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A Real Toy Story

From wild-haired troll dolls to nostalgic teddy bears, Russ Berrie has the gift market all wrapped up.
September 1, 1997
URL: http://www.entrepreneur.com/article/14542

Russ Berrie is still swinging. That's how he knows he's successful--not because his Oakland, New Jersey, gift and novelty firm, Russ Berrie and Co. Inc., posts more than$375 million in annual sales. And not because he's masterminded some of the best-selling gift items in popular memory, ranging from that little plastic statuette from the '60s who, with his arms outstretched, proclaimed "I love you this much!" to, more recently, the troll doll, which enjoyed a formidable comeback in the early '90s. With its top-rated line of baby gifts and accessories, its nostalgic "Bears From the Past" teddy bear series, and a menagerie of other familiar gift items, Russ Berrie and Co. enjoys more than its share of major hits.

Berrie, 64, is understandably pleased with these accomplishments. But it's the longevity of his 34-year-old company that pleases him most. "There are not many companies around today that were here in 1963," Berrie says. "In this business, things are always changing, but we're still around. And it's been fun every step of the way," even though it hasn't always been easy.

In a consumer environment where entertainment tie-ins and mammoth advertising campaigns seem to dominate, Russ Berrie and Co. rides trends the old-fashioned way--by tracking customer interests and responding to them. It is not an exact science. "I'm not going to say to you that every product we've made has done well," Berrie admits. "But batting average is really not the question. It's making sure you get the right hits at the right time and, of course, whether or not you win the game."

The Early Days

Above all else, Berrie seems to love the entrepreneurial game. His career began at age 10. A middle-class kid from the Bronx, Berrie loved baseball--and found a way to profit from it. "I'd go to Yankee Stadium after the games and pick up discarded score cards," Berrie explains. "I'd clean them up [by erasing the pencil marks and smoothing the wrinkles] and take them back the next day and sell them for 10 cents."

Humble beginnings, yes, but he was profitable at it. In fact, jokes Berrie, "I've been trying to match that gross profit margin ever since."

At 11, he developed his own newspaper delivery route, distributing his papers from a borrowed baby carriage. He did odd jobs, worked as a delivery boy, and was even an amateur bookie for a brief time. After high school, he attended college and did a stint in the military. But he never had the patience to finish his degree. "I was eager to make an honest man of myself," Berrie says.

His first job after college, at age 23, was selling toys for a now-defunct Chicago toy company. Here, Berrie found his calling. Within a year, he branched out to become a manufacturer's representative, working for five toy and novelty firms on straight commission.

The entrepreneurial structure of being a manufacturer's rep suited Berrie, but in the end, it wasn't entrepreneurial enough. "I would bring [the manufacturers] certain suggestions as to products I thought would sell, and I was frustrated that they didn't really show an interest," he says. "By 1963, I'd been doing this for about seven years. I had experience, and I knew people who could make products for me. So I continued to work as a manufacturer's rep, but I also invested $500 in some products and rented a converted garage." Russ Berrie and Co. was born.

Berrie's first products were primarily basic toys and impulse gift items such as wind-up gadgets and Indian dolls he purchased from various manufacturers.

Early sales didn't require much extra effort. "I would see my customers and sell them the lines I was representing. Then I'd take out the half-dozen or so different items I had [in my line]," Berrie recalls. With a local teenager's help, Berrie would pack orders and type invoices in the evenings. Orders may have only averaged between $70 and $100, but they added up: Between August and December 1963, Berrie generated a healthy $60,000 worth of sales.

Get The Message

Over the next two years, sales mushroomed to $250,000 in 1964 and $750,000 in 1965. By then, Berrie was ready to give up his rep job and become a full-time enterprise, moving out of the garage and into a tiny bedroom office in his apartment. He had a part-time secretary, a bookkeeper, a handful of independent reps and a stable of products with potential.

Like what? Berrie's goods were largely novelties sporting cute messages. "We developed a product called Fuzzy Wuzzies. They were little sheepskin characters on a wooden base, and they said `Happy Birthday' or `I Love You,' or [a variety of other messages]," Berrie recalls. "We also did Loving Cup trophies that said `World's Greatest Lover' and `World's Greatest Wife,' and so on."

Message novelties proved to be a lucrative niche in the not-yet-liberated '60s. "They were like three-dimensional greeting cards," says Berrie. "Only these were items you would keep." In an era when self-expression was fairly subdued, sweet little novelties that could convey love or appreciation were real commodities.

As times changed, so did Berrie's messages. Although birthday greetings and messages of love never went out of style, by 1968 Americans were ready for something a little bolder. Russ Berrie and Co. introduced Sillisculpts, plastic message figurines with a little more attitude. Two of the most memorable are the "I love you this much!" statuette and another of an old barrister crying "Sue the bastards!" "I think every lawyer in America had one," Berrie laughs.

During the company's formative years, messages, styles and product lines came and went. But the basic formula for success that Berrie originally devised continued strong. He remained active in developing and acquiring gift products with wide-ranging appeal. And he didn't venture into extraneous areas like manufacturing.

"I like to say that manufacturers should manufacture, accountants should account, and salespeople should sell," says Berrie. "We're a sales and marketing organization; we're a product- design organization. That's what we do best." By outsourcing its manufacturing operations, Russ Berrie and Co. has kept itself nimble--a vital attribute in the trend-dominated world of gifts.

Growing Organized

Managing the ebb and flow of product popularity has been key to Russ Berrie's success. But so has managing growth. If the '60s and early '70s were Russ Berrie's era of establishment, the mid-'70s and '80s were the era of expansion. Realizing that a global approach was critical to future success, Berrie set up offices in Korea, Taiwan and Hong Kong in 1977 to help the company's product development efforts and establish good relationships with Far East manufacturers. Russ Berrie and Co. U.K. followed in 1979.

Domestically, Russ Berrie added regional distribution centers across the country and set up warehouses in New Jersey and California. The company's in-house sales force, which began with Berrie and one full-time salesperson in 1968, numbered 600 worldwide in 1985--one year after Berrie took the company public on the New York Stock Exchange.

With growth came wholesale changes for Berrie. The man who once packed his own boxes and typed his own invoices found himself heading a company with hundreds of employees and hundreds of millions of dollars in sales. "I've had to go from being a doer to being a manager and a leader," says Berrie. And though he says his greatest joy now is seeing his employees excel beyond his own abilities, Berrie admits that reaching this plateau has been a challenge.

"When I was younger, I had a different ego," says Berrie. "I had to prove myself to myself. But as you get older, the ego starts to find its own place. I'm certainly dealing better with people today than I did 34 years ago."

Talk Shows

Berrie considers the ability to read people his key business skill--whether that means motivating his employees, negotiating with suppliers, or zeroing in on the needs of the marketplace. Indeed, nothing could be more critical to the company's success than its CEO's ability to predict, gauge and follow consumer demand.

From the beginning, Berrie understood the value of tracking customer response. "For instance, early on we became aware that certain messages would sell really well," he says. "Anything that said `I love you this much!' would sell. `Happy Birthday' or `Get Well Soon' were other good sellers. So whenever we created new [message] products, we'd use these basic messages. In essence, we watched the marketplace, watched what customers were buying, watched our own product line, and expanded on what was selling."

The same principle applies today--only the company's product line is now so vast that the process is nearly scientific. When your company sells 7,000 products in more than 50,000 retail outlets, your internal sales figures alone can give you a pretty accurate read of market trends.

Still, Berrie relies on old-fashioned fact gathering. "One of the most important things an entrepreneur can do is get out and talk to customers--speak to people so you can understand what's going on in the marketplace," he says. "To this day, I go to all the trade shows to really [tap into] the pulse of the public. It's the only way to know the direction they're going."

Berrie says that experience has grounded him. He's witnessed the coming and going of so many trends that it's harder now to surprise him. This doesn't mean he's catatonic, though. Berrie is still capable of being amused, beguiled and carried away. Or at least he was in the early '90s, when a stumpy character with a gentle smile and the scariest hair ever stepped up to the plate--and hit the ball out of the park.

A Troll Tale

Back in Berrie's manufacturing rep days, one of the companies he represented made impish little plastic dolls called trolls. They met with moderate success, but they weren't successful enough to keep their manufacturer from going out of business in the mid-'60s.

That should have been the end, but Berrie had a soft spot for the little creatures. "I tried bringing them back in 1967 with very minor success," Berrie says. "Then, every five, six, seven years, I'd try bringing them back again. Finally, in 1989, the trolls showed some pretty good sell-through, so we expanded the sales force in 1990. By the time 1992 rolled around, we were doing $250 million just in trolls."

This was not bad for a character with no motion picture deal, no giant ad campaign and, frankly, not much in the way of conventional good looks. Troll mania seized the country, and Russ Berrie had a major stake in the action. There were big trolls and small ones, crawling troll babies, trolls in cars and troll mugs.

"It became phenomenal," says Berrie. "I could not have predicted what happened. All I did was recognize the demand and expand to meet it."

And what demand! Veteran that he was, even Berrie was thrilled to see his fortunes rise higher and brighter than a troll's coiffure. "We just got carried away," he admits. "We were not really watching the marketplace."

Then the inevitable happened. "On April 12, 1993, at 1:32 p.m., everyone in the world decided they didn't want any more trolls," Berrie laments. "The bottom just fell out."

Back To Basics

Between 1992 and 1993, sales at Russ Berrie and Co. dropped more than $165 million--from $444 million to $279 million. And it wasn't just lost sales that hurt: The company had also lost momentum.

Berrie was understandably disappointed with the course of events, but he wasn't defeated. This is where experience helped. For one thing, even in the headiest moments of troll fever, Berrie had expanded the company conservatively. "We added a number of salespeople and a few people in shipping and administration, but we had been able to control growth without overburdening the company," Berrie says. "Again, the fact that we don't own any factories helped."

Furthermore, Berrie had been through enough product cycles in his career to know that the next necessary step was development. "We simply started changing the line," he says. "We saw a trend in home décor accessories [and jumped on it]. We developed our line of `Bears From the Past.' They're stuffed bears that have a nostalgic look. We expanded our baby line. We expanded our holiday offerings. We made more themed products. We came out with new products toward the end of 1994, and by 1995 we had a good year," with sales of more than $348 million.

What did Berrie learn from the troll episode? Certainly, that meteoric spikes in sales aren't all bad: Both revenues and profits hit record levels in 1992. But knowing the fundamentals of your business and having the good sense to return to them in times of crisis is the surest recipe for longevity.

"It isn't that complicated," says Berrie. "You need to be able to take the risk, to take your best shot. You run with the winners and bail out on the losers."

He's Got The Gift

Thirty-four years ago, Russ Berrie put together a little collection of products and took it to stores to see what might sell. He kept the winners, ditched the losers, and then he regrouped. Thirty-four years and billions of dollars later, he's still at it.

The players have changed, of course. Even today, Berrie's traditional base of greeting card stores, florists, gift shops and pharmacies is expanding to include home décor shops, department stores, craft shops and garden stores. The company's mix of products is in constant flux. Employees come and go. Opportunities arise, run their course, and give way to new opportunities.

But Berrie just keeps swinging. Though he tries to spend as much time as possible with his six children and his wife, Angelica, he usually works seven days a week. "I take time off on Sundays to watch the Giants lose," he says. But work is his major source of fun. And Berrie wants to keep playing.

"I hope when I'm 92 years old, I'll be on the floor of the Jacob Javits Convention Center doing a trade show and writing orders for customers," Berrie says. As long as there's a market, Russ Berrie will have the gift.

Russ Berrie

BIRTH DATE:March 18, 1933

FAMILY:Married to Angelica, 42; six children: Brett, 38; Richard, 35; Leslie, 34; Scott, 31; Nicole, 15; and David, 11

RESIDENCE:Englewood, New Jersey

BUSINESS PHILOSOPHY:"Running a business is not just products and pricing; it's the whole gamut of human experience. You have to motivate people all the time, and you have to understand what their needs are, whether they be customers or employees or suppliers."

Toying With Success

Russ Berrie and Co.'s annual sales:

1996 - $377 million

1995 - $348.5 million

1994 - $278.1 million

1993 - $279.1 million

1992 - $444.4 million

1991 - $267.9 million

1990 - $250.6 million

1985 - $204.7 million

1984 - $162.4 million

1983 - $112.7 million

1982 - $71.4 million

1981 - $54.5 million

1965 - $750,000

1964 - $250,000

1963 - $60,000

Contact Sources

Russ Berrie and Co. Inc., 111 Bauer Dr., Oakland, NJ 07436.