Calyx Flowers

Calyx and Corolla Case Report

Introduction

Calyx & Corolla was a new entrant into the $8 billion flower industry in the United States in 1991. Through the use of overnight air freight (Fed Ex), information technology, an 800 number, and a catalog, Calyx & Corolla was able to bypass three layers of distribution and provide fresh flowers directly from growers to consumers. As a result of their efficient distribution system, Calyx and Corolla changed the way flowers were distributed to consumers.

Strengths and Weaknesses

I. Strengths

A. Good niche and mission. Calyx and Corolla filled a consumer need. Consumers wanted very fresh and long lasting flowers and the company delivered it. Efficient distribution was the key to flower industry and the company was able to shorten delivery to customers by bypassing the middle distribution layers, and provide much faster deliveries than traditional FTD deliveries. For example, Calyx and Corolla delivered roses from growers to consumers within 1-2 days of purchase order compared with one to two weeks for other FTD retailers and florists.

B. Sales growing at a faster rate than cost of goods sold. Projected FY4 and FY5 also had projected sales growing faster than cost of goods sold. See graph for details (Derived from Exhibit 1).

Growth rate 1988-1989 to 1989-1990 Growth rate 1989-1990 to 1990-1991 Growth rate FY3 to FY4 Growth rate FY4 to FY5

Sales 4.31 1.55 .49 .61

Cost of goods sold 4.14 1.52 .42 .58

C. Good creative catalogs that have appealing photographs, as well as educational information.

D. High customer satisfaction. From Exhibit 2, customers showed genuine satisfaction with Calyx and Corolla's products and services.

II. Weaknesses

A. Business depends very critically upon Fed Ex. If Fed Ex had a major disruption to their delivery system, flowers would not be delivered on time, resulting in dissatisfied customers. For example, if Fed Ex employees went on strike, there would be no alternative equivalent to Fed Ex to deliver flowers to customers. UPS, although an alternative, did not deliver perishable products in the same timely fashion as Fed Ex.

B. Business was also dependent upon information technology. If systems were down for some reason due to viruses or major electricity failure, the company would not be able to fill orders. The company should consider external power supply.

C. Suppliers mainly concentrated in Florida, California, and Hawaii. Calyx and Corolla's suppliers/growers not very diversified geographically. If another deep freeze occurs, the company may have difficulty meeting customers' demands. The company should consider other sources of growers/suppliers, such as growers in Mexico.

D. Company targets people with disposable income to spend on luxuries. However during times of economic downturns, these people may not have the money to spend on luxury items. The company should consider ways to provide consistent streams of revenues.

Steps to develop the Calyx and Corolla concept

I. Expand revenue from corporate clients.

A. Description

Currently Calyx and Corolla derives only 20% of their revenues from corporate clients. In addition, the company receives concentrated revenues in February, May, and December. Increasing sales from corporate clients (i.e. retail stores, hotels, banks, client service companies) would not only increase the company's revenues and profits, but would help stabilize earnings by providing consistent stream of income. By targeting corporate clients who need fresh flowers on a consistent basis, they can boost revenues in non peak months. For example, a bank like Northern Trust who caters to wealthy individuals has fresh flowers delivered to their office every week. For this company, having fresh flowers is a necessity, not a luxury. The company should target companies like Northern Trust who need flowers on a consistent basis and thus provide Calyx and Corolla with consistent income stream. Also, corporate clients are more willing and able to pay more for quality services. By implementing this process, Calyx and Corolla can increase profit margins long-term.

B. Implementation

Send out catalogs to these types of companies and follow up with phone calls and meetings. Calyx and Corolla should research to find out who is responsible for ordering the flowers at these companies and address the catalogs and calls to that person/people. In addition, have meetings with the person/people in charge. These methods will not only add a personalized touch, but more likely to encourage sales because the person will be able to make decisions for the companies instantly.

II. Target group with the highest percentage of after tax disposable income, which is 30+ year