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The San Francisco Chronicle
Business Section
Sunday May 6, 2001

Fad factory Wham-o finds itself back in style

By George Raine
Chronicle Staff Writer

One of the reasons the Hula Hoop is in the pantheon of all-time famous toys is that it pretty much put neighborhood bozos in their sorry place if they couldn't get the knack of it. Those of us who were particularly gifted with the Hula Hoop became neighborhood legends.

Its maker - here's a name for the ages - was and is Wham-O, a company originally from San Gabriel (Los Angeles County) that, four months after introducing the hoop in 1958, had sold 25 million of them. That same year, Wham-O introduced the Frisbee, first called the Pluto Platter. That's a double dose of branding history.

Wham-O sailed along, mostly, listlessly, for years. It later had two corporate homes. It was purchased in 1982 by Kransco of San Francisco and in 1994 by Mattel of El Segundo (Los Angeles County), where it disappeared inside a $4.6 billion business where Barbie was queen.

But now Wham-O is back in San Francisco - and ready to play.

A group of investors, including New York's Charter House and Seven Hills Partners of San Francisco, bought the Wham-O trademarks and assets from Mattel at an auction in October 1997. Difficult as it is to believe, the company that has entertained three generations was re-launched as a startup in 1998.

"We had to get the system up and running in 60 days," said Mojde Esfandiari, president of the now-privately held company, where filing and toy storage are still works in progress at its offices on Second Street.

But here's an encouraging detail: Sales are up about 60 percent at Wham-O, in the $50 million range, up from the $20 million range in 1998, said Cabot Brown, managing director of Seven Hills Partners.

And Wham-O intends to continue the growth.

"Our plan is to put a Frisbee in every garage," said Brown, sketching a simplified business plan for an enormously complex and fickle $23 billion U.S. toy industry. "We also want to restore well-known brands to their glory and have a variety of products that define certain categories."

Wham-O, of course, begins with the kind of name that lifts products and politicos alike. The list of trademarks also includes Hacky Sack and Boogie Board.

The Wham-O Slingshot was the flagship product that Arthur "Spud" Melin and Richard Knerr turned out in 1948 in San Gabriel, and now there are some 50 products under the Wham-O banner.

Analysts like what they see. Wham-O dominates the outdoor water category with its trademarked Slip N' Slide and other water-related products, noted Jim Silver, publisher of Toy Book magazine in New York. Wham-O figured out early on that kids like to get wet, he said.

Secondly, said Silver, Wham-O has had success in the food category with its Baskin-Robbins Ice Cream Maker.

"The longer they expand those lines, the brighter their future will be," said Silver.

The mantra at Wham-O is that kids need to go outside and have some fun, said Esfandiari and Scott Masline, senior vice president for marketing, which has largely made Wham-O a spring-summer business. This winter, however, Wham-O will be introducing a winter game line - including saucers and even small skis that can be attached to scooters to shoot down snow-packed hills - which will extend the famous brands.

In this venture into what's known as "contraseasonal marketing," Wham-O is finding new life for old icons.

One saucer is really a large inverted Fribee and another has a Hula Hoop-like ring, so consumers are not far from images and brand equity they recognize - and parents can see to it that, by golly, their kids will have fun with the very toys of their own youth.

At this point, however, winter is only an opportunity for Wham-O, which must prove itself, said Silver.

"They're not going to set the world on fire with sales, but the kids will have fun this summer and winter with Wham-O toys and Wham-O will make some money," said Christopher Byrne, a toy industry consultant in New York. "Nothing wrong with that."

The challenge of Wham-O, many agree, is for the company to avoid relying too much on its storied past. "History is great," said Masline, "but history does not make a company. Perhaps previous generations that have owned this company relied too much on the history."

Joy seekers

Masline, at age 42, has worked only in the toy and sporting goods industry and thus can say with authority, "I've never had a real job." Esfandiari, whom the investors brought in in 1997 to be the chief financial officer and who became president in November, is also an industry veteran who, at 44 finds it's helpful to become a child again to learn what works - what's fun. Having two kids of her own helps, too. "This is the third time in my life I'm doing the fourth grade," she said.

If guiding a company heavy with brand equity is something of a burden, it's a welcome one, much preferable to having no well-known brands, said Esfandiari.

She, Masline and Wham-O's 50 other administrative and creative people in the corporate office on Second Street spend much of their day wondering what will give kids joy. Some toys have lengthy pedigrees: Hoops very much like Hula Hoops were used in Australia for exercise prior to 1958, and you can find its inspiration in the Middle Ages when boys pushed hoops down roads with sticks.

Still, "You don't want to over-analyze these things," Masline said. "You just have to ask, 'Does it deliver joy; will it make them giggle?'"

"Kids also like repeat fun, over and over again," said Esfandiari.

Good, wet fun

The endless search for what's fun is no simple task. Even the Frisbee is forever being changed to keep its marketplace appeal. This year alone, there are some 30 models by weight and color, said Masline. There's the Moonlighter that glows in the dark and the Heatwave that changes color in sunlight. The company is hoping that sales fly, too.

Slip N'Slide is another item that has undergone constant tweaking. "The Slip N'Slide is a basic plastic slide. It wasn't broken, but we were able to fix it and bring more play to it," said Masline, showing off four similar slides with as many different features and price points.

Since Slip N'Slide's success established that kids get sopping wet, Wham-O has since rolled out Water Blast Hockey, in which two people attempt to put a puck in an opposing goal using two water "blasters" that can be hooked up to a single garden hose. Most toys are developed within Wham-O and other toy companies, but this comes form the "inventor community" in particular, Good Marketing of Cleveland.

President Sid Good said he began with the premise that kids like to play outside and play with water guns, and then he asked himself the question, "What will kids do with water guns other than squirt each other? The answer was to make (the game) competitive, engaging and fun."

Other recent Wham-O developments include the new $15 E-Shoop Hula Hoop, which is interactive and can be used competitively as it counts the number of "shoops" (the sounds the hoop makes) and time in play. Wham-O also offers some Morey Body-boards that are priced at more than $300.

"Wham-O is small enough to be extremely responsive to changing market conditions," Good said. "They have the ability to turn on a dime and get products quickly to market."

Changing Times

Meantime, Wham-O likes playing in the midsize toy company range, with its products available in major outlets like Toys R Us or tiny beach huts. The toys can be found in the Unites States, Europe, Japan, South Africa, Australia and New Zealand at a variety of prices.

During Wham-O's brief relationship with Mattel, its products were not wholly out of distribution (although Slip N'Slide was nowhere to be found for two years). They were, however, a poor fit in a mass-manufacturing company which in time changed its thinking about Wham-O, said Sara Rosales, a Mattel spokeswoman. "One of the things you focus on is profitability," she said, "and when we carefully looked at the financial data, selling (Wham-O) made more sense."

Since the doldrums of the Mattel days, 60 percent growth in sales looks pretty good, said Brown, the investor.

Will Wham-O go public? "One never knows, "he said.

 


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