' Boston Globe, November 26, 1995, p. 81.
• Calta, Marialisa, 'The Place the Teddy Bears Have Their Christmas,' Washington Post, December 22, 1994, p. T6.
• Pedley, Brian, 'Travel,' Daily Telegraph, May 20, 1996, p. 28.
• Reidy, Chris, 'Vermont Company Repositions Teddy Bear,' Boston Globe, May 12, 2000, p. E4.
• Sabo, Sandra R., 'Teddy Bears, Vermont Style,' Beans & Bears!, November 1999, p. 51.
• Smith, Geoffrey, 'Can Teddy Bears Come Out of the Woods?,' Business Week, March 18, 1996, p. 12.
• Sneyd, Ross, 'It's a Bear Market,' Los Angeles Times, September 19, 1995, p. D8.

Source: International Directory of Company Histories, Vol. 36. St. James Press, 2001.

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