Since Bill and Hillary swept into the White House six years ago, American Greetings has proudly trumpeted the First Family's annual holiday card as its greatest prize. Of late, though, some artists at the Cleveland-based company have been itching to lampoon their most famous customers, but worry about offending retailers. Sighs one illustrator: "We won't be doing any cigar gags, that's for sure."
They had better think of something. The big U.S. greeting-card companies are having a hard time tickling funny bones, warming hearts and sparking reflection. And they've got big demographic and cultural problems. Grandma's cohort, traditionally an easy audience and big card buyers, is dying off. Female boomers buy cards, but they're quite diverse in sensibility and ethnicity, so the one-size-fits-all approach isn't working. Boomer men, much like their fathers, avoid card racks for all but the most mandatory occasion, like birthdays and major relationship screwups. For Generations X and Y, paper cards may as well be stone tablets.
The result is an industry in flux. Although condolences are hardly in order--last year the industry sold $7.5 billion in cards--sales are flattening and earnings are lackluster despite a robust economy. The industry enjoyed double-digit growth from the late '70s through the '80s. Wall Street, about as sentimental as a dollar bill, issued its own greeting to the industry recently: "Get lost soon." In a single day's trading in February, American Greetings, the nation's largest publicly owned greeting-card company, with $2 billion in annual revenues, lost $800 million in market value, tumbling 33%, to $23.25, after warning investors that dumping excess inventory would hurt near-term profits. Gibson Greetings' stock is limping along below $9, down from above $29 last year. (Industry leader Hallmark, with $3.9 billion in sales, is private.) Says American Greetings CEO Morry Weiss: "When you disappoint people, confidence will take a while to come back."
Last month Hallmark delivered a different kind of greeting to its competitors: "You're toast." The company launched a new 99[cents] line, undercutting the basic price by a buck, and threw a $50 million ad campaign behind the new product. (Tag line: "Why not?") Hallmark too is trying to ignite sales in its 20,000 mass-market retail outlets and erase any notion consumers might have that it's a high-priced product. But the move--remember Marlboro Friday, when market leader Philip Morris cut the price of smokes?--will fall heavily on its struggling rivals, who can least afford it. "When the leading brand advertises so strongly on price, it's very disturbing," grumbles Frank O'Connell, CEO of Gibson. "They're going to pull pricing down for other companies by trying to compete on price rather than value."
Essentially, Hallmark is abandoning the high ground of prose and pictures for a frontal assault. Although the company still sells premium-priced (about $5) cards in its own shops and franchised outlets, the real battle has shifted to the mass-market stores, such as supermarkets and discounters. There the cardmakers are left slugging it out over exclusive contracts for coveted shelf space. The aggressive deals cut by retailers, combined with slowing sales volume, have put the squeeze on profits.