BEAR NECESSITY FOR STEIFF

When Knut the polar bear was all the rage in Germany a couple of years ago, the toy department at Berlin’s iconic department store KaDeWe called the inventor of the stuffed toy bear, Margarete Steiff GmbH, urging it to get over to the Berlin Zoo to witness all the fuss about this clumsy little baby bear.

Martin Frechen, the CEO of Steiff, later said that the company dropped everything it was doing and within two weeks launched the first Knut plush bears with the trademark Steiff button in its ear. Knut became the bestselling item in the Steiff catalogue and quickly sold-out. “Knut released so much emotion in people,” Frechen said earlier this year. “We sold more than 100,000 Knut bears.”

The Knut craze was a welcome boost to the company that was founded in 1880 by the German seamstress Margarete Steiff. She produced the first stuffed plush animal, a felt elephant pin cushion, then in 1902, Steiff launched the bear, which became known as Teddy’s bear after then US President Theodore “Teddy” Roosevelt.

Over the years Steiff plush animals became expensive designer items with a large share of its sales to collectors rather than kids. The company even has a vault at its headquarters which safeguards more than 50,000 bears. International collectors have paid as much as €145,000 for a vintage Steiff bear.

Now, Steiff is trying to refocus on children. Like other toymakers, as children jump to electronic games at an earlier age, Steiff is hoping to win over younger tots. For Christmas, Steiff is launching a new line of products that it calls the Steiff Selection and includes a collection of stuffed animals, rattles and bedtime music boxes. Steiff is still aiming upmarket and each of the designer-made items consists of fine material such as cashmere. Steiff is also diversifying. The company now manufactures children’s clothing, which Frechen says is a €1.7bn market in Germany.

In the world of traditional German toys, plush animals account for just 5% of the market, or about €112m. It’s not clear how much of that belongs to Steiff, as the company does not publish information about sales, earnings, or how many bears it makes a year. But clearly the room for growth is limited. Steiff has been trying to retool its business for some years; Frechen was appointed CEO in 2006 to turn the family-owned firm around.

One of the challenges facing Steiff is reputation. It faced serious quality issues a few years ago after a failed attempt to outsource about 20% of its production to China. The experiment ended badly. Instead of producing friendly, cuddly bears with a child-winning expression, the bears came back with a grimace. “If the symmetry is offand if it looks like it’s been run over by a car, it’s not what we want. People don’t pay for that,” says Frechen.

Steiff is bringing its Teddy bears back home. In January, it acquired the Duisburg-based textile firm Reinhard Schulte GmbH, and will only maintain a sales force in China, which is still an important growing market. As it did with cuddly Knut, Steiffhopes it can convince kids again that they have a life-long friend in their plush bears.