||More about Equity
Founded in 1984 as a company that marketed free trips for airlines through promotions--originally under the umbrella of Marketing Equities International--Equity Marketing was subsequently split off into a separate entity in 1991, when Kurz and his co-chief executive officer, Stephen Robeck, engineered a leveraged buyout. They then relocated the company, from New York to Beverly Hills, to be closer to the movie business.
When The Lion King came out in 1994, Burger King, which is owned by U.K.-based Grand Metropolitan PLC, bought 30 million Jungle Cat toys from Equity, and saw sales of its kids meals triple. Equity's sales that year jumped 39%.
Some top Equity properties: Lost World: Jurassic Park (Universal Pictures) Looney Toons (Warner Bros.: international distribution) Toy Story (Disney: license for home-video release)Babe, the sequel (Universal Pictures) Godzilla (Sony Pictures) Hercules (Disney: license for Latin America) Anastasia (20th Century Fox)
Too much reliance on one business partner can be unhealthy. Last year, Burger King made up 69% of Equity's total business, down from 85% in 1993. To further move away from its heavy dependence on Burger King, Equity is shifting more of its emphasis to retail toys. While promotional toys yield robust gross profits, retail toys offer double the margin--50%--according to Gerard Klauer Mattison analyst Sean McGowan.
But Furman Selz analyst Rothberg warns that although Equity's toys boost the client's image, the success of their campaign depends on the toy. "You're not always going to have that killer license," he says.
To shore up its promotions business, Equity moved into the acquisitions realm and, last year, purchased EPI Group Ltd., which came equipped with the toy giveaway license for Shell Oil. Given the kind of market in which Shell participates--characterized by a large number of locations, a commodity product and competitive pricing--Equity's profits should get pumped up even more.
In addition, Equity recently forged promotions deals with Blockbuster Entertainment, Holiday Inn, Pillsbury and Pepperidge Farms, and, via its Shell contract, is revving up business on the NASCAR circuit.
Although Equity's products are sold at major retailers like Toys R' Us, Kmart and Wal-Mart--the retail toy division accounts for 25% of the company's revenue, and growing--it's one-shot promotions that have fueled the company's growth. And despite the fact that Equity and Burger King are frozen out of the Disney license here in the States--Disney inked an exclusive deal with McDonald's last year--Equity is working with the magic corporation to produce toys for the relatively untapped Latin American market, which is helping Equity to become a more global player.
Sure, there are risks in being in the toy promotions game. Equity often has as little as six months to fill a massive order, from conception to manufacturing the toys in China to final distribution, with no margin for error, since such promotions are usually preceded by gaudy ad campaigns. And uncertain economic situations can translate into disappointing sales figures.