The Battle of the Brands: Boon and Munchkin fight it out in the Target baby aisle. Babble’s Infant Industry.Greg Allen
My friends and I try to use our baby gear dollars to support independent, parent-run businesses whenever possible. When we saw the Bath Toy Turtle Scoop from Munchkin on Target’s shelf next to the Frog, we were sure it was yet another instance of The Man ripping off the home-spun entrepreneur. At $12.99 vs. $24.99, the Turtle smokes the Frog on price. “Isn’t Munchkin a ‘made for Target’ brand?” one mother I know, Stephanie, asked. “Talk about ripping off start-ups!”
Setting aside for a moment the fact that her cry of indie injustice was coming from the toy aisle at Target, the answer to Stephanie’s question is instructive for parents of conscience. In fact, Munchkin is far more like Boon than unlike it.
Despite its near-inseparable associations with Target, Munchkin is not an in-store brand. If you don’t count Bamboo, their pet products division, Munchkin is not a complex, or even a conglomerate. It’s still privately held by the founders, L.A.-based Steve and Laura Dunn – and Steve’s dad, David, who ran money for the Bass brothers and fronted his son $500,000 to start the business in 1992. (So this is how hedge fund managers show their love: by valuing their son’s yet-to-be-launched business at $2.5 million?)
Dunn founded Munchkin, the story goes, “to rid the world of tired and mundane products by developing clever, innovative products that excite and delight parents and children, making parenting and life safer, easier and more enjoyable.” Boon’s own mission, meanwhile, sounds remarkably similar: to “create innovative products in response to the needs of modern parents.”
Munchkin’s first Great Idea was baby bottles with Dr. Pepper labels on them. (This makes me think that lofty mission statement was polished up off-site.) The idea came to Dunn when he put a nipple on his Diet Coke bottle and fed his infant daughter her formula. (Coca Cola wouldn’t agree to the license.) First full-year sales: reportedly $15 million.
The company wanted to get away from licensing, start developing its own products, and by 1999, original designs constituted 95% of the company’s $24 million revenue. “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,” Dunn told the Los Angeles Daily News.
But it wouldn’t take long. By “innovation,” she meant “licensing Viacom cartoon characters on everything.”In 2002, Munchkin expanded by buying out a waning product line from Johnson & Johnson. As for the names other companies have, they went for that, too, licensing Blues Clues and Dora from Nickelodeon. It was the same year they reported $5.5 million EBIT on $36 million revenue (which, even if you factor in the Forbes Privately Held BS Discount Rate of 25%, is to be commended). As a former Wal-Mart buyer said in the article, “The only thing that drives sales is innovation, and that’s what they do best.” And by “innovation,” she meant, “Innovation. And distribution, like having Wal-Mart, Target, and K-mart as your three biggest accounts. Oh, and licensing Viacom cartoon characters on everything.”
Since 2005, Munchkin has had either six years of double-digit growth, or nine years of 20%+ growth, either of which is impressive. In 2006, they reached $73 million in revenue, which is apparently when companies feel they have the luxury of producing successful me-too products. Thus, the turtle. (I confess, I haven’t asked the new Juvenile Product Manufacturers Association Chairman Andrew Keimach about such knock-offs, but only because I figure he’s too busy at his day job, EVP, Sales for Munchkin.)
So, is Munchkin a hard-fought parent company success story, or did they cross the rubicon into corporate hegemony when they came out with this me-too product? Would they be as palatable as Boon if they were simply less successful? What’s the acceptable price premium for the indie, innovative product? $12? 80%? (Or, in the Like-A-Bike case, 560%?) Is big-box distribution a sign of success for Boon, but a sign of selling out for Munchkin? Or is the problem the licensing juggernauts of Dora, et al? Will everything change again when Boon’s EVP takes over the JPMA?