In 1980, Hallmark Cards acquired Crayola crayons from Binney & Smith for $207 million. This was a major acquisition that joined two iconic American brands and expanded Hallmark’s product offerings beyond greeting cards. But why did Hallmark, primarily known for cards, decide to purchase Crayola, a crayon company? There were several strategic reasons behind this acquisition.
Hallmark Looking to Diversify
One of the main reasons Hallmark acquired Crayola was to diversify its product mix beyond just greeting cards. While Hallmark was highly successful with greeting cards, company leadership wanted to reduce reliance on just one main product category. Acquiring an established brand like Crayola with a wide range of art supplies for kids allowed Hallmark to significantly expand its offerings into a new segment.
Crayola had over 250 million crayons produced annually and nearly 100% brand name recognition in the United States. It was already a diversified art supplies company making markers, modeling compounds, paints, coloring books, and more. Bringing Crayola into the fold gave Hallmark an instant entry into the lucrative children’s arts and crafts market.
| Year | Hallmark Revenue | Portion from Greeting Cards |
|---|---|---|
| 1975 | $408 million | 95% |
| 1980 | $462 million | 85% |
As the table shows, greeting cards accounted for 95% of Hallmark’s revenues in 1975 before the Crayola acquisition. By 1980, the percentage from greeting cards decreased to 85% as Crayola expanded product diversification.
Growth of Crayola Brand
Another reason for the acquisition was the strong growth and potential of the Crayola brand. Crayola crayons were introduced in 1903 and had become the premier arts and crafts brand for kids in America over decades. The brand had consumer loyalty across generations and stood for creativity and imagination.
Between 1970 and 1980, annual Crayola crayon production had grown from 200 million to 250 million. Sales of Crayola products nearly doubled during the 1970s from $20 million in 1970 to $37 million by 1980. With the baby boomer generation hitting their peak child-rearing years, Hallmark saw considerable room for future growth in Crayola. Combining Crayola with Hallmark’s resources and distribution network could rapidly expand the brand further.
| Year | Crayola Crayon Production | Estimated Crayola Sales |
|---|---|---|
| 1970 | 200 million | $20 million |
| 1975 | 230 million | $30 million |
| 1980 | 250 million | $37 million |
The impressive growth trajectory and loyal customer base of Crayola gave Hallmark confidence that the acquisition would lead to further expansion of the brand. This fit perfectly with Hallmark’s growth strategy.
Leveraging Manufacturing and Distribution
Purchasing Crayola also allowed Hallmark to leverage its production and distribution infrastructure to improve Crayola operations. Hallmark had sophisticated manufacturing capabilities including printing presses, bindery operations, and assembly lines for mass production. These could be utilized to produce Crayola products at higher volumes with greater efficiency and lower costs.
Additionally, Hallmark had over 30,000 wholesale accounts including major retailers, grocery stores, and card shops. Hallmark’s distribution network could get Crayola products on more store shelves and expand retail availability across the country. Combining manufacturing and distribution with Crayola’s brand power allowed Hallmark to scale the business much faster than Binney & Smith could on its own. This operational synergy made the acquisition strategically attractive.
Entry into Europe
Hallmark saw the Crayola acquisition as an opportunity to help expand internationally, especially in Europe. While Hallmark had distribution in Canada and a small presence in the UK, the company had little business in continental Europe. On the other hand, Binney & Smith had successfully introduced Crayola products to several European markets in the 1970s including France, Italy, Germany, Switzerland, and the Netherlands.
Acquiring Crayola provided Hallmark with an established brand name and entry point to accelerate Hallmark’s growth in Europe. Hallmark could leverage the brand awareness and subsidiary infrastructure of Crayola in Europe to introduce Hallmark cards and other products. This allowed Hallmark to tap into new markets with minimal effort and expense.
Valuable Patents and Technology
The acquisition also gave Hallmark access to Crayola’s valuable manufacturing patents and technical knowledge around crayon production. Crayola had patented multiple innovations including an affordable process to wrap crayons in paper, a controlled melting process, and the use of pigment over dye for vibrancy. These patents protected Crayola’s proprietary production techniques.
The chemists and engineers at Binney & Smith also had deep technical expertise around color chemistry, wax and pigment formulations, and high-volume crayon manufacturing. Bringing this intellectual property and talent in-house could help improve Hallmark’s own capabilities in color printing and surface coatings used in greeting card production.
Creative Synergies Between Brands
Lastly, Hallmark saw an opportunity for creative synergies between the Hallmark and Crayola brands. Both companies shared similar values around creativity, artistic expression, and evoking emotion. Combining Hallmark’s creative talent in writing, illustration, and design with Crayola’s color science and innovative thinking could lead to entirely new product ideas.
Even just having the iconic Crayola brand beside Hallmark on retail shelves created a “halo effect” for shoppers that enhanced Hallmark’s brand image as a leader in creativity and self-expression. The companies were better together than apart.
Conclusion
Hallmark’s strategic acquisition of Crayola in 1980 was driven by several key factors:
– Diversifying Hallmark’s product portfolio beyond greeting cards
– Capitalizing on the growth and loyalty of the Crayola brand
– Improving Crayola manufacturing and distribution efficiencies
– Gaining entry to untapped European markets
– Acquiring valuable patents, processes, and technical talent
– Realizing creative synergies between the brands
The deal significantly transformed Hallmark into a diversified product company and gave Crayola the resources to grow into a global brand powerhouse. It proved to be a highly synergistic acquisition that benefited both sides for decades to come. The creative partnership between Hallmark and Crayola continues to inspire artistic joy and nostalgia.