WISHING YOU WEREN'T HERE; GREETING-CARD COMPETITION GETS EDGE.

Byline: Dana Canedy The New York Times

When it comes to finding ways to express truly modern sentiments, greeting-card companies have long been at a loss for words.

So the two pillars of the industry are taking a deep breath and trying some new tricks. American Greetings is dropping most of its traditional cards and replacing them with lines that address drug addiction, terminal illness and other issues it once shied away from. And Hallmark Cards has come out with hundreds of cards for occasions in which ``get well'' or sympathy greetings send the wrong message.

Cards now express such thoughts as ``Hope this is one of your better days'' and ``While there is time, let us talk of what matters.''

These modern messages, of course, are aimed as much at customers' wallets as at their hearts, because in the $7 billion greeting-card industry, the battle lines are rapidly being redrawn.

For decades, Hallmark Cards Inc., which sells an estimated 42 percent of the United States' cards, stuck mainly to greeting-card shops, while American Greetings Corp., with 35 percent, had supermarkets and discount stores largely to itself. So the rivals merely eyed each other from a safe distance.

But with mass retailers crowding the landscape, Hallmark is increasingly nosing into American Greetings' turf, setting off a nasty war that no ``get well'' card will smooth over.

``To some degree they are all sort of going into one another's territory and all trying to appear to have an alternative, cutting-edge style,'' said Lynne Hamilton, a fund manager for Society Asset Management, a unit of Keycorp, which owns 14,000 shares of American Greetings.

One force for change is that this is a mature industry, with existing holidays pretty much milked dry. Sales volume has been flat or down for several years, with most growth coming from acquisitions and price increases. And more people communicate by e-mail, have little time to shop or are bored with outdated greetings.

But the main cause of conflict is simply the change in where people buy cards. Americans now buy an estimated 65 percent of greeting cards at mass retailers instead of card shops, up from 45 percent 15 years ago.

Hallmark insists that its card shops are not dying, but it is nonetheless trying to move rapidly into American Greetings' turf in discount stores. In a big shift last year, it offered its powerful brand name to discount stores and supermarkets by starting a line it calls Expressions from Hallmark.

Hallmark's move, though, angered owners of some independent card shops that carry its brand. ``This Expressions from Hallmark going in Wal-Mart is certainly going to hurt me,'' said Marsha Marino, owner of Marsha's card shop in Pharr, Texas. ``There is a Wal-Mart store less than a mile away.''

Expressions, she said, is proof of Hallmark's desperation to move into mass retail channels. ``People don't have to go to Hallmark stores to buy cards anymore,'' she said. ``They can pick up cards at the carwash.''

Hallmark, Marino said, is pressuring independent shop owners to join its Gold Crown network, a distinction given to shops that adhere to certain standards. ``They impose very stringent policies I couldn't afford,'' she said. ``I was forced to buy product I wouldn't normally buy.''

The battle is marked by a rising level of bickering. American Greetings says Hallmark made a crucial error in continuing to sink money into card shops when consumers began to buy valentines where they shop for eggs and blue jeans. Hallmark, meanwhile, contends that American Greetings is paying retailers increasingly large sums for shelf space because its cards lack cachet.

``American Greetings went in and offered a lot of money to Walgreen to take over our shelf space,'' said Irvine Hockaday Jr., president and chief executive of Hallmark, a $3.6 billion company based in Kansas City, Mo. ``They must have figured they had to do something to dislodge us, but Walgreen turned them down and kept the Hallmark brand.

American Greetings counters that when tooting its own horn, Hallmark fails to talk about large retailers like Target that still do not carry its cards. Besides, the company ``hasn't had a whole lot (that is) positive to write about,'' said Morry Weiss, chairman and chief executive of American Greetings, a $2.2 billion company based in Cleveland.

``Hallmark has come to the realization that they can't make it in specialty retail, and for them to survive they have to become more aggressive in the mass retail channel,'' Weiss said.

Industry leaders even have started crowing about their victories in the marketplace. American Greetings, which is known for its low-key style, for the first time listed the names of many of its major accounts on the cover of this year's annual report.

For its part, Hallmark, in a recent employee newsletter, announced the winners of gift certificates to mark its takeover of 320 Wal-Mart stores.

Even as it goes after the mass market, Hallmark says it remains committed to its card shops. Doranne Hudson, who is in charge of card shop retailing at Hallmark, said that 5,000 of the 8,000 stores that carry the Hallmark brand have opted for Gold Crown status. None, she said, were forced to participate.

In mass retailing, Hallmark is in for quite a fight. American Greetings sells cards in 66 percent of mass retailers, including 1,200 Kmarts, 1,100 Wal-Marts and 650 Toys `R' Us stores.

A few years ago, Target, which is owned by Dayton Hudson Corp., carried both American Greetings cards and Hallmark's Ambassador line. But Target dropped Ambassador and now carries just American Greetings cards in all of its 700 stores.

Both companies offer retailers cash and other incentives to lock them into contracts that guarantee shelf space. According to American Greetings' current annual report, in its last fiscal year it agreed to pay $105 million for such contracts in the next few years, twice the level five years ago.

Weiss said he preferred to compete on product performance, ``but if contracts will be the issue, we have the wherewithal and the commitment to build our market share.''

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PHOTO (color) Hallmark cards, left, and American Greetings are taking increasing aim at each other in an unsentimental battle for supremacy in the greeting-card market.

The New York Times