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Another '90s Bad Dream

Beanie Baby mania paralleled the dot-com craze: sky-high prices and then a bursting of the bubble. Ex-devotees cringe at the memory.

August 26, 2004|Thomas S. Mulligan | Times Staff Writer

It was just an online classified ad, under Collectibles for Sale, but it sounded like a cry from the heart: "I'm tired of these things now. Please save me from them."

Kelly Cabral of Tracy, Calif., placed the ad recently after coming across a box in her garage crammed with dozens and dozens of Beanie Babies, the floppy little stuffed animals that sparked an international trading frenzy in the late 1990s.

Years earlier, there were days when Kelly and her husband, Dan, would join the early-morning crowds laying siege to gift shops that were expecting shipments of Beanies.

There were times when the Cabrals would post themselves at different McDonald's outlets to buy stacks of Happy Meals in hopes of scoring a few of the promotional Teenie Beanie Babies they didn't already own.

"I don't want the food," Kelly would say when she reached the counter. "I just want the Beanie Babies."

Now, she says, "My husband's like, 'Where did we get all these?' Then you realize you spent way too much time on this insanity."

Whether a Beanies collection now resides in a cut-glass display case or the back of a closet may depend on the owner's level of embarrassment. Some former collectors cringe when they think of the plush critters, just as certain investors do when they recall Internet crash-and-burns such as Webvan or Pets.com.

In many ways, in fact, the Beanie Baby mania was the dot-com stock bubble writ small.

Both were creatures of a frothy, peacetime economy with low unemployment and towering consumer confidence. Both were abetted by the advent of online trading and the explosive growth of the Internet. Both gave rise to celebrity oracles who seemed able to decode the mysteries of the market. Both spawned fraud and even episodes of violence. And, finally, both flouted all classical notions of investment value. Until they didn't.

Beanie Babies, as aficionados know, are the brainchild of H. Ty Warner, 59, chairman and owner of Ty Inc., based in the Chicago suburb of Westmont, Ill.

Forbes magazine ranks Warner as the 65th richest person on Earth, worth an estimated $6 billion, ahead of Los Angeles insurance and real estate tycoon Eli Broad, Staples Center owner Philip Anschutz and Amazon.com founder Jeffrey Bezos.

Warner's fortune was built on Beanie Babies, helping fund his purchases in recent years of New York's Four Seasons hotel, as well as San Ysidro Ranch, Four Seasons Biltmore Hotel and Sandpiper Golf Club in Santa Barbara.

Nowadays, Warner is intensely private. He doesn't give interviews and declined to comment for this article. His company is so private it does not disclose sales or production figures, displays no logo or identifying sign on its curvy, glass-walled headquarters, and keeps its phone number unlisted.

In his earlier career hawking stuffed animals for Dakin Inc., a venerable teddy bear maker, Warner was less reclusive. On sales calls, he'd drive a white Rolls-Royce and wear a knee-length fur coat, a gimmick he once said was calculated to make people curious about what he was selling. Warner left Dakin and started Ty Inc. in the mid-1980s with a line of $20 stuffed Himalayan cats.

Warner's killer insight was that the world needed an attractive plush toy that a kid could afford. He designed it himself and brought it to market in 1994.

The secret of Beanie Babies' initial appeal, fans say, was that they were slightly under-stuffed with heavy plastic pellets, giving them a pleasing combination of heft and floppiness. They were expertly hand-sewn in Asia and came with antic names such as Freckles the Leopard, Tank the Armadillo and Pinchers the Lobster. At $5 to $7, they were in range of a child's weekly allowance.

"You don't usually get something in the toy industry at that price range that's very cute," said David Marks, a Westport, Conn., toy store owner who surfed the Beanies wave.

Having produced a lovable item at a popular price, Warner then stumbled upon -- or cunningly executed, depending on whom you believe -- a series of moves that made Beanie Baby sales go nuclear.

First, he adopted the distribution model for higher-end plush toys, selling Beanie Babies through specialty gift and toy shops rather than through Wal-Mart, Toys R Us or other giant chain stores. That way, you couldn't find the entire line in one place, and buyers would seldom encounter piles of unsold Beanies -- enhancing their status as collectibles, not mere commodities.

Not only did Warner keep introducing new Beanie characters, but he sometimes made changes in a line when he wasn't satisfied with the style or color. Thus, an orange Digger the Crab gave way to a richer red Digger after a year. Suddenly, collectors swooped on the scarcer original version, eventually bidding it up to $600 or more on the resale market -- perhaps five times what a red Digger might bring.

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