The Ribbon is an item found in Fatty Bear's Birthday Surprise.
Fatty Bear's Birthday Surprise
Fatty Bear will need the ribbon after the puppy escapes from the gift box (her escape caused the original ribbon to break apart). Fatty Bear can find a new ribbon in the closet of Kayla's parents' bedroom. After Fatty Bear lures the puppy into the gift box, he will use the new ribbon to re-wrap the present and keep the puppy inside.
If the player didn't obtain the new ribbon prior to the puppy escaping, Fatty Bear will obtain the original ribbon as a reminder for himself that he needs to find a new ribbon for the gift box.