Ready. Set. Go. You've got three months to build a decent-sized manufacturing and distribution company from scratch, complete with financial and IT departments, a call center, a customer relationship management and enterprise resource planning system, and a brand-new warehouse and the software to run it. What's your first step?
That was the problem facing Precious Moments Inc., a licenser of collectible figurines and other products bearing the image of the popular, tear-drop-eyed characters created by artist Sam Butcher. After decades of collecting fat checks, the Elgin, Ill., company had to create a full-blown operating line of business on the fly in order to save its largest single source of revenue.
Until this year, the entire staff of Precious Moments consisted of Chief Operating and Financial Officer Dan Huwel, a receptionist and three artists. The company made money by licensing images of its signature urchins to scores of other companies, including behemoths such as Hallmark Cards Inc. and Procter & Gamble Co., which then put those images on greeting cards, paper towels and dozens of other products.
Retail sales of Precious Moments-branded merchandise reached into the hundreds of millions of dollars annually, with more than $30 million flowing back to Precious Moments in the form of licensing fees and royalties. There is even a "Precious Moments Inspiration" theme park (run by a sister company in Carthage, Mo.), where the attractions include a chapel decorated with Bible scenes inhabited by Precious Moments-style characters. Hundreds of couples get married there each year.
The Precious Moments figurines themselves are extensions of the original product line based on Butcher's work. The artist licensed the right to make and sell the statuettes to Itasca, Ill.-based Enesco Group Inc., in 1978, shortly after he created the Precious Moments concept. Since then, the figurines, made in Nagoya, Japan, and retailing for as much as $160 for special editions, have become a staple of the so-called collectibles marketthat amorphous, multibillion industry that includes everything from Hummel figurines to Civil War chessmen.
Often attached to life-cycle events such as birthdays and weddingsprecious moments, as it were, marked by a new porcelain gewgawthe figurines are still the largest single source of revenue of Precious Moments' licensing business; under its ongoing contract with Enesco, they were slated to bring in $15 million this year.
But sales of the figurines have slumped in recent years as the collectibles market has suffered a downturn.
Membership in the Precious Moments collectors club has gone from more than 200,000 members in the late 1990s, to 20,000 active members today. Enesco, a publicly traded company that also distributes products licensed from Walt Disney Co., as well as a variety of gift and home-and-garden products, has seen its Precious Moments business collapse. The brand sold just $56 million worth of figurines for Enesco last
yeardown from nearly $100 million three years ago, and more than $170 million in 1998and the company wanted out of the pricey deal.
There were other problems at Enesco, too, including a failed enterprise resource planning software implementation and wholesale management changes. Last year, the company lost $16 million on $269 million in revenue.
Negotiations to end the 27-year partnership between Enesco and Precious Moments started in Marchas did planning for PMI's upcoming independence. On May 17, the licensing agreement came to an end. By July 5, Precious Moments was fulfilling orders at its new, if not quite finished, warehouse.
"They were interested in moving away from collectibles, and we were interested in seeing them make investments in the brand," says Huwel. "It was in our interest to take control once they no longer had a vested interest in the business."
By late August, Steven Troccoli, the director of IT, who himself had been at Precious Moments for less than six months, described the atmosphere as "still frantic, but calming down."