Ceres Gardening Company Case Study
1. How has the company grown? What is its basic strategy + how has it evolved? What have been the key factors in the company's growth?
The growth of the company has been fueled by the market demand growth in organic products. Ceres increased their revenues by over 75% in just five years, while growing profits by over 25% (based on Exhibits 2, 3 & 4).
Ceres’s basic strategy started with its founder, Jonathan Wydown, to promote sustainable organic gardens and landscapes to environmentally conscious consumers. Mr. Wydown has been a proponent of soil preservation, biodiversity, and natural fertilizers and pest control. Mr. Wydown was confident that the same principles behind organic farming would eventually apply to home gardens and lawns. Mr. Wydown’ s vision evolved into the creation and development of a market niche of selected certified organic seeds and seedlings for vegetables, culinary herbs, and flowers – bringing the farm to the home per se. This market niche and products became the company’s differentiator and competitive edge. The key factors that drove the company’s growth are:
* Market demand and segmentation – Ceres developed a market niche for organic-conscious consumers who are concerned about the environment. Although products are priced at a higher premium, the value from the company’s environmentally conscious go-to-market strategy and segmentation allowed Ceres to develop a loyal consumer community.
* Product Offerings – Ceres expanded its products offerings to include open-pollinated, organically grown, and heirloom varieties of seeds and seedlings for vegetables, culinary herbs, and flowers. The company also added live plants, such as one-year-old trees.
* Production Strategy – Ceres’ principal farm was located in central California. As the demand for Ceres’ products increased, Ceres’s production capability was challenged. To keep up with the increased demand, Ceres developed a network of small, independent organic farms, offering them a commitment to purchase goods in exchange for an exclusive supplier relationship. These further strengthened Ceres’ production capability.
* Distribution Channel – In the early years, Ceres operated primarily as a mail-order catalog company. This was their main distribution channel. The operation was ran well and valued for its quality, reliability, and hands-on customer service. Moreover, Ceres provided a free bimonthly company newsletter, which included gardening tips, introduced new products, and created a sense of community among the expanding customer base. This alternative marketing expanded Ceres’ channel from one time purchase to future incremental (post-sale) revenues. Eventually, Ceres expanded its channels to include retail channels, and direct sale through a sales force model.
* GetCeres™ Program – enabled the average nursery or garden center to stock a sufficient inventory of Ceres’ products to meet the seasonal demands of the customer. If a retailer ran out of seasonal products, the customer would probably not return later, thus a potential loss of sale. Essentially the program meets the challenge of having the plenty of stock of the right product in the store at the right time based on consumer attitudes, behaviors, and preferences. The program also provided incentives to retail storeowners by offering deep discounts to carry inventory and extended payment plans.
3.1. How is Ceres’ financial health? Which specific items in the supplemental financial statements + which ratios might you calculate/research to help you assess its financial health?
The financial health of Ceres is excellent and continues to show a positive trend from 2002 to 2006. (Please refer to Table 1)
* Current Ratio shows Ceres’ ability to pay short-term obligations. The current ratio indicates that the company would be able to cover its liabilities in 2002 2 times over.
* Quick Ratio...
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