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Point of difference Featured

8:59am EDT February 26, 2004
Jamie Gallagher's eyes light up when he describes his company's products, as he points to brightly hued packages of metallic colored pencils and award-winning craft sets that allow children to decorate Treasure Trinket Boxes and create a Growing Glowing Garden Glob.

He may be CEO of Faber-Castell USA, with 20 years of experience in the toy industry including stints at Playmobil USA Inc. and LEGO Systems Inc., but he's still a kid at heart

Faber-Castell USA is part of the Faber-Castell family of companies founded in Germany in 1761. Known for its fine writing instruments, wood-cased pencils and art supplies, the company acquired Cleveland-based Creativity for Kids in 1999, then relocated its U.S. headquarters from New Jersey to Cleveland.

Several New Jersey employees moved here to join Creativity for Kids founders Phyllis Brody and Evelyn Greenwald and their Cleveland team. The move joined the Creativity for Kids line with Faber-Castell's reputation for quality art materials.

Brody and Greenwald continue to work on product development, both with Creativity for Kids and Faber-Castell products.

"Their expertise isn't just in developing and evaluating children's products. It's more along the lines of innovation, design and creativity across all types of products," Gallagher says.

Smart Business sat down with Gallagher to discuss the company's growth potential and how it stays relevant in the 21st century.

Faber-Castell produces Creativity for Kids, Play and Learn, Art and Graphic, Graf von Faber-Castell pens, and Design and Porsche Design pens. How has the U.S. division expanded its product line over the past four years?

Taking the entire Faber-Castell line in with us has enabled us to make a larger presence in three markets.

One is the children's art market, through the Play and Learn line. The second market is the young adult or adult art materials market, with the Art and Graphic material line. The third market is the fine writing instrument market. With this line, we're able to enter local pen stores as well as the Office Max/Office Depot-types of chains.

Those (product lines) are manufactured in various places. Some of it comes from here in the U.S., and some of it comes from Brazil, Germany, Malaysia and Indonesia. (In the Cleveland facility), we do some manufacturing of Creativity for Kids sets. It is also our U.S. headquarters for sales, marketing, finance and administration.

The children's arts and crafts market continues to blossom. How does the company plan to grow with it?

Historically, we have focused on the toy industry and toy channels. That is undergoing a tremendous change right now. FAO Schwarz and KB Toys have declared bankruptcy, and Toys "R" Us has closed its Imaginarium stores.

That type of change has driven us to take a serious look at a very interesting and expanding channel of craft and activity stores. Whether it is Jo-Ann Stores or Michael's Stores, that is a very interesting and appropriate growth opportunity for a lot of the products we make.

If you look in the different products within a craft superstore, there are very strong opportunities with us in that market on the children's and young adult side.

We're in what I would call the initial phase of our distribution with the craft superstores. (Hudson-based) Jo-Ann has been a tremendous partner for us, and it's even nicer that it's also a neighbor. We have a very good relationship with them, and I think (there are) some good opportunities with them as well.

Are there any innovations in your product lines that were created in Cleveland?

There's a range of products that has not really been launched yet, so rather than speak about the product, I'll talk about a market segment that we are actively involved in developing.

Our Play and Learn products are high-quality art materials for children who want oil pastels, markers and watercolor pencils. If you walk into any store that sells this type of product, there are a lot of different manufacturers competing in the children's art materials segment.

A lot of crayons, colored pencils and pencils are sold during a back-to-school period. (We've) got modeling dough and glitter dough; we've got a lot of other things that transcend what you would consider back-to-school products.

Where do children go once they leave the age of 8, 9 or 10, yet still express a strong interest in art? We're looking at expanding part of our Art and Graphic line that relates to junior high, high school and college kids who still have a strong interest in art.

This area represents a tremendous opportunity for us because some of the traditional players in this market can't compete or choose not to. It's a bridge for us from the children's market into the young adult and adult market by offering different types of high-quality art materials.

If you look at a segment that we are actively involved in the development of, it's this young artists market. At the moment, we're calling it Creative Studio.

With extensive use of e-mails and faxes, what is Faber-Castell doing to ensure that its writing instruments are an important part of communication in the 21st century?

(We're trying) to make sure our retailers who sell over the Internet or in shops (receive) as much information and training as possible on writing instruments and products so they can confidently sell and communicate the attributes of this product to the people shopping in their stores.

Technology has put a lot of pressure in terms of the writing instruments out there. Despite that, our business has continued to grow. Whether it's our leads, our design or the features within our pens, we have a very specific point of difference.

You will not see us, for instance, competing in the segment of the pen market that sells 12 stick pens for $1; that's not our market. (Our market) is one of a fine writing instrument, which is functional and also a means of self-expression -- 'I use this pen because yes, it writes beautifully, but I also feel it says something about me.'

That segment of the market has probably not eroded as quickly as the more functional-only side of the market.

What's on the drawing board for Faber-Castell USA?

We still believe the young artists market is a strong market that represents growth for us. Another is the craft market for sale of our products through craft distribution channels.

We're also looking at alternative markets for Creativity for Kids-style products that would still be in the area of self-expression but more appropriate for girls 9 to 14 years old, as opposed to 4 to 9. Some people call it a "tween" market ...

Girls 9 to 14 aren't looking for toys. They are looking for other products that represent creative expression.

We launched a product this year called Butterfly Bedroom. It's certainly a craft set, but you can also see where it moves into room décor. (It) takes the Creativity for Kids platform and that creative expression idea and moves into older girls' market. How to reach: Faber-Castell USA, (216) 643-4660 or www.awfaber-castell.com