Sunrise Greetings

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Sunrise Greetings

1145 Sunrise Greetings Court
Bloomington, Indiana 47404
U.S.A.
Telephone: (812) 336-9900
Toll Free: (800) 457-4045
Fax: (812) 336-8712
Web site: http://www.interartdistribution.com

Wholly Owned Subsidiary of Hallmark Cards, Inc.
Incorporated: 1974 as Sunrise Publications Inc.
Employees: 300
Sales: $60 million (2004 est.)
NAIC: 511191 Greeting Card Publishers

Sunrise Greetings is a niche market greeting card company owned by Hallmark Cards, Inc. Based in Bloomington, Indiana, Sunrise targets a female market aged 25 to 55. The company’s greeting cards are sold in more than 22,000 stores in the United States and Canada, often in retail outlets not usually associated with greeting cards, such as Office Depot office supply stores and Wild Oats organic supermarkets.

Some of the company’s major brands/artists include Dena Designs, featuring the work of illustrator Dena Fishbein; Mary Engelbreit, a popular greeting card artist; Sandra Magsamen, author, artist, and art therapist; Max & Lucy, featuring the work of artists Russ Haan and Mike Oleskow; Susan Wheeler, a Texas artist known for her Victorian-era style illustrations; The Flavia Company, offering the work of Flavia M. Weedn; Elliott Bay, a popular line produced by artists Ian Challis and David Roos; and the WeinerDog line of humorous cards. Cards for all occasions are sold under the Sunrise Greetings label.

COMPANY FOUNDED: 1974

Sunrise Greetings was founded in Bloomington in 1974 as Sunrise Publications Inc. by three graduates of Indiana University (IU): Michael Fitzgerald, Stanley Jones, and Craig Aurness. The young men had met at IU in a course titled “The Religious Traditions of the North American Indians.” With the economy mired in a recession, 1973 was not an especially opportune time to graduate from college and begin a business, and in December of that year the three friends began brainstorming in Fitzgerald’s farmhouse about what direction to take with their lives and careers.

Aurness, the son of television’s Gunsmoke star James Arness (who spelled his name differently for stage purposes), was an aspiring photographer and expressed an interest in creating a line of greeting cards using his art pictures. The idea piqued their interest. The American Indian photographs they had viewed in their Religious Traditions class also had potential in that capacity, they decided. Moreover, they could round out a greeting card line with children’s book illustrations.

What may have started out as a lark was actually a well-timed entry into a field that had fallen out of step with the massive baby boom market. Greeting cards at the time, with their sticky verse or goofy humor, adorned with lace and lilies, skewed toward an older female audience and did not appeal to a new generation. The three Indiana graduates formed Sunrise and became pioneers in the alternative greeting card industry.

Sunrise’s founders raised about $80,000 to launch the business, using the funds to lease a building that had served as a six-car garage, renovate the space, and purchase a used printing press. Because the press was capable of printing only black-and-white or sepia tones, Sunrise would have to rely on an area printer to handle four-color projects. Soon joining the three partners was another classmate from Religious Traditions, Jeffrey Willsey, who would become pivotal in growing the business.

Once Sunrise had cobbled together an initial line of greeting cards and some sales materials, Fitzgerald, Willsey, and Fitzgerald’s wife attended the California Card Show tradeshow to present their wares and drum up sales. Although they did line up some business, it soon became obvious that they would need a network of sales representatives in order to effectively sell Sunrise cards across the country. Thus, at subsequent shows the company was just as interested in hiring sales reps as it was in taking orders. However, this was not the most efficient way to assemble a sales force, requiring some turnover before the company fielded a solid team.

Sunrise gradually established itself in the marketplace, as did the alternative greeting card category, while its founders drifted away. Aurness was the first to sell out and leave, becoming a successful photographer in Southern California. Fitzgerald also quit to earn a law degree, although he would always remain involved to some extent. After practicing law for less than two years, he tried his hand at real estate before returning to Sunrise on a full-time basis in 1984, around the same time that Jones sold out and left the company. The one constant was Willsey, who had planned to attend law school as well but ended up staying at Sunrise and becoming instrumental in the company’s expansion.

Sunrise did not place special emphasis on copy in the early years, offering blank cards or turning to office personnel to pen the inside text. While it became quickly apparent that photo art did not sell, American Indian photographs enjoyed success for about a decade. Only the cards that relied on children’s book illustrations proved to have staying power and continued to grow. By the mid-1980s, Sunrise was looking to pursue more traditional greeting card categories. Needing more capital to fund expansion, the founders sold majority control to a Dallas, Texas-based merchant bank, Mason Best Company, in 1984. Sunset would in turn be overseen by Somerset House Corporation, a Houston publishing company owned by Mason Best. Fitzgerald became president of Somerset House’s Greeting Card Division.

With the backing of its corporate parent, Sunset began making acquisitions to keep pace with other alternative card companies, some of which were growing rapidly through acquisitions. In some respects, consolidation proved that the alternative greeting card segment had come of age. Retailers faced with an abundance of options were increasingly interested in finding a single supplier who was not only able to provide a broad range of cards but could also offer a strong distribution system. Sunset focused on adding humorous card lines, which were the best-selling greeting card category and one that the company had neglected.

The first deal came in December 1985 with the addition of Kersten Brothers, a company based in Scottsdale, Arizona. It was run by Rick and Pete Kersten, who took over the business their father had started. Sunset soon acquired two more companies: Mary Engelbreit Inc. and Moodz Inc. Mary Engelbreit was an artist who would design greeting cards as well as postcards, invitations, posters, and posted notes for Sunrise. Based in Ogden, Utah, Moodz was a four-year-old greeting card company that offered Valentine’s Day, Christmas, and everyday cards.

As a result of the new card lines, Sunset increased sales to $15 million in fiscal 1986. The company continued to beef up its lines of humorous cards in early 1987 by creating a unit called Funny Papers. The initial five lines, introduced in May 1987, included work by Mad magazine’s Don Martin. With its own dedicated sales force, comprised mostly of independent representatives, Funny Papers was seen as a vehicle for Sunrise to begin breaking into the mass market and hopefully taking the company’s wares to national retail chains.

COMPANY PERSPECTIVES

Sunrise Greetings offers distinctive greeting cards for special occasions and everyday sending. Only Sunrise Greetings offers consumers a warm stylish solution of artistic imagery and just the right message to help nurture relationships with family and friends.

By the start of the 1990s Sunrise offered about 2,000 different card designs and marketed 30 million cards a year to some 10,000 retailers in the United States and Canada, including the likes of B. Dalton Bookseller, Jordan Marsh, L.L. Bean, Marshall Field’s, Neiman Marcus, and Saks Fifth Avenue. By this time Sunrise was the sixth largest greeting card company in the country, albeit its market share was negligible compared to the industry leaders, Hallmark Cards with 40 percent of the business and American Greetings with 35 percent. In addition, many Sunrise designs were licensed in such countries as Australia, Belgium, Luxembourg, New Zealand, and the United Kingdom. Neither did the company limit it itself to greeting cards, also producing specialty “thank you” cards for professionals, including insurance and real estate agents, as well as invitations, calendars, posters, and stationery. Further income came from licensing card designs to a wide range of products: coffee mugs, bags, wrapping paper, and even wallpaper. Sunrise’s business was so strong that in 1991 the company began construction on a 20,000-square-foot addition to its 53,000-square-foot warehouse, a far cry from the six-car garage that housed the company in the 1970s.

NAME CHANGED TO INTERART: 1997

Sunrise had long operated as a stand-alone company within Somerset, and then in 1992 it regained its formal independence when it was acquired by management in a leveraged buyout. A year later sales totaled $18 million. That number would begin to grow at a sharper pace in the mid-1990s when the company beefed up its infrastructure and created a supply management program to attract business from large retailers. Along with its own lines Sunrise began distributing the cards of other small alternative greeting card companies. It also assumed responsibility for managing retailers’ card displays, restocking them as needed and keeping track of sales. It was a popular arrangement with national retailers, who had long since grown weary of dealing with multiple vendors and burdened with the management of their own racks.

Small greeting card companies, which by themselves could not meet all of a retailer’s needs and lacked the wherewithal to fund a distribution and sales operation, were also pleased with the service. Because Sunrise was as much a greeting card distributor as it was a greeting card producer, the company changed its name to Inter-Art in 1997, reflecting that it represented an assortment of brands of participating greet card companies.

In 1998 sales topped $70 million, and InterArt appeared poised for several more years of strong growth. The company’s success, and that of alternative greeting cards, was not lost on the giants of the industry, which began launching their own alternative lines. When American Greetings began courting the company, Fitzgerald sensed the timing was right to sell out to a larger firm and insure its long-term prospects. To get the best deal, Fitzgerald sought bids and eventually decided to sell InterArt to Hallmark in the autumn of 1998.

Hallmark was a good choice on a number of levels. It allowed InterArt a large measure of autonomy, because Hallmark was interested in retaining the management team, at least for a time, that had successfully built the company. Because of its size, Hallmark was able to provide the kind of expertise InterArt needed to handle the operational challenges that came with increasing scale. For Hallmark, the InterArt deal represented its first domestic greeting card acquisition. It was a good fit because of a limited overlap in distribution. As a result, Hallmark would be able to reach even more consumers in even more retail outlets.

In 2000 Fitzgerald was succeeded as president and chief executive officer by a 23-year Hallmark veteran, John Hastings. Pleased with the product InterArt had to offer, Hastings was patient in his approach to improving it, conducting numerous focus groups and gathering other marketing data before making any major moves. Using the information assembled, InterArt launched the WeinerDog brand, built around an irreverent canine character. In addition, the everyday line of Sunrise Greeting cards was refreshed. To attract further business from national retailers for the upgraded line, the company also began advertising in trade publications. One of the major customers InterArt was able to attract in this way was Office Depot, which agreed to take a vertical display for cards to attract impulse sales from people who came in for office supplies and might take the opportunity to buy a card for someone at work or at home.

KEY DATES

1974:: Company formed as Sunrise Publications Inc.
1984:: Sunrise merged with Somerset House Corporation.
1992:: Management engineers leveraged buyout.
1997:: Name changed to InterArt.
1998:: Hallmark Cards acquires company.
2005:: Name changed to Sunrise Greetings.

NAME CHANGED TO SUNRISE GREETINGS: 2005

InterArt also introduced Spanish-language cards and in 2003 began producing and distributing the Max & Lucy cards through an exclusive licensing agreement with artists Russ Haan and Mike Oleskow. Unfortunately, the effects of a struggling economy caught up to InterArt later in the year. Because specialty retail stores, which distributed most of the company’s cards, were hit especially hard, InterArt suffered. To make matters worse, the company lost a major national contract with Target. Forced to tighten its belt, InterArt cut payroll in October 2003, followed by another round of layoffs in February 2004. InterArt continued to reorganize its business throughout the rest of the year, and then in January 2005 InterArt changed its named to Sunrise Greetings, reflecting the company’s new focus on building and distributing its flagship line of greeting cards, in many ways representing a return to the company’s past.