TM Capital Gift and Home Accessory Report

Industry Spotlight

www.tmcapital.com Over Two Decades of Consumer Products Excellence

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Haining Mengnu Group Co.

a portfolio company of Original from PDF has been acquired by Original from PDF has completed a has acquired recapitalization with

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Recreate PMS

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Martin Himmel, Inc. Church & Dwight Co., Inc. Church & Dwight Co., Inc. has sold has acquired through a U.K. has acquired public cash offer has acquired

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Block Drug Company, Inc.

For details visit www.tmcapital.com Gift and Home Accessory Spotlight

Introduction

Past Themes Revisited Comedian Lily Tomlin could have been describing the anemic Category Expansion – The most innovative GHA vendors global economy over the last four years when she famously are accelerating efforts to provide retailers with multi-category said, “things are going to get a lot worse before they get worse.” product assortments and the opportunity to “fi ll a store” with Fortunately, the economic tide appears to be turning. While coordinated products from a single source. As we noted in vendors in the Gift and Home Accessory (“GHA”) market have our previous report, several dominant vendors were ranked not been immune to signifi cant, sustained economic headwinds, highly in the 2009 Giftbeat rankings across multiple, diverse the sector has demonstrated continued resiliency. In fact, the categories. For example Mud Pie and Ganz ranked highly in prolonged market downturn has served to further underscore the Baby, Wine Themed, Tabletop, and Monogram categories. several industry themes TM Capital fi rst discussed in 2010: Today, these leaders have continued their category expansion with Mud Pie ranked as one of the premier Fashion Accessories Strong Getting Stronger – Healthy GHA vendors have vendors and Ganz scoring highly for Personal Accessories and capitalized on the continued market uncertainty to displace Message Jewelry in the 2012 rankings. The drive towards multi- troubled competitors and category offerings will also aggressively win market spur strategic mergers and share. These leading acquisitions (M&A), as vendors have made evidenced by Ganz’s 2012 sustained investments acquisitions of Beyond a in continued product Bag and Midwest-CBK. design, logistics effi ciency, sourcing expansion, Independent Retailer inventory management and Resiliency – The channel extensions. More independent specialty gift conservative vendors have and home channel reduced both the number is critical within the GHA of product introductions market. In part due to high and the design “risk” concentrations of second of those new catalog career entrepreneurs and additions—opting instead empty nesters, this market to focus on historically is particularly prone to strong product lines. broader macroeconomic Vendors are also cautious conditions and susceptible when pre-committing to considerable retailer to manufacturing churn. Remarkably, quantities, submitting after analyzing sales initial re-order volumes trends at several leading and extending credit to vendors, we have found retailers. Stronger, more aggressive vendors have not only that the number of independent retailer customers they been able to stay ahead of the design curve with fresh, service has grown during the downturn, despite overall vibrant catalog additions, but have also provided retailers churn throughout the specialty retail landscape. Further, with higher levels of invent