The First Years Inc.

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The First Years Inc.

One Kiddie Drive
Avon, Massachusetts 02322
U.S.A.
Telephone: (508) 588-1220
Toll Free: (800) 225-0382
Fax: (508) 583-9067
Web site: http://www.thefirstyears.com

Public Company
Incorporated: 1952 as Kiddie Products Inc.
Employees: 156
Sales: $132.1 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: KIDD
NAIC: 42192 Toy and Hobby Goods and Supplies Wholesalers; 42199 Other Miscellaneous Durable Goods Wholesalers

The First Years Inc. is a developer and marketer of products for infants and toddlers. The company groups its products into three broad categories: Feeding & Soothing, Play & Discover, and Care & Safety. Feeding & Soothing products include bottles, nipples, teethers, bibs, breast-feeding accessories, and a line of spill-proof bowls and cups. The Play & Discover line includes crib toys, hand-held toys, and large playthings. The Care & Safety product group consists of home safety devices such as door and cabinet latches, monitors, toilet-training accessories, and other health and hygiene products. The First Years sells its products worldwide both under its own brand and under the licensed names “Winnie the Pooh,” “Disney Mickey,” and “Sesame Street.” Its customers are primarily major toy and mass-merchandising retailers, including Wal-Mart, Target, and Toys “R” Us. Other outlets include department stores, grocery and drug store chains, and specialty shops.

Formative Years

The First Years Inc. was founded in 1949, in Roxbury, Massachusetts, by Marshall Sidman and his wife Evelyn. Sidman, who was then in his mid-thirties, had served as a Navy ensign during World War II. After his discharge in 1945, he experimented with various careers—including piloting, baking, and selling clothing, tires, stationery, and reupholstering services. But Sidman was not content to sell someone else’s products. He wanted a product of his own to promote, and ultimately, he found one—a diaper pin that a friend had developed. As Sidman approached local merchants with his diaper pins, however, he found that they were looking for full product lines rather than individual products. The Sidmans responded by adding baby items from other manufacturers to their product offering—and the company was born. The couple incorporated their business in 1952, as Kiddie Products, Inc.

The Sidmans were progressive in their approach to sales and marketing. For advice on how to best promote their products, they formed the “Mothers Council,” a group of local women who met every three weeks to confer. The couple was also hardworking and determined to make a go of their fledgling business. According to local rumor, Evelyn Sidman once pushed a baby carriage from door to door to sell products. And the Sidmans’ son Ronald, who was two when his parents founded Kiddie Products, remembers his mother taking him along on deliveries to retail customers.

It is perhaps not surprising that the little boy who rode along on deliveries grew up to become an important force in his parents’ business. In the late 1960s, Ronald—who had recently graduated from New England’s Bowdoin College—went to work for Kiddie Products. In 1970, he was promoted to vice-president and in 1974 was advanced to executive vice-president.

As Ronald Sidman was assuming more responsibility in his parents’ company, changes were afoot in the retail industry. Until that point Kiddie Products had functioned essentially as a distributor for other manufacturers, selling their products to independent drug stores and five-and-dimes. But by the mid-1970s, the “big box” stores—large chains like Kmart—were beginning to edge out those smaller, independent stores that Kiddie Products catered to. The Sidmans needed to start selling to the large chain stores—but there was a major hitch. Those stores tended to buy directly from the manufacturer, eliminating the distributor.

Ronald Sidman knew that the company had to change its strategy. “It was clear that we had to develop our own product line or we would be out of business,” explained Ronald Sidman in a 1997 interview with the Boston Globe. Sidman got to work developing products, ultimately unveiling a line of baby rattlers, bibs, teethers, and pacifiers that were sold under the brand name “The First Years.” Such products were hardly revolutionary—but Kiddie Products distinguished itself by making a priority of product safety and durability. Ronald Sidman enlisted his brother, a chemical engineer, to help develop rigorous product-testing procedures. By dropping, stretching, and torque-testing toys and pacifiers, the company made sure its products could withstand the pummeling they were sure to be given by real-life babies and toddlers. Some of the tests the Sidmans developed were effective enough to be later adopted by the U.S. Consumer Product Safety Commission.

Working and Playing Well with Others

Kiddie Products had effectively distinguished itself from its competitors by emphasizing safety and durability—but that point of differentiation did not last long. Soon, other companies followed suit, and Kiddie Products had to find a new way to set itself apart. It did so by focusing on the real needs of its customers.

Much as Marshall and Evelyn Sidman sought advice from their “Mothers Council” in the early days of their business, Kiddie Products again went looking for counsel from those who were actually “in the trenches.” In 1973, the company formed a small Parents Council of local expectant and new parents to offer feedback and pre-test products. The Parents Council did not stay small or local; ultimately it grew into a worldwide organization with more than 50,000 members. Members of the council provided feedback in a range of different ways—from participating in company-led “play groups” to home-testing products to responding to surveys.

However, the company was not content to simply meet the practical needs of parents. It also wanted to address the developmental needs of the children themselves. For advice on this front, Sidman approached the Child Development Unit at Boston’s Children’s Hospital, which was founded and directed by pediatrician and child development expert Dr. T. Berry Brazelton. Brazelton and some of his staff agreed to serve as consultants for Kiddie Products, helping the company design products that safely and effectively met the developmental needs of infants and toddlers.

In addition to going outside for advice, Kiddie Products took care to fill its internal staff with child-raising “experts” as well. “We made a point of hiring working moms with infants and toddlers at home as the lead marketing person in each [product] cateogory,” Ronald Sidman said in a 1995 interview with the Boston Globe.

Responding to External Stimuli

By the early 1990s, Kiddie Products had established itself firmly as a leading manufacturer of children’s products. For years it had exhibited a relatively conservative, “slow but steady” strategy, introducing new products at a less frenetic rate than its competitors. In 1993, however, a series of accomplishments by its nearest competitor, Safety 1st, jolted the company into reassessing its approach. Safety 1st—located in Canton, Massachusetts, just a few miles from Kiddie Products—had been founded in 1984 on the tremendous popularity of its first product: a bright yellow “Baby on Board” sign designed to hang in car windows. Building on the success of that product, the company went on to introduce an ever-increasing line of child safety products. Safety 1st moved at an aggressive pace, soon surpassing Kiddie Products and becoming Massachusetts’ largest manufacturer of children’s safety products. In 1993, Safety 1st went public, raising $15 million. Its sales and earnings increased significantly. Even more significantly, that same year the company introduced 111 new products—more than twice as many as Kiddie Products.

Put on the defensive, Kiddie Products scrambled to respond. The company reduced operating expenses by closing a packaging and assembly plant and outsourcing the work done there. It also dramatically stepped up product-development efforts and hired a New York-based PR firm to increase public awareness of the company. In a 1994 interview with the Boston Business Journal, Marshall Sidman talked about Kiddie Products’ realization that it needed to regroup. “Last year was the year it was made clear we would have to improve things real fast,” he said. “We’ve continually tried to improve what we’re doing, but the urgency is certainly increased because of the intensity of the competition.”

The company’s efforts had the desired results. It ended 1994 with record net income of $3 million. Sales for the year were $53.2 million—up 15 percent from 1993’s sales. The company also introduced 90 new products for 1995, more than twice as many as it had for the previous year and more than ever introduced in any earlier year.

A New Identity in the Mid-1990s

In the spring of 1995, Kiddie Products’ 81-year-old founder died. Ronald Sidman, who had served as president since 1989, became CEO and chairman of the board as well. Shortly after Sidman was installed, Kiddie Products announced that it was changing its name to The First Years Inc. The name change capitalized upon the strength of the company’s brand name, more closely aligning the organization itself with its well-known products in the minds of consumers and shareholders.

Company Perspectives:

At The First Years, we strive to make the first three years of life happier, healthier, and easier for children and the parents who love them.

The company was flourishing—thanks, in part, to the new products it had brought to market the previous year. Especially popular were the company’s new Washables and Firstronics lines. Washables products consisted of 100 percent washable, dishwasher-safe toys. Firstronics was a line of hand-held electronic toys—such as imitation remote controls and cellular phones—inspired by Ronald Sidman’s young son. The company’s “TumbleMates” line, which had been launched in 1992 and extended in 1994, was also a big seller. TumbleMates were a variety of dishes and utensils designed for serving, storing, and transporting snacks and drinks.

The First Years continued to push forward with new product development. In 1995, the company added several higher-priced items to its product mix—including a new “Nurserytronics” line of electronic products for the nursery, such as a tape player and crib light and a rechargeable pocket monitor. Other more expensive products included odor-proof diaper pails, booster and bath seats, diaper bags, and a line of child carriers and travel tote bags.

Perhaps the most significant development on the new-product front, however, was a licensing agreement with Walt Disney Co. that allowed The First Years to develop a Winnie the Pooh line of products. By the end of 1995, the company was offering more than 40 Winnie the Pooh products, including rattles, teethers, bibs, bottles, bath accessories, and gift sets. These new products were immediate hits, generating approximately $15 million in sales for 1995, and doubling in volume in 1996. By the middle of 1997, the Winnie the Pooh line accounted for approximately one-third of The First Years’ total sales revenue.

Encouraged by the success of its first licensing venture, the company quickly moved to secure another such deal—this time with the Children’s Television Workshop. Signed in 1996, this new agreement allowed The First Years to develop a line of products using Sesame Street characters, and by the end of 1997, the company had introduced 30 such items. The introduction of these new products, combined with the continued expansion of existing product lines, pushed The First Years’ sales up to $120.7 million for the year—a 29.6 increase over 1996’s $93.1 million. Net income was $7.4 million, up from $5.2 million the year before.

The First Years continued to focus heavily on new product development, steadily rolling out between 50 and 60 new items each year. The company’s licensed character products quickly proved to be its most popular lines. By the end of 1998, sales of the Winnie the Pooh and Sesame Street lines accounted for almost half of The First Years’ total revenue.

Future Challenges

After almost a full decade of dramatic growth, The First Years stumbled near the end of the 1990s. In 1998, the company was forced to recall several of its products when environmental groups asserted that a chemical used in them could cause health problems in infants. The recall resulted in a $3 million charge for the company. 1999 brought more bad news. Demand for the company’s licensed products, which had shown steady growth since their introduction, suddenly dropped off. Net sales for the year showed only a 3 percent increase over 1998—a significant departure from the 23 percent average growth of the previous five years.

In 2000, the company posted a decrease in both net sales and net income. It also unveiled a four-point plan for recovery—which included strengthening its management team, improving its internal processes, realigning its business structure, and finding new ways to partner with its retail customers. Toward the first point of the plan—enhancing the management team—The First Years hired three new senior managers to oversee marketing and sales, product development, and human resources. The company set about improving its internal processes by adopting a version of the Six Sigma methodology. It realigned its business structure so that marketing and product development were focused on brands rather than on product categories—that is, one group worked on The First Years brand, while another group was dedicated to the licensed products. To achieve the fourth point of the plan—which focused on customer relationships—the company began using sophisticated market analysis to customize product mix for individual retailers.

The First Years also took a look at how it was handling both its own brand and its licensed products. It made plans to more aggressively market The First Years brand, pushing for higher visibility and heightened consumer awareness. To reinvigorate the lagging sales of its licensed products, the company used new graphics to jazz up existing products. It also began working with its major retail customers to offer them exclusive versions of the licensed character graphics—so that end customers could only get a certain type of graphic on products at a certain store.

The First Years continued to struggle for the first half of 2001. At the six-month point, the company posted sales of $67.3 million and net income of $3.9 million—down from $71 million and $5.3 million respectively in the previous year. Sales of licensed products remained depressed, and sales of The First Years brand also fell of slightly, due to a general slowdown in the domestic economy.

Key Dates:

1949:: Marshall Sidman and his wife Evelyn begin selling diaper pins and other infant products to local retailers.
1952:: Sidman incorporates his business as Kiddie Products Inc.
1968:: The Sidmans’s son Ronald joins the company.
1970s:: Kiddie begins developing its own line of products under The First Years Brand.
1973:: Kiddie forms The Parents Council.
1981:: Kiddie partners with Dr. T. Berry Brazelton and the Child Development Unit of Boston Children’s Hospital.
1989:: Ronald Sidman becomes president of Kiddie Products.
1995:: Marshall Sidman dies; Ronald Sidman becomes CEO; Kiddie Products changes its name to The First Years; company unveils new Winnie the Pooh product line.
1997:: The First Years introduces new line of Sesame Street character products.

By the third quarter of 2001, however, it appeared as though the company might be moving toward brighter days. Its quarter sales and income both showed improvement over the previous year’s numbers. Sales of its licensed specialty products increased 14 percent over 2000’s third quarter, and sales of The First Years Brand also picked up slightly. Even with the improvements, however, The First Years was cautious in its assessment of the future. In an October 2001 earnings release, Ronald Sidman was quoted as saying, “While we are pleased with the sales growth and profitability achieved for the quarter, our outlook remains tempered by the continuing economic uncertainty and soft retail sales many of our customers are experiencing.”