Sanrio Co. Ltd.

founded: 1960

Contact Information:

headquarters: 1-6-1 osaki 1-chome, shinagawa-ku
tokyo, 141-8603 japan phone: 81337798111 fax: 81337798054 url: http://www.sanrio.co.jp

OVERVIEW

Sanrio Co. is best known for its "Hello Kitty" brand of merchandise. The Hello Kitty character, along with other characters created by Sanrio, appears on stationary, apparel, school supplies, and a multitude of other products typically purchased by children and teenagers. These products, called social communication gifts by Sanrio, account for 92 percent of the firm's sales. Greeting cards account for another 4.9 percent, while movies, video, and publications bring in 1.6 percent, and restaurants secure 1.3 percent. Theme park operations account for less than 1 percent of total revenues. Sanrio sells its own merchandise in roughly 200 Sanrio outlets; however, the majority of sales take place at retailers licensed to sell Sanrio products.

COMPANY FINANCES

After growing from $1.26 billion in 1999 to $1.3 billion in 2000, sales for Sanrio dropped 17.9 percent to $1.08 billion in 2001. Earnings followed a similar pattern, growing from $43.1 in 1999 to $193.6 in 2000, and then falling to a loss of $21.1 million in 2001.

HISTORY

Shintaro Tsuji created Yamanashi Silk Center Co., Ltd. in 1960. The firm developed Strawberry, its first character design, in 1962. Seven years later, Yamanashi Silk opened a specialty store in San Francisco, California, named the Strawberry Shop, to sell merchandise with the Strawberry character. Another retail outlet, called the Gift Gate, opened in Tokyo in 1971. Yamanashi Silk changed its name to Sanrio Co. Ltd. in 1973. Sanrio launched its first publication, Shi to Meruhen, or Poetry and Fairytales, in May of that year.

The Hello Kitty character was first drawn in 1974. Two additional characters, Patty and Jimmy, were developed as well. That year, Sanrio diversified into film production and distribution with the establishment of Sanrio Communications Inc. in Los Angeles, California. The company published Strawberry News for the first time in 1975. The following year, Sanrio completed its first film, Little Jimbo.

Various manufacturers began to license Hello Kitty, Strawberry, and other characters created by Sanrio in the mid-1970s. A U.S. subsidiary, Sanrio Inc., was created in 1976 to oversee U.S. operations, including those of Sanrio Communications. In 1978, the firm received an Academy Award for its documentary, Who Are the Dead-bolts and Where Did They Get 19 Kids? Another film, Glacier Fox, was released that year as well.

Expansion into Europe first took place in 1980, when Sanrio opened an office in West Germany. That year, the company also created the Sanrio Theater to show family-oriented films made by Sanrio and other film producers. Sanrio GmbH was established to oversee German operations in 1983. By then, Hello Kitty had started to gain popularity with teenage girls. UNICEF named Hello Kitty its child ambassador in the United States, and the firm diversified into video sales. International expansion continued when Sanrio created Sanrio do Brasil Comercio e Representacoes Ltd. in 1987. To handle the import and export of its merchandise, Sanrio established Sanrio Far East Co. Ltd. in 1990. The company also opened Sanrio Puroland, its first theme park. Another theme park, Harmonyland, opened in 1991.

Subsidiaries in both Taiwan and Hong Kong opened in the mid-1990s. Hello Kitty became the child ambassador for UNICEF in Japan in 1994. Sanrio began to license Hello Kitty to mass markets in the late 1990s. In 2000, a Hello Kitty store opened in New York City. The following year, the firm announced its intent to open three Hello Kitty stores in Madrid, Spain.

FAST FACTS: About Sanrio Co. Ltd.

Ownership: Sanrio Co. Ltd. is a public company traded on the Tokyo Stock Exchange.

Officers: Shintaro Tsuji, Chmn. and CEO; Kunihiko Tsuji, Senior Managing Dir.; Tetsuo Uohashi, Managing Dir. and CFO; Yoshihiko Kaneda, Managing Dir.

Employees: 947

Principal Subsidiary Companies: Japan-based Sanrio Co. operates several domestic subsidiaries, including Sanrio Puroland Co., a theme park operator; Sanrio Far East Co., an importer and exporter of gift items, and Sanway Co., a restaurant operator. The firm also operates subsidiaries in the North America, South America, Europe, and other parts of Asia.

Chief Competitors: Competitors to Sanrio Co. include Mattel, Hasbro, and other manufacturers of merchandise for children and teenagers.

STRATEGY

Throughout most of the 1980s and 1990s, Sanrio limited distribution of Hello Kitty products, by far its best selling merchandise, to specialty stores and department stores. In 1999, however, the firm launched several brand building tactics, such as pushing Hello Kitty products into mass market stores like Target. To this end, Sanrio also forged a joint marketing venture with McDonald's, which agreed to feature Hello Kitty products in select areas throughout its popular fast food restaurant chain. Sales soared as a result. To maintain the sense of exclusivity it had worked for years to develop for Hello Kitty products, Sanrio continued its practice of only offering new products for a few months a time. Because it released nearly 100 new products a month, the firm was able to continually rotate which products were available for sale.

CURRENT TRENDS

Hello Kitty products began to appeal to a new market in the United States in the late 1990s. The reason for this, according to a September 2001 article in Business Week, was the character's appeal to various celebrities: "Supermodels Tyra Banks and Laetitia Costa love it. Christina Aguilera, Mariah Carey and the gals from Sex and the City are avid collectors. The newest couture line? No-rather, purses, bags, and T-shirts adorned with Hello Kitty. All the rage for decades in Japan and once merely the domain of little girls in the U.S., the round-faced cat is suddenly cheap chic in the fashion world." Celebrity sightings at the Hello Kitty store in New York City helped to fuel the fad. This trend wasn't merely a stroke of luck for Sanrio, however. Sanrio had begun to target the U.S. teen market in 1998 with a national marketing campaign that included advertisements in magazines like Seventeen.

PRODUCTS

Although Sanrio has developed roughly 400 different characters, it's Hello Kitty that produces nearly half the firm's profits. More than 15,000 Hello Kitty products, including bags, purses, clothing, and school supplies, are sold in stores across the world. Other characters include a penguin named Badtz-Maru and Hello Kitty's boyfriend, Dear Daniel. Sanrio also sells greeting cards, produces movies, and operates theme parks and restaurants.

GLOBAL PRESENCE

Latin America proved to be the most lucrative market for Sanrio's Hello Kitty character merchandise in the early 2000s. With 76 Hello Kitty stores, Venezuela accounted for 23 percent of Sanrio's Hello Kitty sales. North America also proved to be a growth area for the firm. As U.S. celebrities began to embrace Hello Kitty merchandise, North American sales grew more than threefold to $300 million in the late 1990s. Sanrio operates

CHRONOLOGY: Key Dates for Sanrio Co. Ltd.

1960:

Sanrio's predecessor company is founded

1974:

Hello Kitty is created

1976:

Sanrio begins licensing its characters for merchandise

1980:

Sanrio expands into Germany

1987:

Sanrio opens a subsidiary in Brazil

1992:

Sanrio opens a subsidiary in Taiwan

2000:

Sales reach a record $1.3 billion

HELLO KITTY AT MCDONALD'S INCITES FIGHTS

In 2000, as part of its plan to push its Hello Kitty merchandise into the mass market, Sanrio decided to sell Hello Kitty dolls for a limited time at McDonald's restaurants in Hong Kong. Demand proved so high that fights erupted between some of the patrons waiting to purchase the dolls.

international subsidiaries in the United States, Germany, Brazil, Taiwan, and Hong Kong.

SOURCES OF INFORMATION

Bibliography

betzold, james. "hello kitty: bill hensley." advertising age, 8 october 2001.

"character company on a roll with cute hello kitty." south china morning post, 17 january 2001.

cosgrove, julia. "cat on a hot thin model." business week, 10 september 2001.

"hello kitty finds another life in drugstores." women's wear daily, 21 january 2000.

sanrio co. ltd. home page, 2002. available at http://www.sanrio.co.jp.

"taking kitty beyond kiddies." adweek eastern edition, 6 july 1998.

"your money: trends: hello kitty." asiaweek, 9 march 2001.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. sanrio's primary sics are:

5091 sporting & recreational good & supplies

5092 toys & hobby goods & supplies

also investigate companies by their north american industry classification system codes, also known as naics codes. sanrio co.'s primary north american industrial classification system, also known as naics codes are:

421910 sporting & recreational goods & supplies

421920 toys & hobby goods & supplies