Opening day of the Sneezy sale was a madhouse. By 11 a.m., the sales board was filled with scribbled numbers, dealers had tied up phone lines trying to place orders and those who did get through had gobbled up $1.5 million worth of the silver medallions.
By day's end, orders had been placed for $2.5 million worth of the Rarities Mint "Sneezy," the fifth in a series of 11 medallions based on the key characters in Walt Disney's classic, "Snow White and the Seven Dwarfs."
The coin-sized medallions, minted and issued by Rarities in an exclusive deal with Walt Disney Co., were expected to bring in $2.5 million when the agreement was signed last year. So far, with six more from the Snow White series to go, Anaheim-based Rarities has grossed $25 million.
Something the experts call "Disneyana demand" caught Rarities owner Ian Simpson by surprise and has given him a production challenge he has never before faced at his 10-year-old mint, which claims to be second only to the federal government as the nation's largest minter of proof sets--newly minted coins or medallions made specifically for collectors.
Simpson, 36, said his father, grandfather and great-grandfather were jewelers, but he branched from that field into the private mint business because he decided that the growing popularity of minted, limited-production proof sets would make him more money than gems while practicing the jewelry craft.
Simpson set up shop in Anaheim as a one-man operation in 1977 and began designing and manufacturing commemorative proof sets featuring George Washington and U.S. Bicentennial themes.
The company also produced medallions for the 1984 Republican national convention and struck proof sets featuring a space shuttle and Halley's comet. The company gained exclusive rights three years ago to produce a gold medallion for the state of California.
Don Paul Nay, Rarities' sales manager, said the secret of success in the private minting business is to identify popular commercial characters and obtain the rights to produce proofs bearing their images. For Rarities, the Disney proofs are the first "character" sets. Their popularity has dwarfed that of past offerings.
Ironically, Rarities' recent success resulted from its biggest failure, the official California gold piece that Rarities began minting for the state in 1984.
"We've spent nearly $1 million on it, but the state hasn't marketed it," Simpson said. The state exempted the medallion from sales tax because it earns royalties from each sale, but the state never intended to be its marketer, said John Babich, deputy director of the state Department of General Services. So, Simpson said, the existence and availability of the quarter-ounce, half-ounce and one-ounce gold pieces is never mentioned in state promotional campaigns devised in Sacramento.
Despite slow sales of the California gold piece, Rarities' status as official state minter helped boost its reputation and was a factor in the Disney contract.
Simpson said sales from the Disney commemoratives will make Rarities solidly profitable and will boost revenue to $50 million in the privately held company's current fiscal year, which began this month.
He declined to give further financial information about the company, which recently increased its employees to 70 to handle the crush of orders for the Disney medallions.
Because of the demand, dealers' supplies are being rationed and Rarities is being pressured to produce larger runs of each of the Snow White proof sets. Simpson, however, said he will not increase the number of medallions in each limited edition because it would decrease their value.
Rarities produced 20,000 one-ounce silver "Sneezy" pieces, which retailers price at $35, nearly double the wholesale rate. Also minted were 20,000 half-ounce silver pieces, 5,000 five-ounce silver pieces, 5,000 tenth-ounce gold pieces and 3,500 quarter-ounce gold pieces.
There is no guarantee that Rarities can match its current success, but Simpson is optimistic. He said he has snagged licensing agreements to produce proofs tied to the Hollywood Walk of Fame, characters from the "Peanuts" comic strip and the 10th anniversary of the movie "Star Wars."
Foreign Sales Seen
Simpson said he also plans to export Disney commemoratives and California gold pieces to Japan.
Terry Gram, owner of Stamps & Coins at Hobby City, a Rarities dealer in Anaheim, said foreign buyers are a reliable barometer of success. They are cautious purchasers, he said, but are wild about Disney.
"When they buy, I buy," Gram said.
With the success of the Disney proofs has come the dilemma of meeting production and quality demands while maintaining delivery deadlines.
Some of Rarities' 300 dealers complain that deliveries have trailed orders by as long as 10 weeks--which can cause crippling cash crunches, because dealers generally have to make up-front payments on orders.
For instance, dealers paid for the Sneezy issue immediately after placing their orders three weeks ago but may not begin receiving them until the end of the month.
Delivery time and the quality of the proof sets have improved with each issue, said Michael Armstrong, owner of Wayne Family Coin & Gold, Ltd. in Wayne, Mich.
And no complaints about Rarities are on file at the Industry Council for Tangible Assets, a Washington trade group for dealers and manufacturers of collectable proof sets.
Delay Not Unusual
Delivery lag time and the requirement that orders be accompanied by payment in full are standard in the minting business because it takes months to develop new proof issues and because minters say they can't produce without receiving money in advance.
To speed production--which ultimately cuts the time its dealers are without a saleable product--Rarities has added a second production shift and has increased the sales staff that handles wholesaling from the company's crowded, well guarded administrative offices.
At a separate manufacturing site in Anaheim--for security reasons, Simpson won't reveal the location--gold and silver bullion is brought in regularly to begin a 50-step production process.
The metals are first melted and formed into thin sheets, from which the coin-shaped medallions are cut.
The medallions then are struck with tempered metal forms, called dies, that are carved with an inverse image of the design that will appear on each side. Simpson said 15% of the pieces may be rejected on inspection and must be remelted and restamped.
While the value of Disney commemoratives resides in their rare-metal content and the sentimental attachment of collectors, the Disney name and image is so pervasive that "anything with Disney is a collector's item," said Beth Deishler, editor of Coin World, a weekly newspaper in Sidney, Ohio. "Baby boomers are collectors, and they're the ones in love with Disney."
New Buyers Attracted
The Disney mystique has created new customers for Rarities' proof sets, including some who have never bought medallions and others who typically buy only government-issued legal tender, Deishler said.
The medallions' "fairly reasonable price" has also spurred popularity, said Dennis Baker, editor of Coin Dealer Newsletter, which publishes daily in Torrance.
With no established track record, it's tough to speculate on the Disney medallions' extended value, said Bill King, owner of Newport Coin Exchange.
But the first Disney issue was a series of "Mickey's Christmas Fantasia" silver pieces. The one-ounce piece wholesaled for $17, retailed for about $30 and is reselling for $140 seven months later, several dealers said.
Deishler said Disney commemoratives have a better chance than most medallions of sustaining value because they have the highly prized Disney license.
Lois Fullmer, a buyer for Disney, said the medallions have been big sellers in Disney gift catalogues and at the company's parks in Anaheim and Florida.
She called Rarities a dependable supplier--high praise in a business in which a hot issue isn't unusual and in which meeting demand can become a nightmare.
Even the U.S. Mint has been plagued with an inability to produce fast enough to satisfy voracious dealers and collectors.