Boom in Black greeting cards.

REMEMBER "COUSIN MATTIE'S Daddy's Sister's People," the line of black greeting cards with life-size soft sculpture dolls depicting scenes from everyday African American family life? Their creator, Cheryl D. Munson, was pictured with some of the characters she created in the December 1989 issue of BLACK ENTERPRISE. Ever wonder why you can't find the cards in your local store anymore? In 1991, six years after Munson's cards went on the market, Love, Auntie Cheryl Greetings Inc. went bankrupt.

Munson's story is not unusual. Of the 17 black-owned greeting card companies listed in that story, about one-third can't be traced today. And many of those that are still around are fighting to stay in business. In fact, the challenge may be greater today than it was six years ago.

The $5.6 billion greeting card industry is dominated by the "Big Three"--Hallmark, American Greetings and Gibson Greetings--which control 80% to 85% of the market. The rest of the pie is divvied up between 1,000 or so independent companies, including several African American manufacturers.

The major have thrust themselves into the ethnic greeting card market in a big way. Each has developed an ethnic line with hundreds of cards to compete for a share of the niche that African American and Hispanic-owned small businesses have serviced since the '60s. And with deeper pockets, better distribution and a near monopoly on retail outlets, the Big Three are changing the dynamics of the ethnic market. African American-owned greeting card makers are having a tougher time getting their products in the hands of their constituents. But analysts and some manufacturers argue that there are really two different retail customers, and that there's enough room--and money--for all.

"Small companies really do well because they don't really compete directly with American, Hallmark and Gibson," says Gray Glass, an industry securities analyst for Wheat First Securities in Richmond, Va. "They find their niche and they can usually do okay despite the fact that the bigger boys are out there."

But don't tell that to Vivian and Edward Broom, owners of Detroit-based Broom Designs, one of the oldest black-owned greeting card companies still in business. "Business should be getting better, but it's not. White companies have become interested in targeting the African American market," says Vivian. "Because they have their foot already in the door, they're getting the big bucks, and we're not."

To compete and keep their market share, black entrepreneurs are coming up with innovative solutions. Some companies are using alternative distribution channels, including mail order and cooperative direct sales agreements to increase sales. Others are forming alliances with other companies to share production costs, or arc investing in technology to absorb more production responsibilities in-house. Still others are looking abroad to foreign markets for new growth.

For black entrepreneurs, who are traditionally undercapitalized and short-handed, the challenge is formidable. "We want to stay in the business; it's become our life," says Vivian Broom, "but it has to be profitable."

THE PIE IS GETTING LARGER, BUT FOR WHOM?

The Greeting Card Association estimates that 7.4 billion cards will be sold in 1995. In terms of total number of units sold, the industry has experienced only marginal growth, averaging 2% over the past nine years. However, industry analysts point out, price increases of 4% to 6% have boosted overall earnings by 5% to 9%. This has resulted in moderate growth, ranging from 7% to 11%, since 1987.

About 90% of greeting cards are purchased by women, most of whom are between the ages of 35 and 54. With little demographic movement in this age group, there's been virtually no growth in the total number of cards sold. As overall business has peaked, the big companies have turned to niche marketing as the new avenue for industry growth. And the growing population of blacks, Latinos and Asians has created fertile ground for targeted products, including greeting cards.

"Where there is growth is where everyone wants to be," says Jose Martinez, product manager of ethnic markets for American Greetings. The Cleveland-based company is the second largest card manufacturer in the world and the largest that's publicly traded.

With a projected total income of $347.3 billion, and $238 billion in spending power, African Americans are an attractive force. According to market research, African Americans purchase an estimated 52 million cards each month. With the average card retailing for $1.50, that's a whopping $78 million per month, or $936 million annually.

Another survey by Miami-based Market Segment Research estimates that six of 10 African Americans buy greeting cards, most often for birthdays (84%), Christmas (75%) and anniversaries 41%)--the three biggest occasions for which greeting cards are purchased. With a flat line of growth in the general market, it's no wonder that "alternative" markets have become the focus of big companies trying to boost their bottom lines.

At the same time, the overall number of traditional retail outlets selling greeting cards--mainly independent gift shops and bookstores--has declined as consumers do more one-stop shopping in superstores, from supermarkets to mega discount stores. As a result, manufacturers are competing for even more premium shelf space. And here again, the majors are winning.

The Big Three have each established separate ethnic card marketing groups to create and develop new products targeted to these customers. Paul Quick, general manager of Hallmark's Ethnic Business Center, explains that the company, which began producing black greeting cards in the '60s, started its Mahogany line in 1987. However, Hallmark did not set up a formal brand management team to develop a marketing strategy until 1994. The Kansas City-based manufacturer now offers more than 800 different cards in this line, including boxed Christmas and Kwanzaa cards.

DEVELOPING A DEMAND FOR BLACK CARDS

The Big Three may have finally recognized the viability of designing and selling greeting cards targeted to African Americans--something black entrepreneurs knew long ago.

"We started this business because we had young children, and we wanted to instill a consciousness in them that they were fine the way they were and didn't need to imitate white people," explains Vivian Broom. She and her husband Edward, a graphic artist, started producing the cards in 1971. "We found a small local printer who would make them up, and we'd pay him later."

Along their 24-year enterprising odyssey, the Brooms have sold their card line to major retailers such as Dayton-Hudson, Rich's (now Macy's) and Kmart. The Brooms still distribute their products on their own, but they also employ manufacturer representatives--middlemen, like black-owned Atlanta Cards, who get sales accounts and keep track of inventory. Last year, the company had sales revenues of about $250,000. "Although we're making more money, we're spending more. So profits have remained constant, which is depressing," says Vivian.

While some African American entrepreneurs stumbled into the card business, others, like Cheryl Munson, saw developing a line of greeting cards as the starting point for other businesses. "Because I started with a group of characters for the cards, it was always my intention to expand the characters into other markets," says Munson of her Cousin Mattie's softsculpture dolls. "Greeting cards were a way to introduce them into the market."

Munson, a former advertising copywriter, did all the right things to launch her card line. She surveyed the market, wrote a business plan and developed a marketing and development strategy. In 1985, she found a major venture capital firm willing to loan her $250,000.

Munson then struck a deal with Gibson Greetings to distribute the cards in their retail outlets. But Gibson didn't provide any advertising support for the line. "They couldn't justify advertising something that was a very, very small part of their revenue structure." Meanwhile, Munson's investors wanted to see her cards in more retail outlets.

Although her company earned $250,000 in sales in 1989, the venture capitalists pulled the plug by the end of the 1990 Christmas season. Munson had an inventory of 100,000-plus cards in her Oakland warehouse and no money to market them. Even her mail-order business, which generated as much cash as her retail relationship and one-half the company's revenue, folded because she ran out of cash to print and mail catalogs. In the end, she dissolved the business and went home to Milwaukee for a year's sabbatical, before a permanent move to Atlanta.

In 1993, free of the strictures of investors and distributors, Munson decided to refocus her strategy on the collectibles market. Her new company, Gifted Black, still features her mainstay, Cousin Mattie's Daddy's Sister's People (which Munson never sold the rights to), which she uses to manufacture limited edition resin replica dolls of her soft-sculptures. She also has a line of figurines and tree-top ornaments along with seven new greeting card designs.

For companies like Munson's, the lure of working with major companies is the promise of instant mass distribution. And for the Big Three, distributing cards from small minority vendors has given them a presence in the ethnic market.

But black-owned card companies, writers and artists complain that now that they've proven the viability of Afrocentric cards in the marketplace, they're being shut out. Instead of signing African American companies to distribution deals, the Big Three are using in-house talent-primarily white artists and writers--to develop these new product lines. The relationships with black vendors were used as the litmus test to determine the strength of the market. They also assert that these cards are just white faces painted black.

"What we did was to define the African American card as a cultural card," says Bob Smith, CEO of Los Angeles-based Blacksmith Cards. "Until recently, Hallmark has not known how to do that, and I'm not certain that they know even yet."

"I see the Mahogany line as helping to create some exposure for African American artists and getting their work out there," counters Hallmark's Quick. "We're not working against them--we're supporting them."

Quick explains that corporate structures like Hallmark have 700 artists, designers, writers and photographers on staff. Each is assigned to work on several product lines. Within the Ethnic Business Center, there are two editors and two designers (one of each is black) who influence the creative direction of the lines. "We've also partnered with outside artists to bring something new to consumers," adds Quick.

Artists like Synthia Saint James say they've partnered with minority-owned firms like Dallas-based wrapping paper manufacturer Ethnic Reams Rolls and Bags, and majority-owned companies like Los Angeles-based EthnoGraphics to turn out cards as another way to get their work into the market.

Ethnographics' CEO, Carol Weinstock, took Saint James' cards, along with those of another artist, to Hallmark, which tested the line for one year. That was 1991. Hallmark expanded its Mahogany line soon after. Nonetheless, the relationship was fruitful for everyone involved. It proved that there's a market for a line of modern black greeting cards with vibrant designs; Saint James' work boosted Ethnographic's bottom line; and the artist gained wider publicity and popularity for her work, putting it in the hands and homes of more people. Best of all, all entities made money.

This past fall, Hallmark also teamed up with black-owned Carson Products to put samples of its Mahogany cards into packages of Dark & Lovely hair relaxer. The goal: to create brand awareness among black women. "We created a win-win situation because it was a way for Dark Lovely to say thank you to its customers and for us to get the product out in front of our target market," says Quick.

BLACK COMPANIES FIND THE KEY TO SURVIVAL

If strategic alliances have become a marketing strategy for majority-owned firms, they may prove to be the key to survival for most black card companies.

"We've had to use every channel we could, from the traditional of going directly to stores to alternative channels like fund-raising programs," says Wayne Wilson, president of black-owned L'Image Graphics.

The 12-year-old, Culver City, Calif.-based company has engaged in joint marketing programs with the Thurgood Marshall Scholarship Fund and Miller Brewing Co., whereby proceeds from the sales of selected cards Miller purchased from L'Image went to scholarships. A similar program was done with Kraft General Foods and UNCF. Besides having a strong order business, L'Image has established its own program to sell directly to churches, fraternities and other organizations.

The company's retail strategy places more emphasis on its 1,500 active independent accounts, including the U.S. Army and Air Force military exchanges. But its biggest boost has come from a 1992 licensing agreement with Chicago-based Recycled Paper Greetings, the fourth largest greeting card company and No. 1 company in the alternative card market. Under the agreement, L'Image produces the designs and Recycled handles the manufacturing and distribution and services the accounts.

"If you're trying to sell to a chain with 200 to 300 stores, it's hard for a small company to have the capital to get a service agent in each store. This is where the relationship pays off, "says Wilson. And it has--to the tune of about $1.5 million in gross sales including the licensing agreement.

Other African American greeting card companies, such as Philadelphia-based Send Inc., are looking abroad for growth. "We're a niche general market card, made on high-quality stock," explains CEO Mark David Norris. His company has expanded into Europe, Canada and China. Norris projects that this year's sales will increase 428% from last year's $500,000. And, although foreign sales are only 20% to 30% of his business, Norris attributes his success to the fact that his 300 general market cards are an "American" product and not "specialized." "Those companies who are only ethnic are going to get eaten up," he says.

But most African American greeting card companies want to produce their lines for the black consumer. Ninety-nine percent of these companies were started because their founders couldn't find black cards they felt reflected themselves. To stay in business, black card companies, like Washington-based Kofi Tyus Studios, are forming cooperative agreements with other black entrepreneurs like Kumba Kollectibles to split overhead costs. Others, such as Ethnic Reams Rolls and Bags, are seeking to invest in hightech printers to bring production in-house and generate new business.

Although the challenge to remain profitable is great, African American-owned companies are unwilling to concede the market to the majors. All see the ethnic marketplace as rowing, as attested by the fact that the Big Three are investing heavily in the development of this market segment. And, the little guys still believe there's room for everyone out there. "The majors don't want to service really small accounts," explains Wilson. "That's where smaller companies come in."

Ultimately, the big winner will be black consumers. Says Bob Smith of Blacksmith: "Americans no longer have to buy only what's available; now they can buy what they want. There's enough room for all of us."