Wham-O, Inc.

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Wham-O, Inc.

5903 Christie Avenue
Emeryville, California 94608
U.S.A.
Telephone: (510) 596-4202
Toll Free: (888) 942-6650
Fax: (510) 596-4292
Web site: http://www.wham-o.com

Private Company
Incorporated: 1948 as Wham-O Manufacturing Co.
Employees: 100
Sales: $50 million (2003 est.)
NAIC: 339920 Sporting and Athletic Goods Manufacturing

Wham-O, Inc. is a leading American toy manufacturer with several well-known classic products. Wham-O brought out the Frisbee flying disc in 1957, and in 1958 introduced the Hula Hoop, which became one of the world's most popular toys. Wham-O continues to hold the leading market share in flying discs, and produces other classic toys such as the Superball. The company makes more than 70 products, mostly toys designed for active, outdoor play. Wham-O manufactures a complete line of snow toys including sleds and saucers, and water toys including floating tubes, the Slip 'n Slide, and water blasters. The company makes other outdoor games such as bumper golf and croquet golf, and some tabletop action games such as Pinball Soccer. Wham-O markets the Hacky Sack, a pellet-filled ball used for a game of agility, and the Morey brand of Boogie Boards. The company was owned by giant toy firm Mattel in the 1990s, and in 1997 relaunched under a private management group. In the 2000s the company has been growing quickly and acquiring a variety of smaller manufacturers.

Making a Name in the 1950s with Fad Products

Wham-O began as a business started in the garage of two college friends, Richard Knerr and Arthur "Spuds" Melin. While attending the University of Southern California, the pair searched for some product they could easily sell through a small home business. The company name came from one of their first products, a slingshot. Melin and Knerr were fans of hunting with falcons, and they used a homemade wooden slingshot to fling bits of meat up to the birds. "Wham-O" was meant to evoke the sound of the slingshot. The two friends bought a saw from Sears on the installment plan and began making slingshots in a garage. They sold them through the mail to customers who saw their advertisements in sporting magazines such as Field & Stream. The company had a variety of early products, including blowguns and tomahawks. Melin and Knerr were always on the lookout for exotic new toys, and they hit it big twice in a row in the mid-1950s.

First came the Frisbee. The founding mythology of the Frisbee is contradictory. One prevailing story is that students at Yale threw pie tins from the Frisbie Baking Company for fun, as far back as the 1920s. The California version is that kids at the beach made a sport of whirling plastic coffee can lids, or that Hollywood cameramen did the same with the lids of film cans. In 1948 a California carpenter, Fred Morrison, began making plastic throwing discs, which he called Pluto Platters, and selling them on the beach and at local fairs. Morrison patented the Pluto Platter in 1955, and then sold the rights to Wham-O. Wham-O brought out the plastic Pluto Platter in 1957, and retailed it for less than a dollar. The company hired college students to hawk the Platters when it could not get distribution in regular stores. The Platters became all the rage at college campuses. Within the year, Wham-O had sold a million discs. In 1958 Wham-O enhanced the design of the disc and renamed it Frisbee. Richard Knerr claimed in an interview with the New York Times (July 1, 2002) that he had named the product after a cartoon character, Mr. Frisbee, and the similarity to the Frisbie Baking Co. was just a coincidence. Whatever its origin, the name Frisbee stuck, and became the generic term for plastic flying discs long after other companies began putting out their own brands.

The Frisbee proved an enduring favorite, and eventually Wham-O did much to market and promote the toy, creating Frisbee sports and then sanctioning national competitions. But this did not come until the 1960s. Wham-O was kept very busy the year the renamed Frisbee came out, because the company debuted one of the hottest toys ever, the Hula Hoop. Knerr and Melin were always searching for offbeat toys, so an Australian friend introduced them to a bamboo ring kids in that country used in exercise classes. Knerr and Melin were first baffled by the hoop until they figured out that it was meant for twirling around the waist. Wham-O began making the hoops out of plastic, and introduced them to the market in the spring of 1958.

The Hula Hoop became a sudden craze, as children in southern California learned the balanced motion that kept the Hula Hoop swinging. The fad swept across the country, and Hula Hooping children were shown on television and organized into competitions. Within four months, Wham-O had sold more than 20 million hoops. Wham-O struggled to find enough manufacturers to keep stores supplied. At the peak of the craze, the company contracted with more than a hundred plastic manufacturers. As the fad went global, Wham-O also set up manufacturing outposts abroad, with factories in Tokyo, London, Frankfurt, and Toronto. In the United States, psychologists offered abstract explanations for the popularity of the Hula Hoop, explaining it as the rebellion of children against their parents (children were usually better at Hula Hooping than adults), and as a comfort that counteracted the stress of a population that frequently changed homes.

Whatever the reasons behind it, the Hula Hoop was an incredible sales phenomenon, eventually becoming the first toy ever to sell more than 100 million units. But the Hula Hoop fad disappeared as quickly as it came. By the fall of 1958, with children back in school, sales dried up completely. Although Wham-O had sold an incredible amount of hoops, the company's profit was only $10,000. Knerr later bemoaned the craziness of that year to a writer from Forbes (February 15, 1982): "We completely lost control," he said. "I'd rather lose money and know where I lost it than make money and not know where I made it."

New Products and Marketing in the 1960s and 1970s

Although the Hula Hoop came and went, the Frisbee steadily gained in popularity. Wham-O promoted the Frisbee through the 1960s by developing appealing Frisbee sports. Wham-O Vice-President Ed Headrick was credited with a successful promotional campaign that spawned several official Frisbee games. The first Frisbee game (beyond simple throwing and catching) was called Guts, and it may have been played before the Frisbee era with pie tins, or even with rusty circular saws. The idea of Guts was to throw the disc at the opposing team so hard that no one could catch it. Headrick helped the burgeoning sport by introducing a Professional Model Frisbee. Headrick also modified Frisbee design with rings or grooves that made the disc fly more steadily. The rings became known as the Lines of Headrick. The game of Guts had its first officially sanctioned international tournament in 1958, and Headrick continued to organize teams and promote the sport through the late 1960s. Another Frisbee sport, Ultimate, was invented in 1969. Ultimate caught on quickly, and was an official intercollegiate college sport by 1972. By 1974, Frisbee sports had grown so popular that that year's World Frisbee Disc Championships were held in the Rose Bowl, in Pasadena, California. Spuds Melin invented Frisbee golf shortly after his company bought the rights to the Pluto Platter, and by the early 1970s, official disc golf courses were found all over the United States. Wham-O brought out many different model Frisbees for these various games. Wham-O held 90 percent of the flying disc market through the early 1980s. It had no serious competition in this market segment until that time.

Meanwhile, Melin and Knerr continued to search for other odd, engaging toys. Another big success was the Superball. Wham-O bought the rights to a bouncing ball made of a new plastic from chemical engineer Norman Stingley in the early 1960s. The Superball was a unique toy, much bouncier than anything on the market at that time, and Wham-O managed to sell some 20 million of them in the 1960s. Competitors eventually brought out similar balls, however, and Wham-O phased out its original product.

The company had scores of other products in the 1960s and 1970s. One that threatened to become another huge fad was instant fish. Melin traveled to Africa in the 1960s and was introduced to a species of fish that laid eggs in a lake bottom. The lake dried out in the dry season, becoming mud. When it rained again, the eggs hatched. Melin collected the dry mud and hawked it as just-add-water "instant fish." Wham-O promoted its instant fish at a toy show and was inundated with orders. But the African fish were not happy in California, and Wham-O was simply unable to come up with enough viable fish eggs to make the product work.

Through the 1960s and 1970s Wham-O made blow guns, bubble makers, do-it-yourself bomb shelters, plastic shark teeth, and a variety of other simple toys. Most Wham-O toys were meant for outdoor play, and sold in the spring and summer months. Many competitors made most of their sales in the months and weeks before Christmas. Wham-O was able to employ seasonal workers after the Christmas rush. It contracted out most of its manufacturing and used its plant in San Gabriel, California, principally for labeling and packaging.

Company Perspectives:

Headquartered in Emeryville, California, for more than 50 years Wham-O, Inc. has provided children and adults with innovative, imaginative toys that spark creativity, encourage social interaction and get kids playing. Founded in 1948, and inheriting its name from the sound that its flagship product, the Wham-O slingshot, made when connecting with its target, Wham-O, Inc. continually redefines the concept of fun by remaining simple, uncomplicated and without age boundaries. Led by a diverse group of multi-talented entrepreneurs, Wham-O, Inc. makes simple, fun, affordable, interactive products for all seasons.

Under New Ownership in the 1980s and 1990s

The company's finances had been erratic at first, especially regarding the Hula Hoop. But sales grew steadily between 1977 and the early 1980s. Wham-O kept expenses down by having contractors do its manufacturing, and the company's product list was small. By 1982, the company put out only ten toy lines, and these all retailed for less than $20. The company's unofficial motto was "Keep it simple, stupid!" Its toys did not have moving parts and they did not break easily, so the company rarely dealt with defects and returns. Wham-O kept to active, outdoor toys, and so did not worry about following trends such as licensed toys or electronic gadgets. In addition, it derived steady sales from the Frisbee. In 1982 the company decided to relaunch the Hula Hoop. This time it brought out pink-andwhitestriped hoops filled with scented peppermint powder. Wham-O hoped the time was ripe for a new Hula Hoop craze. But the 1982 relaunch did not stimulate a huge revival. Several months later, Melin and Knerr decided to sell the company.

The two founders owned 52 percent of Wham-O's stock, and they had no family members following in their footsteps. Melin claimed that he was tired of the business, and he persuaded his partner to sell out. At first the company agreed to sell to Hasbro, the Pawtucket, Rhode Island company that was rapidly consolidating the toy industry. But later the company announced the deal for $16.8 million was off. One month later, in September 1982, Wham-O Manufacturing Co. was acquired for approximately $12 million by a San Francisco company called Kransco. Kransco was a private firm that made various toys and sporting goods.

Under Kransco, Wham-O made a significant acquisition in the mid-1980s. It acquired the U.S. and Canadian marketing rights to the Hacky Sack, made by Kenncorp. R. John Stalberger, Jr., invented the Hacky Sack in the early 1980s. The toy itself is a little bag filled with pellets. The game involves players standing in a circle keeping the Hacky Sack in the air using only legs and feet. Stalberger began making Hacky Sacks himself and selling them, mostly at Frisbee events. Within a few years, and with virtually no marketing beyond word of mouth, Stalberger sold more than one million Hacky Sacks. The sport seemed to appeal to the same group—mostly college kids—who made Frisbee a mainstay. Consequently, in 1984 Wham-O paid $1.5 million for the marketing rights. The company moved manufacturing to Taiwan and was able to use its clout to get the product into major chain stores. Wham-O also operated as it had with Frisbee, promoting Hacky Sack events and promulgating official rules.

Yet little else of note seemed to happen to Wham-O over the 1980s. The company came up with new toys such as bubble wands and skates, continuing its tradition of outdoor fun products. The company lost market share in the flying disc category, beginning the 1980s with 90 percent and dropping to roughly 70 percent by the early 1990s. Other companies were successful with new disc designs. Superflight Inc. made the Aerobie, a flying ring that could be thrown twice as far as the traditional Frisbee. Another competitor, Sandee Inc., made the Spinjammer, which players could easily spin on their fingers. Although games like Ultimate and disc golf continued to grow, the Frisbee brand was not always the preferred disc. The 1991 World Club Ultimate Championship, which attracted 600 players to Toronto, used the Ultra-Star, made by the Michigan company Discraft, as its official disc. This was the first time a Wham-O disc had not been used for the competition. Wham-O focused its Frisbee marketing on schools, producing a learning packet and demonstration for school physical education teachers. But it seemed unable to recapture the leading position it had long held.

In 1994 Kransco sold Wham-O to Mattel, Inc. Mattel was the nation's leading toy manufacturer. Its flagship product was the Barbie line of dolls. It also owned many smaller toy companies. Mattel was a $5 billion company by the mid-1990s, and Wham-O was just one small piece of it. Evidently, Mattel did little to promote Wham-O products. In 1997, a group of investors took Wham-O private. The company relaunched, bringing back old favorites and buying up other companies that suited its product mix.

Private Company Again in the 1990s and 2000s

In December 1997, Mattel's Wham-O division became Wham-O, Inc. The buyout was arranged by Charterhouse Group International, Inc., an investment firm that had equity in other toy companies, as well as in firms in many different industries. Charterhouse and a management group spent $20 million to take Wham-O private and to buy Mattel's sports division. This gave the new company the classic Wham-O brands Frisbee and Hula Hoop, as well as Hacky Sack and Mattel's water sport bodyboard lines Morey and Boogie, Churchill swimfins, and Aviva water toys. The company's president was Michael Cookson, who had founded Aviva and sold it to Mattel in the early 1990s. The toy industry in the late 1990s was dominated by the two giants Mattel and Hasbro, who had sales of $5 billion and $4 billion, respectively. The number three toy company had sales of $300 million, a big gap. Cookson hoped to build Wham-O into a medium-sized firm somewhere in that $300 million range, with sales coming from revived classic brands and from new lines of outdoor products. One of Wham-O's first moves as its own company again was to buy a ball company and bring back the Superball. Sales in its first full year as an independent company were estimated at $50 million.

Key Dates:

1948:: Arthur "Spuds" Melin and Richard Knerr found the business in a garage.
1957:: Wham-O brings out the Pluto Platter.
1958:: The company's Hula Hoop ignites a worldwide craze.
1982:: The founders sell the company to Kransco.
1994:: Kransco sells Wham-O to Mattel.
1997:: Wham-O relaunches as a private, independent firm.
1998:: The company buys Yes! Entertainment's line of girls' toys for $9.8 million.
2002:: The company acquires the Sledz brand of sleds and Pro Body Boards from Earth and Ocean Sports.
2003:: The company acquires Riva Sports, Inc., maker of a line of winter sports products, and Rocky Mountain, Inc., manufacturer of inflatable tubes used for snow and water play.

The company moved to eliminate unprofitable product lines. This took $10 million off revenues in 1999. Wham-O also struggled to maintain a good relationship with major chain stores such as Target and Wal-Mart. These had complained that Wham-O's shipping record was poor, and that customers returned a lot of Wham-O products. A particular disaster was the Slip 'n Slide, a plastic mat that kids used as a horizontal slide in the summer, wetting it with a hose. When a large percentage of Slip 'n Slides were returned because they were falling apart, Wham-O's COO Mojde Esfandiari went over the product on her hands and knees to figure out the problem. Esfandiari changed the manufacturing process, and her success in handling this disaster earned her the chief executive spot in 2000.

The company upped its advertising budget and also promoted sales abroad, particularly in Germany and Australia. It also moved to balance out its spring and summer product lines with new lines of snow toys. It came out with new sleds and saucers, as well as foam boards called "Snowboogies" built like its water bodyboards. Wham-O also began acquiring smaller companies. In 1998 it spent $9.8 million to buy Yes! Entertainment's line of girls' toys. The Yes! line included two cooking toys, the Mrs. Fields Baking Factory and the Baskin-Robbins Ice Cream Maker. The company's focus moved more to water and snow toys, and in 2002 Wham-O made another significant acquisition, buying up the Sledz brand of sleds and Pro Body Boards from Washington company Earth and Ocean Sports. In 2003 Wham-O bought another outdoor sports firm, Riva Sports, Inc. Riva, based in Maryland, made a line of winter sports products including sleds, saucers, snow boards, goggles, and snow gear. Later that year Wham-O acquired Rocky Mountain, Inc., a manufacturer of inflatable tubes used for snow and water play.

By the early 2000s, Wham-O had emerged as a company of two major complementary product lines, winter and summer. Its toys were mostly for outdoor play, from sleds to water games. The company also built on its storied past with re-releases of its classic brands. The company put out as many as 30 different Frisbee models in the 2000s. Foreign sales grew to almost 20 percent of revenue as the company made its name known again overseas. With sales in the range of $40 million to $50 million in the early 2000s, the company hoped to grow by a factor of four or five by the end of the decade.