BABY STEPS: TINY IMITATOR INSPIRES DAD'S BUSINESS VENTURE.

Byline: Enrique Rivero Daily News Staff Writer

Steven B. Dunn can thank his first child for sparking the idea that gave birth to Munchkin Inc. a decade ago.

Since then, Munchkin has become a significant player in the world of products for babies, often by putting a slightly whimsical spin on the blankets, teethers and other wares that are almost as old as childhood itself.

The company started with a simple idea: Dunn put a nipple on a Diet Coke bottle for his daughter Beau, then 2. Munchkin has since matured into a multimillion-dollar private enterprise. Its products, which emphasize safety and convenience, have won awards four years in a row from an industry association.

Popular sellers include spoons and bowls that change color when food is too hot and an all-in-one blanket, teether and pacifier holder. Dunn, who is president and chief executive officer, believes the time is right to seek wider exposure.

``We're trying to take it from underground to above ground,'' said Dunn, 41.

The company is about to embark into new territory that it hopes will give it a higher profile, an early learning system aimed at stimulating babies' brains even before birth. Its catchphrase is ``Learning begins in the classwomb.''

Details are vague at this point, but Dunn expects to begin releasing products this summer in the embryonic line.

His strategy is based on belief that success requires constant innovation, which he says is needed in an industry whose products overall have undergone little change in 30 or 40 years.

``We don't have the luxury of coming out with me-too products, because we don't have the name that some of the other (companies) have,'' he said.

Although Munchkin products emphasize comfort and safety, the company isn't adverse to coming up with products as whimsical as its name. Dunn, a former venture capitalist with a master's degree in business administration from Harvard University, began the company with just that kind of product.

It all started in 1989, when his 2-year-old daughter kept grabbing at his soda bottles.

``I always drank out of Diet Coke bottles - I have an old-fashioned Coke machine at home - and one day I filled a Diet Coke bottle with formula and fastened a nipple on it, and she was able to drink out of a Diet Coke bottle and look like her father,'' he said.

That gave him his first big idea - baby bottles in the shape of soda bottles. He approached The Coca-Cola Co., Pepsi Co., 7up and Dr. Pepper with hope of licensing their names. Only Coca-Cola turned him down.

His company was incorporated in 1991 and began selling products in July 1992. In 1993, the company's first full year of business, Munchkin Inc. racked up about $15 million in sales and turned a profit, according to Dunn.

In fact, the company has operated in the black every year but one: 1994, when the Northridge Earthquake caused about $1 million in damage to the old Keebler building on Roscoe Boulevard and Woodley Avenue that Munchkin had turned into its new headquarters.

``Our opening day in the new facility was the day of the earthquake,'' Dunn said. ``Those are the little trials and tribulations of a start-up.''

The company now operates out of a 63,000-square-foot building on Strathern Street in Van Nuys.

In its first two years, about 99 percent of the company's products were licensed from other sources. Now about about 95 percent are original. Munchkin holds about 20 patents and 10 others are pending, according to Dunn, who expects the company to reach $24 million in sales this year.

Munchkin has won awards four times from the Juvenile Products Manufacturers Association:

In 1998 for the Back Sleeper, which keeps babies on their backs while they sleep, a position that is said to reduce risk of sudden infant death syndrome.

In 1997 for the Teething Blanket, which has built-in teethers and pacifier holders.

In 1996 for the White Hot Soft Bite Safety Spoon.

In 1995 for the One Step Drop-In Starter Kit, a disposable feeding line that the company discontinued last year.

A dozen or so Munchkin products are among the key items carried by The Right Start Inc., a Westlake Village-based retailer of baby goods, said Mindy Moss, assistant buyer for the chain.

``The best way to know a customer loves your product is by what you sell,'' Moss said. ``They really picked the niche in the market where no one had ever been before.''

Dunn's children continue to inspire new products. The Teething Blanket, for example, came about because he wanted to find a way to keep his son Steven from dropping everything Dunn gave him.

``Every time I have a kid, it spurs a new product,'' Dunn said. ``I'm trying to talk my wife into a third, but I'm not sure I'm going to be successful.''

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6 Photos

PHOTO (1--Color) Steve Dunn, front center, and his staff show some of the products Munchkin Inc. sells for babies.

David Sprague/Daily News

(2--Color) Wanda's feet are safe teething toys.

(3--Color) This `pet' goes in the tub with a toddler.

(4--Color) A safety spoon has won an award.

(5--Color) A duck is a charming bath partner.

(6--Color) A baby can cut teeth on blanket corners.