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Ty Inc.

Ty Inc.

280 Chestnut Avenue
Westmont, Illinois 60559
U.S.A.
Telephone: (630) 920-1515
Fax: (630) 920-1980
Web site: http://www.ty.com

Private Company
Incorporated:
1985
Employees: 600
Sales: $750 million (est.)
NAIC: 339931 Doll and Stuffed Toy Manufacturing

Ty Inc. is a designer and manufacturer of stuffed toys. The company is best known for its Beanie Babiesa line of small stuffed animals, each with its own name. Beanie Babies, produced in limited numbers and retired after a period of time, became a phenomenon in the mid-1990s among kids and adults, with some hard-to-find models commanding hundreds, and even thousands, of dollars in the secondary market. By the end of the 1990s, the Beanie Baby fad had cooled considerably, though the company continues to produce new lines of plush toys, many of which become collectibles. Ty keeps a low profile, with virtually no advertising or promotional efforts. It distributes its products only through specialty, card, and gift stores rather than through large chain retailers.

198594: FLOPPY CATS AND BEANIE BABIES

Ty Inc. was founded by and named after H. Ty Warner, a 40-something eccentric who wanted to build a better stuffed toy. Warner, who was raised in a suburb of Chicago, was an old hand at the toy business by the time he started his own toy company. After graduating in 1962 from Kalamazoo College in Michigan, he became a salesperson for Dakin Inc., a San Francisco-based manufacturer of stuffed toys. Warner remained at Dakin for almost 20 years, building a successful career and a reputation for being flamboyant and eccentric.

In 1980 Warner left Dakin and the toy business behind to spend a few years in Europe. When he returned to the States in the early 1980s, he had a plan. Using a $50,000 inheritance he had received in 1983, Warner established Ty Inc. and designed his first stuffed toya white Himalayan cat named Angel. The cat, which retailed for around $20, was purposely under-stuffed so that it could be manipulated into different positions and poses. Warner started making the rounds of specialty stores and gift boutiques to pitch his new product and met with success. He followed up with a whole line of Himalayan cats, each bearing a different look and a different name.

By the early 1990s, the Ty catalog featured several under-stuffed, floppy animals, most in the $10 to $20 price range. But Warner was thinking smaller. He wanted to create a quality stuffed toy in the $5 range something that a child could afford to buy with allowance money. The result was the Beanie Baby, a $5, pocket-sized toy made of polyester plush and loosely filled with PVC pellets. Warner introduced the first nine Beanie Babies at a Chicago toy trade show in 1993. Each of the nine toys came with a short poem and its own nameSpot the Dog, Squealer the Pig, Patti the Platypus, Cubbie the Bear, Chocolate the Moose, Pinchers the Lobster, Splash the Whale, Legs the Frog, and Flash the Dolphin.

199496: BIRTH OF A NATIONAL CRAZE

In January 1994 Beanie Babies quietly went on sale in Chicago. Shunning advertising campaigns and large, national chains, Ty targeted smaller specialty and gift shops, a practice he had carried over from his years at Dakin. He explained how his Dakin experience had influenced his distribution decision in an interview with Forbes in 1996: That taught me that its better selling 40,000 accounts than it is 5 accounts, he said. Its more difficult to do, but for the longevity of the company and the profit margins, its the better of the two.

Early sales of the toys were good, but not astonishing. In the early summer of 1994, Ty increased consumer interest slightly by introducing several new Beanie designs. It also began expanding its sales territory to include the East and West Coasts, the South, and scattered locations throughout the rest of the country. Ty brought out new Beanie characters periodically throughout the year, and young customers began to look forward to adding the new introductions to their existing collections.

By the summer of 1995, the demand for Beanies was escalating, in large part because of their scarcity. As with toy crazes of the pastsuch as Tickle Me Elmo or Cabbage Patch DollsBeanie Babies became hotly desired simply because there were not enough of them to go around. The reason there were not enough to go around was that Warner himself made sure of it. He began limiting the number of Beanies that each store could buy, allowing only 36 of each character per month. When stores sold out of a particular model, customers had to wait for the next months delivery which sometimes arrived on time and sometimes did not. For the Beanie aficionado who desperately needed a certain character to complete his or her collection, the anticipation was almost unbearableand the competition from other collectors was intense. Warner was proving a master at capitalizing on the age-old principle of supply and demand.

While Warners inventory-limiting tactic would probably have created a stir on its own, it was his decision to retire Beanie characters that delivered the coup de grace. In 1996, when Ty began announcing on its web site that it would stop making certain creatures, it whipped the Beanie community into a frenzy. Collectors and dealers realized that some of the retired characters could become truly valuable. An extremely active secondary market sprang up, with buyers willing to pay outrageously inflated prices for the rarer Beanies. Some of the hardest-to-find characters commanded up to $6,000 in the aftermarketmore than 1,000 times their original selling price. Beanie fans began looking at their collections as serious investments.

The character retirements and the explosive growth of the Beanie aftermarket had an extremely positive impact on Tys sales. Unsure of which Beanie might be retired nextand thereby become much more valuablecustomers were determined to get their hands on all the characters. Stores that carried Beanies began to get hundreds of calls each day to find out which, if any, were available. Dozens of shoppers lined up outside on days when new shipments arrived. Stores that maintained Beanie Baby waiting lists routinely had more than 1,000 names of customers waiting to get the characters they wanted.

As Beanie fans proliferated, they built a whole network of information sources and events dedicated to their hobby. Dozens, if not hundreds, of individual web sites were built to offer news, rumors, pictures, and descriptions of the growing number of Beanie characters. Beanie Baby fairs, swaps, and conventions held all around the nation gave devotees the chance to ooh and ahhh over each others collections and to buy, sell, or trade the creatures. Hastily produced books and magazines appeared in bookstores, cataloging the various characters and their estimated secondary market prices.

COMPANY PERSPECTIVES

Tys philosophy has always been to create products of unique design, products of the highest quality, and to price these products so they can be easily affordable to children.

In the middle of all the frenzy, Warner and his company began to assume almost mythic proportions. Since Tys inception, it had been something of a mystery. In the competitive toy business, where most companies did their best to out-advertise each other, its absence of blatant self-promotion was an anomaly. The companys low profile was not limited to advertising. Warner kept Tys headquarters in Oak Brook, Illinois, as insulated as possible, with no signage, no listed street address, and no listed telephone number. He rigorously avoided the media, almost never granting an interview, and forbid his employees to answer questions about him. This enigmatic approach inflamed the publics curiosityand engendered myriad rumors and speculations about the company and its founder.

199798: NEW PRODUCTS, NEW DISTRIBUTION CHANNELS

Ty continued to periodically introduce new Beanie characters and retire others. By early 1997, approximately 100 characters had been introduced and 25 had been retired. The company had experienced tremendous growth, quadrupling its employee count between 1995 and 1996. Although Ty was characteristically tight-lipped about finances, analysts estimated that its sales had grown from $25 million to $250 million during the same period.

In the spring of 1997, Ty made its first venture into conventional toy marketing when it teamed up with McDonalds for a Beanie Baby Happy Meal promotion. The five-week promotion, which began in April, offered one of ten Ty creations with the purchase of every McDonalds Happy Meal. The Happy Meal toys were smaller versions of the originals and were called Teenie Beanies. Explaining why he decided to partner with McDonalds, Warner cited the promotions potential for reaching new markets. We really did it to expand our product to children who wouldnt be shopping in upscale shopping malls, he said in a 1997 interview with Reuters Business Report. We saw McDonalds as the best avenue to get these kids to see them.

Ty finished 1997 with an estimated $400 million in sales and a demand for Beanies that showed no signs of abating. Just to be sure, however, Warner unveiled a new initiative designed to rekindle any flagging consumer interest. In early 1998, Ty partnered with Cyrk Inc., a Massachusetts-based promotions company, to develop the Beanie Babies Official Club. Simultaneously, Warner made a $10 million investment in Cyrk, which gave him approximately 7 percent ownership in the company.

Beanie Baby mavens who wanted to join the official club had to buy a $10 membership kit at one of the specialty stores that carried Ty products. The kit included various Beanie paraphernalia, such as a character checklist, a membership card and certificate, stickers, and a newsletter. Once enrolled in the club, members were eligible to order special Beanies that were produced exclusively for the club and were not available in stores. Members also received periodic newsletters, access to password-only sections of the Ty web site, and top secret news and info about Beanie Babies and authorized Ty products.

In late 1998 Ty attempted to build on the success of the wildly popular toy by introducing a line of auxiliary products. The company began offering calendars, collectors cards, card binders, and protective containers designed to store the heart-shaped Ty tags found on all Ty products. The new merchandise line, like the Beanie Baby Club kits, was handled by Cyrk.

Ty also introduced a line of nine Beanie Buddies. The Buddies were similar in appearance to the Beanie Babies, but largeraround 18 inches, as compared to the 8-inch Babies. They were also more expensive, retailing for around $15. Ty expanded the line of Buddies by periodically adding new characters.

Meanwhile, retailers were still contending with customer stampedes every time a new shipment of Beanies was delivered, and Tys sales were ratcheting ever higher. When total Beanie sales reached $1 billion, Warner celebrated by giving each of his employees two special-edition, autographed Billionaire Bear Beanies. The bears were estimated to be worth $3,500 if sold on the secondary market.

KEY DATES

1985:
H. Ty Warner founds Ty Inc.
1993:
Ty exhibits Beanie Baby stuffed animals at Chicago trade show.
1994:
Beanie Babies go on sale in Chicago specialty shops.
1997:
McDonalds offers Ty Teenie Beanies as part of a Happy Meal Promotion.
1998:
Ty starts the Beanie Baby Official Club.
1999:
Ty announces that all Beanie Babies will be retired; Warner purchases his first luxury hotel, the Four Seasons in New York.
2000:
Company decides to keep producing Beanie Babies; Warner acquires the Four Seasons Biltmore and the San Ysidro Ranch.
2003:
Warner purchases the Sandpiper Golf Course.

1999: THE END OF THE BEANIE EMPIRE?

By the middle of 1999, it looked as though the Beanies popularity was finally beginning to wane. The number of sales and the prices in the secondary market started to fall off, and the frenzied demand at the retail level began to cool. Consumers, always on the lookout for the latest thing, were turning their attentions elsewhere. This decline in consumer interest was not in itself shocking. Almost everyoneexcept perhaps diehard Beanie fans expected the stuffed toys to eventually be eclipsed by the next fad. Most industry experts were only surprised that their vogue had lasted as long as it had.

As it turned out, however, Warner wanted a more dramatic send-off for his Babies. On August 31, 1999, Ty posted a brief message on its web site, stating that all Beanies would be retired at 11:59 P.M. on December 31, 1999. The message also introduced ten new charactersthe last one a black bear named The End. The announcement sent shock waves through the Beanie community, prompting hundreds of calls to retailers from upset collectors. Ty refused to elaborate on the web site message, leaving its customers guessing at whether the retired Beanies would be replaced by new ones or the whole line would be discontinued.

Many collectors and dealers chalked the announcement up as a marketing ploya way to revive dwindling consumer interest in the creatures. They believed that Ty was merely clearing the way for a whole new generation of Beanies. Others familiar with the industry, however, believed that the Beanies really were on their way out. Some applauded Warner for being shrewd enough to end Beanie-mania with a bang, rather than a slow fade.

2000 AND BEYOND

From the most savvy toy industry expert to the youngest Beanie fan, no one could be sure what the future held for Ty. Many predicted that the company would release a brand-new line of collectible toys in the hopes of duplicating the Beanie Baby frenzy. The company itself remained characteristically secretive about its plans. Then spokespersons announced that the company would hold a consumer vote to determine the fate of Beanie Babies. To no ones surprise, fans voted to keep Ty in production. More than 200,000 people voted paying 50 cents per voteand 91 percent of them came down on the side of the Beanie Babies. While fans were relieved when the company announced it would abide by the voters decision and continue producing Beanie Babies, many expressed disillusionment with the company. They suspected that Ty had planned to continue making the toys all along and had threatened to discontinue them only to revive a waning craze. Others pointed out that the company had employed such savvy marketing techniques all along, and that at least the proceeds from the vote would go to a good cause. The money raised from the vote was donated to the Elizabeth Glaser Pediatric AIDS Foundation; Ty had pledged to donate triple the amount raised from voters. In the end, the company went well beyond that, donating enough to bring the total donation to $1 million.

Tys charitable contribution in the wake of the Beanie Baby vote was not an isolated act. Over a period of several years, the company donated millions of plush toys to the Red Cross, Toys for Tots, the Toy Bank, and other organizations that distributed the toys to underprivileged kids. In addition, Ty issued a number of special-edition Beanie Babies to raise money for causes. In October 2001, for example, the company produced a Beanie Baby called America and announced that all of the proceeds would be donated to the American Red Cross Disaster Relief Fund to aid victims of the September 11, 2001, terrorist attacks. The company pledged a minimum donation of $1 million, projecting that the total donation would far exceed that amount. In 2006, Ty issued a pink Beanie Baby bear to tie in with Breast Cancer Awareness Month, donating a portion of the proceeds to breast-cancer charities.

In the aftermath of the Beanie Baby phenomenon, Ty introduced new lines of collectible toys that followed the Beanie Baby blueprint. In early 2000 the company issued the first Beanie Kids, doll-like plush toys featuring a variety of hairstyles, skin tones, and outfits. While many collectors eagerly looked forward to the new product line, others felt that it would be impossible to re-create the enthusiasm for the new toys that had arisen for the Beanie Babies. In early 2002, Ty unveiled another new line, similar to the Beanie Kids: Teenie Beanie Boppers. Like the Beanie Babies, the new products were small and floppy, and they retailed for about $5, making them appealing and accessible to kids. The new toys did not generate the same buzz that the Beanie Babies had, and even the Beanie Babies had lost most of their luster by the time their tenth anniversary rolled around in 2003. By that time, Beanie Babies were no longer fetching outrageous prices in the secondary market; many collectors sold hundreds of Beanie Babies at a time for just a couple dollars per toy.

Ty continued to sell new Beanie Babies, however, and while the frenzy for the toys had all but evaporated, the annual revenues from those and other Ty products amounted to hundreds of millions of dollars. Industry observers estimated that Warner had made as much as $6 billion during the Beanie Baby craze, and beginning in 1999 he began investing those earnings into a completely different business: luxury hotels and other high-end real estate. In 1999 Warner bought New Yorks Four Seasons Hotel, designed by world-renowned architect I. M. Pei. The following year he purchased the Four Seasons Biltmore Hotel in Santa Barbara as well as the nearby San Ysidro Ranch, a private getaway favored by elite celebrities. During the summer of 2003 he acquired the Sandpiper Golf Course, also in California.

Real estate acquisitions were not the only Ty Warner activities to make headlines during the early 2000s. Ty Inc. had been involved in numerous lawsuits throughout the 1990s to protect the Beanie Baby name and the toys designs. During the early 2000s the company was involved in several high-profile trademark and copyright cases, with mixed results. A Houston company called HolyBears lost a 2000 lawsuit to Ty Inc.; the company had made religious-themed plush toys with names like Solace and Forgiveness, with each bear accompanied by a Bible verse. After Ty Inc. tried to get an injunction to stop HolyBears from selling its Beanie Baby look-alikes, the companys founder, Robert LeClair, generated controversy by saying that Ty was trying to prevent the spread of Gods word. In the end, HolyBears agreed to change the design of its toys.

A few years later, Softbellys Inc. was sued by Ty for producing Screenie Beanies, plush toys with chamois bellies designed for wiping off computer screens. Ty asserted that the term beanie was part of its copyright rather than a generic term for a loosely stuffed plush toy. In the summer of 2006, an Illinois judge and jury agreed with Ty Inc., ruling that the Screenie Beanies infringed upon Tys trademark and diluted the companys brand. That victory was marred by an earlier decision, however: in 2005, a federal judge in Chicago determined that Warner had tampered with a witness, a toy-industry expert who had planned to testify that the word beanie was a generic term for a bean-bag-type stuffed animal. Warner had allegedly persuaded the expert not to testify, thus ensuring Tys victory in the case. The controversy seemed only to add to Warners reputation as a powerful and mysterious businessman. While Warner had yet to spark a new phenomenon to compare to the Beanie Baby fad of the 1990s, his reputation as an unpredictable and ingenious marketer kept fans and industry insiders watching and waiting for the next big thing.

Shawna Brynildssen
Updated, Judy Galens

PRINCIPAL COMPETITORS

Gund, Inc.; Hasbro, Inc.; Mattel, Inc.

FURTHER READING

Baglole, Joel, Beanie Babies Born into Wealth, Toronto Star, November 11, 1998.

Bergen, Kathy, Beanie Baby Czar Building a Hotel Empire, Knight-Ridder/Tribune Business News, February 22, 2004.

Consumers Vote for More Beanie Babies, New York Times, January 3, 2000, p. P2.

Ethridge, Mary, Past Their Prime, Beanie Babies Celebrate Their 10th Birthday, Knight-Ridder/Tribune Business News, March 16, 2003.

Faust, Fred, Ohhhh Babies No Fee Fi Fo Fum, Just Toys after This Beanie Stalk, St. Louis Post-Dispatch, February 24, 1997, p. 1A.

Global Beanie Baby Vote Generates $1 Million for Elizabeth Glaser Pediatric AIDS Foundation, PR Newswire, January 6, 2000, p. 622.

Jones, Nora A., Beanie Babies and Barbie Among Holiday Litigants, Rochester (N.Y.) Daily Record, January 6, 2004.

Jury Out on Beanie Kids, Playthings, February 2000, p. 8.

Mannix, Margaret, Beanie Bubble, U.S. News & World Report, August 3, 1998, p. 53.

Neilsen, Karen Britton, Beanie Babies Conspiracy, Dallas Business Journal, January 7, 2000, p. 46.

Palmer, Ann Therese, and Alex Tresniowski, Up Front: Bean There, Done That, People, September 20, 1999, p. 72.

Pethokoukis, James M., Ty Warner, U.S. News & World Report, February 16, 2004, p. 8.

Pink Beanie Babies Support Cause, Marketing to Women, October 2006, p. 9.

Precker, Michael, Beanie Baby Boom, Dallas Morning News, March 8, 1997, p. 1C.

Sachdev, Ameet, Ty Inc. Hit with $716,000 Judgment, Knight-Ridder/Tribune Business News, February 16, 2005.

Saito-Chung, David, Ty Warner Put the O! in Toy, Investors Business Daily, October 1, 2003, p. A04.

Samuels, Gary, Mystique Marketing, Forbes, October 21, 1996, p. 276.

Sixel, L. M., Texas Maker of Beanie Baby Doppelgangers Repents, Settles Lawsuit, Houston Chronicle, August 23, 2000.

Sweet, Phoebe, Beanie Baby Bust, Knight-Ridder/Tribune Business News, September 25, 2004.

The Toy Bank Kicks Off Its First Summer Toy Drive Giving Millions of Toys to Millions of Kids, Business Wire, July 27, 2004.

Trends: Beanie-Mania, People, July 1, 1996, p. 84.

Ty Inc., Managing Intellectual Property, June 2006, p. 6.

Ty to Sell Fundraising Beanie BabyAmerica, Gifts & Decorative Accessories, October 2001, p. 12.

Ty Unveils Teenie Beanie Boppers, Home Accents Today, March 2002, p. S20.

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Ty Inc.

Ty Inc.

280 Chestnut
Westmont, Illinois 60559
U.S.A.
Telephone: (630) 920-1515
Fax: (630) 920-1980
Web site: http://www.ty.com

Private Company
Founded:
1985
Employees: 1,000
Sales: $1 billion (1998 est.)
NAIC: 339931 Doll and Stuffed Toy Manufacturing

Ty Inc. is a designer and manufacturer of stuffed toys. The company is best known for its Beanie Babiesa series of small, stuffed animals, each with its own name. Beanie Babies, which are produced in limited numbers, have become a favorite of collectors, and hard-to-find models often command hundreds, or even thousands, of dollars in the secondary market. Ty keeps a low profile, with virtually no advertising or promotional efforts. It distributes its products only through specialty, card, and gift stores rather than through large chain retailers.

1985-94: Floppy Cats and Beanie Babies

Ty Inc. was founded by and named after H. Ty Warner, a forty-something eccentric who wanted to build a better stuffed toy. Warner, who was raised in a suburb of Chicago, was an old hand at the toy business by the time he started his own toy company. After graduating in 1962 from Kalamazoo College in Michigan, he became a salesperson for Dakin Inc., a San Francisco-based manufacturer of stuffed toys. Warner remained at Dakin for almost 20 years, building a successful career and a reputation for being flamboyant and eccentric.

In 1980 Warner left Dakin and the toy business behind to spend a few years in Europe. When he returned to the states in the early 1980s, it was with a plan. Using a $50,000 inheritance he had received in 1983, Warner established Ty Inc. and designed his first stuffed toya white Himalayan cat named Angel. The cat, which retailed for around $20, was purposely under-stuffed so that it could be manipulated into different positions and poses. Warner started making the rounds of specialty stores and gift boutiques to pitch his new product and met with success. He followed up with a whole line of Himalayan cats, each bearing a different look and a different name.

By the early 1990s, the Ty catalog featured several under-stuffed, floppy animals, most in the $10 to $20 price range. But Warner was thinking smaller. He wanted to create a quality stuffed toy in the $5 rangesomething that a child could afford to buy with allowance money. The result was the Beanie Baby, a $5, pocket-sized toy made of polyester plush and loosely filled with PVC pellets. Warner introduced the first nine Beanie Babies at a Chicago toy trade show in 1993. Each of the nine toys came with a short poem and its own nameSpot the Dog, Squealer the Pig, Patti the Platypus, Cubbie the Bear, Chocolate the Moose, Pinchers the Lobster, Splash the Whale, Legs the Frog, and Flash the Dolphin.

1994-96: Birth of a National Craze

In January 1994 Beanie Babies quietly went on sale in Chicago. Shunning advertising campaigns and large, national chains, Ty targeted smaller specialty and gift shops, a practice he had carried over from his years at Dakin. He explained how his Dakin experience had influenced his distribution decision in an interview with Forbes in 1996: That taught me that its better selling 40,000 accounts than it is 5 accounts, he said. Its more difficult to do, but for the longevity of the company and the profit margins, its the better of the two.

Early sales of the toys were good, but not astonishing. In the early summer of 1994, Ty increased consumer interest slightly by introducing several new Beanie designs. It also began expanding its sales territory to include the East and West Coasts, the South, and scattered locations throughout the rest of the country. Ty brought out new Beanie characters periodically throughout the year, and young customers began to look forward to adding the new introductions to their existing collections.

By the summer of 1995, the demand for Beanies was escalating, in large part because of their scarcity. As with toy crazes of the pastlike Tickle Me Elmo or Cabbage Patch DollsBeanie Babies became hotly desired simply because there werent enough of them to go around. The reason there werent enough to go around was that Warner himself made sure of it. He began limiting the number of Beanies that each store could buy, allowing only 36 of each character per month. When stores sold out of a particular model, customers had to wait for the next months deliverywhich sometimes arrived on time and sometimes didnt. For the Beanie aficionado who desperately needed a certain character to complete his or her collection, the anticipation was almost unbearableand the competition from other collectors was intense. Warner was proving a master at capitalizing on the age-old principle of supply and demand.

While Warners inventory-limiting tactic would probably have created a stir on its own, it was his decision to retire Beanie characters that delivered the coup de grace. In 1996, when Ty began announcing on its Web site that it would stop making certain creatures, it whipped the Beanie community into a frenzy. Collectors and dealers realized that some of the retired characters could become truly valuable. An extremely active secondary market sprang up, with buyers willing to pay outrageously inflated prices for the rarer Beanies. Some of the hardest-to-find characters commanded up to $6,000 in the aftermarketmore than 1,000 times their original selling price. Beanie fans began looking at their collections as serious investments.

The character retirements and the explosive growth of the Beanie aftermarket had an extremely positive impact on Tys sales. Unsure of which Beanie might be retired nextand therefore become much more valuablecustomers were determined to get their hands on all the characters. Stores that carried Beanies began to get hundreds of calls each day to find out which, if any, were available. Dozens of shoppers lined up outside on days when new shipments arrived. And stores that maintained Beanie Baby waiting lists routinely had more than 1,000 names of customers waiting to get the characters they wanted.

As Beanie fans proliferated, they built a whole network of information sources and events dedicated to their hobby. Dozens, if not hundreds, of individual Web sites were built to offer news, rumors, pictures, and descriptions of the growing number of Beanie characters. Beanie Baby fairs, swaps, and conventions held all around the nation gave devotees the chance to ooh and ahhh over each others collections and to buy, sell, or trade the creatures. Hastily produced books and magazines appeared in bookstores, cataloging the various characters and their estimated secondary market prices.

In the middle of all the frenzy, Warner and his company began to assume almost mythic proportions. Since Tys inception, it had been something of a mystery. In the competitive toy business, where most companies did their best to out-advertise each other, its absence of blatant self-promotion was an anomaly. And the companys low profile wasnt limited to advertising. Warner kept Tys headquarters in Oak Brook, Illinois, as insulated as possible, with no signage, no listed street address, and no listed telephone number. He rigorously avoided the media, almost never granting an interview, and forbade his employees to answer questions about him. This enigmatic approach inflamed the publics curiosityand engendered myriad rumors and speculations about the company and its founder.

1997-98: New Products, New Distribution Channels

Ty continued to periodically introduce new Beanie characters and retire others. By early 1997, approximately 100 characters had been introduced and 25 had been retired. The company had experienced tremendous growth, quadrupling its employee count between 1995 and 1996. Although Ty was characteristically tight-lipped about finances, analysts estimated that its sales had grown from $25 million to $250 million during the same period.

In the spring of 1997, Ty made its first venture into conventional toy marketing when it teamed up with McDonalds for a Beanie Baby Happy Meal promotion. The five-week promotion, which began in April, offered one of ten Ty creations with the purchase of every McDonalds Happy Meal. The Happy Meal toys were smaller versions of the originals, and were called Teenie Beanies. Explaining why he decided to partner with McDonalds, Warner cited the promotions potential for reaching new markets. We really did it to expand our product to children who wouldnt be shopping in upscale shopping malls, he said in a 1997 interview with Reuters Business Report. We saw McDonalds as the best avenue to get these kids to see them.

Ty finished 1997 with an estimated $400 million in sales and a demand for Beanies that showed no signs of abating. Just to be sure, however, Warner unveiled a new initiative designed to rekindle any flagging consumer interest. In early 1998, Ty partnered with Cyrk Inc., a Massachusetts-based promotions company, to develop the Beanie Babies Official Club. Simultaneously, Warner made a $10 million investment in Cyrk, which gave him approximately seven percent ownership in the company.

Beanie Baby mavens who wanted to join the official club had to buy a $10 membership kit at one of the specialty stores that carried Ty products. The kit included various Beanie paraphernalia, such as a character checklist, a membership card and certificate, stickers, and a newsletter. Once enrolled in the club, members were eligible to order special Beanies that were produced exclusively for the club and were not available in stores. Members also received periodic newsletters, access to password-only sections of the Ty Web site, and top secret news and info about Beanie Babies and authorized Ty products.

Company Perspectives:

Tys philosophy has always been to create products of unique design, products of the highest quality, and to price these products so they can be easily affordable to children.

In late 1998 Ty attempted to build on the success of the wildly popular toy by introducing a line of auxiliary products. The company began offering calendars, collectors cards, card binders, and protective containers designed to store the heart-shaped Ty tags found on all Ty products. The new merchandise line, like the Beanie Baby Club kits, was handled by Cyrk.

Ty also introduced a line of nine Beanie Buddies. The Buddies were similar in appearance to the Beanie Babies, but largeraround eighteen inches, as compared to the eight-inch Babies. They were also more expensive, retailing for around $15. Ty expanded the line of Buddies by periodically adding new characters

Meanwhile, retailers were still contending with customer stampedes every time a new shipment of Beanies was delivered, and Tys sales were ratcheting ever higher. When total Beanie sales reached $1 billion, Warner celebrated by giving each of his employees two special-edition, autographed Billionaire Bear Beanies. The bears were estimated to be worth $3,500 if sold on the secondary market.

1999: The End of the Beanie Empire?

By the middle of 1999, it looked as though the Beanies popularity was finally beginning to wane. The number of sales and the prices in the secondary market started to fall off, and the frenzied demand at the retail level began to cool. Consumers, always on the lookout for the latest thing, were turning their attentions elsewhere. This decline in consumer interest was not in itself shocking. Almost everyoneexcept perhaps diehard Beanie fansexpected the stuffed toys to eventually be eclipsed by the next fad. Most industry experts were only surprised that their vogue had lasted as long as it had.

As it turned out, however, Warner wanted a more dramatic send-off for his Babies. On August 31, 1999, Ty posted a brief message on its Web site, stating that all Beanies would be retired at 11:59 p.m. on December 31, 1999. The message also introduced ten new charactersthe last one a black bear named The End. The announcement sent shock waves through the Beanie community, prompting hundreds of calls to retailers from upset collectors. Ty refused to elaborate on the Web site message, leaving its customers guessing at whether the retired Beanies would be replaced by new ones or the whole line would be discontinued.

Many collectors and dealers chalked the announcement up as a marketing ploya way to revive dwindling consumer interest in the creatures. They believed that Ty was merely clearing the way for a whole new generation of Beanies. Others familiar with the industry, however, believed that the Beanies really were on their way out. Some applauded Warner for being shrewd enough to end Beanie-mania with a bang, rather than a slow fade.

2000 and Beyond

From the most savvy toy industry expert to the youngest Beanie fan, no one could be sure what the future held for Ty. Many predicted that the company would release a brand-new line of collectible toys in the hopes of duplicating the Beanie Baby frenzy. The company itself remained characteristically secretive about its plans. Then spokespersons announced that the company would hold a consumer vote to determine the fate of Beanie Babies. To no ones surprise, fans voted to keep Ty in production; and the company complied, introducing a new line in early 2000 as well: Beanie Kids. With Warners knack for toy design and his genius for marketing, Ty was very well positioned for continued success.

Principal Competitors

Applause Enterprises, Inc.; The Boyds Collection, Ltd.; Hasbro, Inc.; Mattel, Inc.; Russ Berrie and Company, Inc.; Play by Play Toys & Novelties, Inc.; Vermont Teddy Bear Co., Inc.

Key Dates:

1985:
Ty Warner founds Ty Inc.
1993:
Ty exhibits Beanie Baby toys at Chicago trade show.
1994:
Beanie Babies go on sale in Chicago specialty shops.
1997:
McDonalds offers Ty Teenie Beanies as part of a Happy Meal Promotion.
1998:
Ty starts the Beanie Baby Official Club.
1999:
Ty announces that all Beanie Babies will be retired.
2000:
Company decides to keep producing Beanie Babies, as well as new line of Beanie Kids.

Further Reading

Baglole, Joel, Beanie Babies Born into Wealth, Toronto Star, November 11, 1998.

Faust, Fred, Ohhhh Babies No Fee Fi Fo Fum, Just Toys after This Beanie Stalk, St. Louis Post-Dispatch, February 24, 1997, p. 1A.

Mannix, Margaret, Beanie Bubble, U.S. News & World Report, August 3, 1998, p. 53.

Palmer, Ann Therese, and Alex Tresniowski, Up Front: Bean There, Done That, People, September 20, 1999, p. 72.

Precker, Michael, Beanie Baby Boom, Dallas Morning News, March 8, 1997, p. 1C.

Samuels, Gary, Mystique Marketing, Forbes, October 21, 1996, p. 276.

Trends: Beanie-Mania, People, July 1, 1996, p. 84.

Shawna Brynildssen

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