Calyx & Corolla

Company Background

• Pioneered the concept of selling fresh flowers by mail

• Founded by Ruth Owades a mail order expert

• Business Directly linked the consumers with flowers from growers instead of retailers

• With her expertise and direction the business has made over millions of dollars in sales and investments, excellent press reviews, all serving as a springboard for the company‘s future plans

Industry Background

• The Retail Flower Industry is a 9 billion.

• 25000 florists had the largest market share selling at 59%.

• Supermarkets has 18% of the market. Typically, growers distribute directly to local or more distant wholesalers and retailers.

• Typically direct relationships existed between growers and distributors and larger retailers, such as super market chains

• Disctributors typically marked up flowers 50% on cost to wholesalers who in turn marked them up, on cost 100% to retailers, florists then took a markup of another 150% to 200% on costs.

Distribution System C&C Competition

Order By Customer to Growers Grower through C&C

Grower Distributors

Fed-Ex Wholesalers

Consumer Florists, Supermarkets

Consumers Main Competitors FTD Super Markets and Retailers • Member owned worldwide • Been creating presence in the cooperative of 25000 florists industry • No guarantee that the flower • Raised prices to $32 to be orders would be fresh( required competitive with florists transmission and delivery fee) • Large super markets maintain • Products appeal to individuals direct relationships with with an income $35000+ growers, distributors and • Particularly attractive during the importers holidays accounting of 21.5% of • Sales staff lack sensitivity of their income florists • $24 million of ad support for its • Flowers are kept near ripened members fruit which increases deterioration rate of the flowers

Porters 5 Force Analysis Bargaining power of suppliers Strong dependency on suppliers and growers have more work to do when working with C&C. However, there is a good relationship between them at the moment, due to higher profits and freebies (vases for info). No one supplier is supplying more than 25% of their business.

Bargaining power of customers (buyers) High power as they have other options such as from FTD, retailers and supermarkets. However, with this current level of customer service, the customers will stay loyal. Exhibit 2 page 14. 5 Forces Analysis Cont’d Threat of new entrants Concept is easy to imitate, but difficult to operate and maintain similar relationships. Hence, the threat of new entrants is not strong. “Initially convincing growers to support C&C was one of Owades’ toughest tasks.” “Floral Gift Express, most direct competitor failed recently"

Threat of substitute products or services Flowers from FTD and retailers such as supermarkets. The future threat depends on C&C’s positioning plans.

Intensity of competitive rivalry Intensive if competing with FTD, not intense if following the niche. Dependant on positioning. “FTD was a member owned, worldwide co-operative of 25,000 florists.” “FTD processed almost 21million orders, 500,000orders and messages daily during holiday periods.’ Strengths (internal) (+) Weaknesses (internal) (-) * Flowers that are fresher than others, they * Dependency on growers and Fed Ex directly come from growers to consumers * No extensive services offered like retail

* Fast 1-2day delivery, compared to 2-3 weeks florists, hence loss of large potential revenue from competition, the business structure is more efficient * Tracking of orders through Fed-ex

O pportunities (external) (+) Threat (external) (-) * Proven success with tie-up promotions in the * Seasonality in demand and climate, e.g. past, e.g. Bloomingdale vase promotion (off freezing conditions during December (biggest season sales) sales of the year)

* Big base of buyers who do not like traditional * FTD network contains 25,000 florists and a florists and are not accustomed to mail order large ad budget * Numerous untapped advertising and * Easily imitable concept marketing mediums like billboards, Internet * Gaining market share of supermarkets marketing etc * Catalog Flooding * Europe per capita consumption of flowers is $60 compared to $36 in US Problems: Positioning There is no direct problem, Calx & Corrolla has truly established themselves as a mail order, quality product start - up. They have great relationships with growers, distributors and customers.

Calyx & Corolla is trying to expand The main Problem is positioning:

Company does not realize that people who buy for weddings and funerals do not care if its fresh for 3 weeks, on the other hand in home people look for it lasting. in order for them to position

They want to expand but how would you position yourself without losing your core business.

Alternative 1 Niche/Differentiation

Launch a media campaign (billboards, TV, Internet) to acquire FTD customers on seasons where FTD is laying low. Target women from 30 to 55 . Increase marketing via corporate promotions (restaurants, hospitals, retail stores, beauty salons, boutiques, and women's clubs and spas.) and team with florists and supermarkets to sell C&C products through catalogues.

Pro’s & Con’s – Niche / Differentiation

Advantages Disadvantages

* Acquire customers not used to mail- * Existing sales in off seasons are lower ordering from Jun to Oct

* Faster delivery than FTD provides benefits * Not as much advertising is allocated to to customer and retailer Peak months, thus losing market share in in those months * Corporate promotions have been successful in the past and hold large potential

* Offset catalog flooding

* Lower risk from seasonality Alternative 2 - Direct Competition

Compete directly with retail outlets, such as retail florists and wire services like FTD. Position the company and segment the market to concentrate on special occasions, i.e. weddings, funerals, anniversaries, valentines day. Add customizable bouquets.

Pro’s & Con’s – Direct Competition

Advantages Disadvantages

- Market & Product Expansion, leading to - Relationship with growers might be higher market revenue and hence negatively affected, further affecting the standing mailing market of the business

- Risk diversification through entering and - Higher capital required in order to positioning directly in the retail industry expand product line and market

- Increased Day to Day sales, generating - Damages the CC Brand (Freshness) & consistent market and revenues for the might also cannibalize the mailing market company affecting relations with FED-EX

- Premium Prices could be charged providing these services Alternative 3: No Change

Calyx and Corrolla should stay in the same market.

Advantage Disadvantage Maintain their competitive Market Saturation advantage.

Critical Issues

1) Finacial implication 2) Organizational implication 3) Keeping up with the Brand 4) Relationship with growers and Fed Ex Recommendation

Alternative 1 – Niche/Differentiation

Wonder Why? Here is why: * Catalog distribution to customer and recipients should not be the only promotional activity carried out.

* C&C targets people who want fresh flowers delivered in the U.S. and should stick to this niche market. Women aged 30-55 are the core customers.

* The media campaign will attract either new customers or break away the customers from FTD. At the moment C&C is not going for extensive marketing except for peak seasons, this seriously hampers new customer acquisition capabilities of C&C.

* By concentrating on seasons where FTD stays low, C&C might be able to capture a larger share of the minds and hearts of the consumer.

* The corporate promotion related sales at C&C are responsible for over $1 million of Profit before G&A, based on the figures in Table 1 and Appendix B. There is large potential and proven success in the past. This area should be expanded on.

* Finally, we recommend that Calyx &Corolla avoid or delay entry into Europe to avoid language and customs related problems; and prepare the company for the advent and widespread application of e-commerce.

Thank – You

Questions ?