LongBench v2 / 66f3918f821e116aacb2d8b7 / In Calyx & Corolla's customer base, which demographic is underestimated and…

Harvard Business School
9-592-035
Rev. October 6, 1995
David Wylie prepared this case under the supervision of Professor Walter J. Salmon as the basis for class discussion rather
than to illustrate either effective or ineffective handling of an administrative situation. Certain numbers have been
disguised.

1
Calyx & Corolla
Well, it’s two botanical parts of the flower—the calyx (the guard leaves that protect
the bud) and the corolla (the flower itself).  It was on the very first list of names that a good
friend and I brainstormed and we liked it right away.  I liked the way it sounded and the way
it looked and its uniqueness.  But a lot of people didn’t like it—too hard to pronounce and
nobody would know what it meant.  So we went back to the drawing board, and brainstormed
a second and third and fourth list.  Each time we’d get a consensus on a name, we couldn’t
clear it with the trademark office.  Finally, so much time had elapsed, we were ready with a
catalog layout but had no company name and no logo . . .
One Friday evening, we all unenthusiastically agreed on using the name: “The First
Flower Company.”  That Sunday, I was leafing through some trade magazines and turned to
a full-page ad by a new consortium of South American flower growers: “The First Flower
Corporation”!
That was it—I walked in on Monday morning, showed the ad to my staff and said:
“We’re going to be Calyx & Corolla.”
—Excerpt from Owades speech
It had been two and a half years since Calyx & Corolla had pioneered the concept of selling
fresh flowers by mail.  During 1990, it had consummated over 150,000 transactions, yielding revenues
in excess of $10 million.  The company’s results had surpassed the plan that Ruth Owades, its
founder, had presented to the 18 investors who had provided the original $2 million in capital.  In
fact, the results were sufficiently positive to enable Owades and her management group to raise
another $1 million in the Spring of 1991, mainly from the original investors.  (See Exhibit 1, Five-Year
Summary Financial Statements and Projections.)
Nevertheless, stimulated by their success in introducing a new distribution channel for
flowers, Owades and her two key associates, Fran Wilson and Ann Lee, were reassessing the firm’s
long-term growth strategy.  Was Calyx & Corolla more a mail order operation or should it compete
directly against more traditional outlets, such as retail florists, and wire services, such as Florists
Telegraph Delivery (FTD)?  How fast did it have to grow to protect its initial success?  What would be
the financial implications of various growth strategies?  How should its personal objectives and those
of its investors and employees influence the character and pace of growth?
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Calyx & Corolla was an exceptionally innovative direct mail concept.  Besides mailing six
yearly color catalogs and having an 800 telephone number, its distribution and transportation
arrangements were unique.  Orders from customers were received by telephone, fax, or mail at the
central office in San Francisco and then sent via fax or computer to the 30 flower growers who
supplied Calyx & Corolla.  They, in turn, packed and shipped individual orders and sent them
directly to consumers by Federal Express.  Calyx & Corolla customers thus received much fresher
flowers, often fresher by as many as seven to ten days, than were available through conventional
retailers.  Prices, which included the cost of delivery, were competitive with conventional florists.
(See Exhibit 2, letters from customers.)
If the goal of most entrepreneurs is to build a business that’s better than what’s
already out there, Ruth Owades has done it in spades.  In fact, you could say she has created a
new market. . . .
Until Calyx & Corolla came along, the hugely lucrative $8.4 billion American flower
industry had encountered few innovations.  There had been flowers by wire, but not garden-
fresh, exotic flowers displayed in a beautiful catalog (you actually get to see what you’re
ordering), with a money-back guarantee.
But as Owades realized early on, having a revolutionary idea is one thing; executing
it is something else again.  To make her brainchild work, she had to get major industry players
to disrupt their established routines and see things her way.
- Working Woman Magazine, February 1991
The Calyx & Corolla Management Team
Ruth Owades was no stranger to the mail order business.  Upon graduation from the
Harvard Business School in 1975, she joined the CML Group as director of marketing.  The CML
group then owned a number of retail and direct mail businesses.  Within two years, Owades
proposed to CML executives that they launch a direct mail business focused on garden implements
and accessories.  When they declined, Owades resigned and, under her own auspices, launched
“Gardener’s Eden.”  Very quickly, the business grew and prospered.
In 1982, Owades sold Gardener’s Eden to Williams-Sonoma, an upscale direct mail and retail
seller of cookware, serving pieces, and other merchandise associated with the kitchen.  For four and a
half years Owades directed the Gardener’s Eden division of Williams-Sonoma, during which time it
continued to grow and prosper.  Since the price Williams-Sonoma paid for Gardener’s Eden was
based in part upon a multiple of sales in the years subsequent to the purchase, the funds Owades
ultimately received for Gardener’s Eden reflected her stewardship during these years.
After about a year of relaxation and rejuvenation following her resignation from Williams-
Sonoma, Owades decided to establish Calyx & Corolla.  This time, she enlisted Fran Wilson, a 1983
graduate of the Harvard Business School and a former employee of Williams-Sonoma, as vice
president of operations.
After about a year of operation, Ann Hayes Lee joined Calyx & Corolla as vice president of
marketing.  Lee was a veteran of the catalog business.  She had spent almost twenty years in the
industry, most recently with the Roger Horchow Company, a catalog seller of both home goods and
apparel, where she was creative director.
I was fortunate to convince two of the most talented and experienced people
in our industry to join the Calyx & Corolla start-up team—Fran Wilson became vice
president of operations and created the unique yet crucial systems that make this
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business work.  Ann Hayes Lee became vice president of marketing, creating six
spectacular catalogs a year, while overseeing all merchandising and other marketing
programs.
- Excerpt from Owades speech
As in many small businesses, titles did not fully define responsibilities at Calyx & Corolla.
Owades herself took a major hand in the selection and pricing of flowers and other merchandise that
appeared in the catalog.  She also set the critical strategy for the catalog mailing plan.  Wilson was
responsible for customer orders and service, day to day communications with growers, systems
development and management, and finance and accounting.  Lee took responsibility for merchandise
development and catalog creation and production.  She was also responsible for a number of
nondirect mail initiatives aimed at accelerating the growth of the business (described in more detail
later).
The entire management team of Calyx & Corolla was dedicated to the success of the business.
Owades realized that the ultimate success of Calyx & Corolla would hinge on the efforts of this team.
They had adapted their lifestyles to the rigors of a start-up venture but each executive appreciated the
congenial corporate culture and found job satisfaction and the promise of a substantial payout at
some future date to be powerful incentives.
The Fresh Flower Industry
Retail flower and plant sales were almost a $9 billion business in the United States in 1990,
having grown at a rate of 7.7% since 1985.  While most flowers were grown domestically, over half of
the carnations, almost a third of the roses, and a variety of other flowers were imported from over 50
countries around the world.  Colombia was the major source of imported flowers, representing over
60% of the total.
The horticulture industry was extremely fragmented at all levels, with small, family-operated
companies dominant among growers, distributors, wholesalers, and retail florists.  Although there
were some larger organizations, they did not represent a major share of the business.  The typical
channel of distribution was from growers to distributors located in the growing regions to
geographically dispersed wholesalers who sold to florists, supermarkets, and other retailers in
geographic proximity to them.  Of the retailers, the 25,000 florists had the largest market share, selling
59% of all floriculture products (flowers, seeds, and potted plants) in 1987, the last year for which
government retail statistics were published.  Supermarkets had about 18% of this market, while
nurseries, mail order companies (such as seed companies), and other miscellaneous retailers
accounted for the balance.  In most major cities there were flower markets in which a number of
wholesalers would gather to sell their goods to retailers.
Often industry participants would not confine themselves to a single role.  For example, most
growers distributed some flowers directly to local or more distant wholesalers and retailers.  Many
distributors and wholesalers engaged in some of their own production.  In addition, direct purchasing
relationships often existed between growers and distributors and larger retailers such as supermarket
chains.
Distributors generally paid growers in 60 to 90 days and then extended the same terms to
wholesalers.  Retailers usually paid wholesalers in cash.  They shopped for availability, quality, and
freshness from the many wholesalers who serviced them.  Distributors typically marked up flowers
50% on cost to wholesalers who in turn marked them up, on cost, 100% to retailers.  Florists took a
markup of another 150% to 200% on cost.  A flower that a grower would sell for approximately $5, for
example, would thus cost the ultimate consumer about $40.  Exhibit 3 includes summary financial
data for FTD affiliated florists as well as additional data on their sales and advertising expenditures.
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Retail florists were very service oriented.  Often they prepared custom bouquets and, for
major events such as weddings, provided flower arranging services, usually as part of the cost of the
product.  It was not unusual, for example, for the bill for flowers used in a large wedding to amount
to several thousand dollars.
Flowers were purchased by consumers for a variety of occasions.  Flowers were an essential
part of most weddings and funerals and were often given as manifestations of love and caring for
occasions such as birthdays, anniversaries, convalescence, Valentine’s Day, and Mother’s Day.  Cynics
often claimed that flowers were given to assuage guilt rather than to demonstrate affection.  Many
Americans also bought flowers for occasions such as dinner parties or regularly kept fresh flowers or
plants in their homes.
Fresh flowers were more ubiquitous in Europe than in the United States.  Per capita
consumption of flowers and plants in the United States was $36 annually, whereas in Holland it was
$60, which approximated the average in Europe.  Americans were only beginning to acquire the
European propensity to purchase flowers for themselves year round.
Flowers varied in their perishability.  Roses, for instance, could last as long as one to two
weeks from the time they were picked until they would have to be discarded, while anthurium could
still be acceptable for sale two to three weeks after picking.  Time, however, was not kind to flowers,
and quality deteriorated steadily from the time of picking.  Each day a flower remained unsold
diminished its remaining value.
Efficient distribution was thus key to the flower industry.  The almost infinite variety of
species, colors, and growing locations on the supply end, however, and fragmentation within the
channels of distribution resulted in a rather inefficient distribution system.  A flower might, therefore,
be as much as seven to ten days old before it was available for sale in a retail store.
Although some flowers were bought and taken from the store by purchasers, most were
delivered to the recipient.  Typically, florists made deliveries themselves for an extra charge within a
radius of several miles from their store.  For delivery beyond their own service areas, florists usually
used FTD or one of the several competing service organizations that had cloned FTD.
FTD was a member-owned, worldwide cooperative of 25,000 florists.  Its members took
orders from local customers for delivery by member florists at other locations.  Although there was a
catalog of “FTD Bouquets” at each member florist, there was no guarantee that the delivery florist
would deliver the freshest flowers in inventory.  The consumer to whom FTD historically had
appealed represented a wide cross-section of households with incomes in excess of $35,000.  Typically
a consumer would pay an extra 3.50ordertransmissionfeeand,dependingonlocationanddistance,anadditional6.50 for delivery.  During holiday periods, incoming wire orders accounted for 21.7%
of the revenues of FTD florists, while outgoing wire orders accounted for another 18.7% according to
a 1989 FTD survey.  During nonholiday periods, these proportions were 17.9% and 15.1%
respectively.  FTD processed almost 21 million orders in 1990, including more than 500,000 orders
and messages daily during holiday periods.  Of the total order (including flowers, transmission fee,
and delivery charge), the florist who originated the order received 20%, the florist who delivered the
order 73%, and FTD 7%.
In addition to its clearing service, FTD offered its members promotional and advertising
support, supplies, educational programs, marketing research, publications, and credit card
processing. With the total value of orders from U.S. florists of over 700million(almostthreetimesitsnearestcompetitor)andrevenuesofapproximately49 million, FTD spent over $24 million on
advertising in 1989, 55% of which was concentrated in holiday periods.
According to Leading National Advertisers, an Arbitron publication, FTD concentrated most of
its advertising on network television spots (73%), newspaper advertising (14%), and network radio
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(8%).  The balance was spent on a mixture of magazines (4%), outdoor advertising, and cable and
local television spots.  The image promoted in electronic media had been “FTD, the feeling never
ends,” featuring ex-Ram’s defensive tackle, Merlin Olsen.  FTD was shifting, however, to a theme of
“It’s as easy as FTD” and shifting the percentage spent on more costly prime time television to news-
hour spots.  The intention was also to reallocate significant advertising dollars to magazines and
major regional newspapers.  Print advertising was much more product oriented.  FTD even planned
to put a mini-catalog in magazines featuring six everyday products and a selection of seasonal
bouquets.  (See Exhibit 4 for sample FTD advertisements and Exhibit 5 for monthly advertising
media expenditures of FTD itself.)
One of the largest FTD members was a 1984 start-up called “800-Flowers,” which was
becoming increasingly popular.  When customers called 1-800-FLOWERS, one of 300 salespeople in
its telemarketing center would take an order and transmit it by FTD or another service to a network
of florists around the country.  Minimum orders were $35 and went up in 5increments.Theretailcustomerwaschargeda2.96 relay fee and a $5.99 handling fee in addition to the price of the
flowers.  800-Flowers received as its fee 25% of the flower order from the delivering florist.  Revenues
of 800-Flowers in 1990 were about $16 million.  800-Flowers advertised primarily through billboards,
subway posters, and on CNN television.  Its advertising expenditures in 1990 totaled 5million.Supermarketswerealsobecomingincreasinglyimportantflowerretailers.Recentlytheirfloristdepartmentsweremovingpricepointsupwardsfromunder10 to compete more with florists
whose average order was over $32.  In addition, larger supermarket chains were purchasing directly
from growers, distributors, and importers.  Although many florists considered supermarkets to be a
serious threat, they felt that supermarket employees lacked the sensitivity and expertise required to
handle, package, maintain, and sell flowers effectively.  Flower shops in supermarkets often, for
example, were placed next to produce departments where fruit, as it ripened, produce ethylene gas, a
chemical which hastens the deterioration of flowers.  Sixty-five percent of the nation’s 17,460 chain
and 35% of the nation’s 13,290 independent supermarkets sold flowers in 1990.  The average annual
sales for supermarket floral departments was $104,950, having grown almost fourfold in the past 10
years.
Calyx & Corolla
Calyx & Corolla represented a true departure from traditional channels of distribution by
directly linking the consumer with growers and, through Federal Express, growers with consumers.
Calyx & Corolla was able to reduce very substantially the time it took to deliver flowers to the
consumer’s door.  Calyx & Corolla typically delivered roses to the consumer within one to two days
from the time they were cut.  Anthuriums were delivered within three to four days.  FTD deliveries of
roses and anthuriums, in contrast, often occurred one to two weeks and two to three weeks,
respectively, following cutting.
Owades and her colleagues realized that Calyx & Corolla was an entirely new concept which
revolutionized the distribution of flowers.  In order to succeed, however, they also had to understand
the emotions that consumers tried to convey with flowers and to maintain critical relationships with
both growers and Federal Express.  Owades said in a speech about the Calyx & Corolla concept:  “I
envisioned a table with three legs, and Calyx & Corolla was only one of them.  The second was the
best flower growers available, and the third was Federal Express, the number one air carrier.”
Owades herself took responsibility for maintaining these relationships.  She often telephoned or
visited growers to overcome problems that had arisen, to negotiate seasonal prices, or simply to
further strengthen healthy relationships.  She also maintained direct contact with Federal Express
representatives to maintain and improve their service.
Although Calyx & Corolla was by far the most successful of the “new wave” of mail order
flower retailers, other companies with slightly different concepts were arising.  The most direct
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competitor, a very well financed venture capital-backed start-up called “Floral Gift Express,” had
recently failed and Calyx & Corolla had acquired some of its assets.  “Stillwater,” another yet-
unproven competitor, had recently entered the market.  It was a division of a large, well-capitalized
Japanese conglomerate.
Calyx & Corolla was not without problems, either.  As Owades suggested:
Did we have problems?  Of course.  How about the coldest December on
record for our first Christmas?  Where even our California and Florida growers were
in a deep freeze (not to mention our customers in Minneapolis and Boston).  Did we
deliver their holiday bouquets?  Of course.  How?  With numerous sleepless nights
and with the extraordinary combined efforts of that strong partnership I spoke
about—of Calyx & Corolla, our growers, and Federal Express, a partnership getting
stronger and more solid with each challenge.
—Excerpt from Owades speech
Calyx & Corolla Operations
The headquarters of Calyx & Corolla were in modest offices just south of downtown San
Francisco.  Four thousand square feet housed the three senior executives, middle management,
computers and fax machines, and all supporting functions, including the sales and customer service
staff that took orders and answered customer inquiries or complaints respectively.  Because the
number of sales and customer service staff could rise from a normal complement of 5 to as many as
60 (full-time equivalents) before Mother’s Day and other holidays, the company was squeezed for
space at peak periods.
Apart from these offices, the company also occupied about 6,000 square feet of nearby
warehouse space.  Vases, wreaths, and dried flowers plus other nonperishable items and packaging
supplies used by growers were kept there.
Owades and her colleagues recognized that the sales staff and customer service
representatives were key components of the entire Calyx & Corolla system.  For these positions they
hired service-oriented people who demonstrated a real interest in flowers and plants.  Their
remuneration, which was about average for equivalent positions in the Bay area, was supplemented
by various contests and incentive programs to reward them for exceptional quantitative and
qualitative performance.  Senior management maintained a very personal role in training and
working with these individuals.
Relationship with Growers
She provided an answer to what growers perceived as a problem.  The industry and
market needs had changed.  Flower importing had greatly increased, as had domestic
production.  But although supply, and thus competition, had increased, consumption hadn’t
kept up.  What Owades offered was a new—and needed—outlet for selling flowers.  “We had
toyed with mail order, and even tested it.  But we’re growers, not marketers” (said a grower).
—Working Woman Magazine, February 1991
Initially convincing growers to support Calyx & Corolla was one of Owades’ toughest tasks.
She faced the challenge of recruiting growers whose business for generations had
consisted of packing 500 or 1,000 stems in large cartons and shipping them by truck across
the country.  They were being asked to carefully pack 11 perfect stems in special cartons,
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packaged according to stringent aesthetic specifications, and to include a neatly handwritten
gift card.
—Working Woman Magazine, February 1991
She had, however, become acquainted with several growers through her previous work.
Together we worked through the logistics of how we might make Calyx &
Corolla happen.  We tested flowers for longevity and shipability and packaging.  We
tested various packing materials that would protect the flowers, keep them cool, keep
them wet, maintain a constant temperature, and that would look good and be
environmentally sound.
—Excerpt from Owades speech
Owades’ relationships with the growers, combined with a lot of hard work, had resulted in
the current network of 30 quality flower suppliers.  For these growers, Calyx & Corolla represented
an exciting new distribution opportunity that could increase sales and help offset the seasonality of
their business.
Calyx & Corolla’s growers were located primarily in California, Florida, and Hawaii.
Although most were smaller operations with sales of under 1million,severalhadsalesofover5
million.  The largest had sales of $100 million.  The eight largest growers combined supplied 80% of
Calyx & Corolla’s product.  Sales to the company represented no more than 25% of any one grower’s
business.  Calyx & Corolla had contracts with the growers that prohibited them from supplying any
other mail order retailers.
The Sunbay Company was typical of the larger growers.  Located about two hours south of
San Francisco, this family-operated grower/distributor/wholesaler had sales of $6 million and
carried 300 items.  Of those, it grew 90, representing 20% of its revenues.  The balance were flowers
purchased from other local growers, imported, or purchased from other distant distributors, to
complete the selection they offered local florists.  Calyx & Corolla purchased only locally grown
flowers from Sunbay.
In addition to educating growers to execute their retail responsibilities accurately and
quickly, Calyx & Corolla provided growers with shipping boxes, cards, labels, vases, etc., and also
sent them demand forecasts.  The growers, in turn, notified Calyx & Corolla of low stock positions so
substitute suppliers could be utilized or alternate selections offered at or after the time of customer
ordering.  Growers also informed Calyx & Corolla of excess stocks so special offers could be
communicated by supplementary selling when taking incoming orders or by outbound
telemarketing.
Two or more times daily, depending on the season and the grower, Calyx & Corolla
transmitted orders by modem to its growers.  There, the Calyx & Corolla account manager employed
by the grower would supervise the printing of orders, selection and packing of flowers, handwriting
of gift messages, and preparation of Federal Express shipping manifests.  Although during the slow
seasons several people could handle the volume, during peak holidays such as Mother’s Day, up to
50 workers might be dedicated to fulfilling Calyx & Corolla orders at a particular grower.
The price Calyx & Corolla paid to growers was really a combination of two factors.  While
Calyx & Corolla was a big volume purchaser, it had to reimburse growers for the additional retail
functions which they performed.  As a consequence, Calyx & Corolla paid growers wholesale prices
plus a surcharge to cover extra labor and other added costs associated with their orders.  Despite this
premium, Calyx & Corolla was able to achieve gross margins of almost 80% of sales.
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Other expenses incurred by Calyx & Corolla included Sales and Marketing and General and
Administrative expenses (G&A).  Sales and Marketing expenses mainly consisted of catalog
production and mailing (.32percatalog),mailinglistrental(.08 per name), freight out (9.00perorder),andorderprocessingandfulfillment(5 per order).  G & A included management salaries,
depreciation, rent, and office supplies and other miscellaneous expenses.
Relationship with Federal Express
Owades knew that her next challenge would be winning an overnight-delivery
service to her side.  Ideally, she wanted the industry giant Federal Express Corporation, since,
Owades says, customers feel it has the most reliable service.  And without quality service,
Calyx & Corolla would not be able to do business.  But Owades knew that Federal Express
had rigid operating procedures, and she would need exceptions for her start-up.
—Working Woman Magazine, February 1991
Well, the Calyx & Corolla concept epitomized time-sensitivity.  Here was the
first mail order business in America that would promise exact-day delivery.  The
most important question we ask our customers is “When would you like that
delivered?”...
But, my objective from the start was to establish a relationship where they
would work with us—a partnership, together we would create and execute this novel
means of marketing and distributing fresh flowers.
—Excerpt from Owades speech
Pricing was certainly one important issue, but such subjects as dealing with several seasonal
peaks and deliveries on freezing days when flower recipients were not home were critical as well.
Calyx & Corolla used Federal Express exclusively for shipping perishable products. For less-
perishable products such as dried flowers or vases, it sometimes used United Parcel Service.
The relationship with Federal Express had matured over several years.  At first, Federal
Express considered Calyx & Corolla a minor account that required special attention.  By 1991,
however, the relationship had vastly improved.  Owades had negotiated a price that varied little by
weight.  During peak periods, Federal Express now left trailers at the various growers to be filled and
replaced when full.  Many delivery drivers had also become aware of Calyx & Corolla and when no
one was at home, would not leave packages to freeze on a cold day.  Frozen flowers did not
encourage customer repeat orders from Calyx & Corolla.  Saturday deliveries were now offered as
well, although Sunday and holiday deliveries were still an unresolved issue.  Since few conventional
florists delivered on Sundays and holidays, this service could represent a major competitive
advantage for Calyx & Corolla.  Federal Express had even placed computer terminals in the Calyx &
Corolla offices and at the major growers to allow on-line tracking of shipments.  This equipment
permitted Calyx & Corolla customer service representatives to respond immediately to customer
inquiries concerning the whereabouts of an order.
The Calyx & Corolla Product Line
The Calyx & Corolla catalog included fresh and dried flowers, a selection of plants such as
bonsai, and a variety of vases and other floral accessories. (See Exhibit 6 for selected pages from
catalogs.)  Prices for fresh flowers, including delivery, ranged from 23forasinglestemofproteato60 or $70 dollars for bouquets of several dozen flowers.  In addition, Calyx & Corolla offered vases
and accessories starting at $12.  The catalog also included continuity programs such as “a Year of
Orchids” for $450, which included a selection of orchids to be delivered the first week of every
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Calyx & Corolla
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month.  Continuity programs comprised a significant portion of Calyx & Corolla sales.  Most single
items ranged from $30 to $60.
Although Calyx & Corolla did a substantial everyday business, seasonality was pronounced.
Summer was slow and holiday spikes big.  (See Exhibit 7 for a graph of monthly sales for the year
ending June 30, 1990.)  Continuity programs were, however, less seasonal, since they were usually
gifts for the regular delivery of flowers over a number of months.  Calyx & Corolla and its growers
favored this business because it helped offset peaks and valleys.
Owades took an active role in developing the product line and the content of each catalog.
She worked closely with Ann Lee and with the growers to create new and exciting bouquets to reflect
changing tastes, seasonal variation, or to introduce new products.
Customers and Communication
If the catalog format offered Calyx & Corolla a leg up on the competition, the flowers
and arrangements pictured still had to look appealing, “like they belong in your home,” says
Owades, “or you would be proud to give them as gifts.”  Because flowers are “emotional,” her
presentation was all the more challenging.  “Poets throughout the ages have known that when
words don’t communicate, flowers do.”
Yet no matter how beautiful the photographs, Owades feared that page after page of
flowers and vases could get boring fast.  So in addition to the cost and color choices in each
selection’s accompanying copy, she hit on the strategy of weaving in some educational trivia
(“The curled _flower_ of the petite calla lily is actually a modified leaf”); consumer
information (“Protea stay fresh in water for up to two weeks; after that, they dry
beautifully”); and arrangement suggestions (“_Glads_ are especially striking when displayed
in a tall vase”).
—Working Woman Magazine, February 1991
Seventy percent of Calyx & Corolla’s revenues were derived directly from the catalog, while
20% were derived from corporate clients and promotional “tie-ins.”  The remaining 10% was from
outgoing telemarketing to previous flower recipients and existing customers.
The catalog was the main form of advertising.  Six catalogs were produced every year and
mailed out under eight to nine covers.  In fiscal 1991 one hundred thousand prior customers received
one catalog per month, which provided 60,000 orders.  Recipients of Calyx & Corolla flowers and
others who had called to inquire about Calyx & Corolla flowers, who cumulatively totaled 500,000,
received six catalogs each per year.  The balance of the 12,055,000 catalogs mailed in fiscal 1991 were
to 7,855,000 rented mailing-list names.  Response rates varied significantly.  Prior customer mailings
yielded about 5% to 10%, while recipient and rented mailing lists only yielded between 1% and 2%.
The recent rise in postal rates added materially to the expense of obtaining the attention of consumers
who already received an avalanche of catalogs from other retailers.
Ann Lee characterized active buyers as those who had purchased at least two times a year,
although she added that some purchased as many as 10 times a year.  Eighty five percent of these
customers were women, mostly ranging in age from 30 to 55.  Most worked and had substantial
disposable income.  Sophisticated information systems allowed Calyx & Corolla executives to analyze
and manipulate the extensive database of customers, recipients, and prospects, allowing them to
understand better their customers and to target their mailings more precisely.  The largest group of
potential buyers, however, were people who patronized florists or other retailers and were
unaccustomed to buying anything by mail order.
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Lee, in addition to her other responsibilities, marketed flowers to corporate clients who used
them for reception areas, conference rooms, incentive programs, and customer gift programs.  But by
far the greatest proportion of corporate flower purchases were for promotional tie-ins, a segment of
the business which management considered a major opportunity for incremental sales, and, more
important, new mail order customers.
Promotions and incentives, corporate gifts, joint marketing approaches with
specific partners and consumer brands—all these offer exciting potential both for
revenues, for generating new customers, and for expanding awareness of our service
and our product.
—Excerpt from Owades speech
Lee maintained a frequently referred-to list of objectives for proposed promotional programs.
Each program had to (1) coincide with available resources, (2) fit with the Calyx & Corolla image, (3)
open doors for new business opportunities, (4) be profitable, (5) not aggravate seasonal peaks, and (6)
permit Calyx & Corolla to do a good job.  Several such programs are described below.
Bloomingdale’s used Calyx & Corolla flowers to help promote a selection of vases on
Mother’s Day.  Advertised at Bloomingdale’s expense through a full-page advertisement in the New
Yorker (Exhibit 8) and other upscale regional publications, five dendrobium orchids were offered free
with the purchase of any vase.  A point-of-sale display greeted customers at each store, featuring a
variety of vases complete with flowers.  The vases were priced between $150 and $1,000.  When
purchasing a vase, the customer designated the recipient of the bouquet.  Calyx & Corolla provided
the flowers, which normally sold in the catalog for $34, at a discount to Bloomingdale’s.
The program was a success.  Lee believed that it opened the door for similar opportunities
with other upscale retailers.
Another tie-in program was with SmithKline Beecham (SB) for a Mother’s Day promotion of
Contac 12-hour caplets for allergy relief.  This program comprised four stages: (1) flowers were sent
to SB retailers to spruce up stores and to promote Contac; (2) $10 coupons usable for discounts on
purchase of Calyx & Corolla flowers were offered to store employees to generate excitement; (3)
newspaper freestanding insert coupons were placed (see Exhibit 9) to gain exposure to 50 million
readers, with coupons for $5 off an order to Calyx & Corolla without a Contac purchase and two
coupons at $10 each for discounts on two different flower orders with proof of purchase of Contac  (a
special 800 number with a telemarketing agency was used for Calyx & Corolla orders), and (4) at its
conclusion, SB purchased and sent bouquets to all distributors and key store personnel for
contributing to the program’s success.
The program was very profitable.  Three out of four stages performed well, while sales from
the consumer stage missed plan.  The experience of creating and implementing this complex multi-
level program was a valuable education and created a foundation for future promotions of this type.
Discussions were currently under way with other consumer product manufacturers for future
programs.  Other types of programs were being considered as well.  A major mail order retailer was
committed to including several pages of a forthcoming catalog to a selection of Calyx & Corolla
flowers.  Also under consideration was what was termed an “affinity group promotion.”  This
program would offer discounts on flowers to doctors who were members of the Voluntary Hospitals
of America (VHA), a trade organization that, among other services, arranged for discounts to doctors
on the purchase of office and other supplies.  Lee had, however, not yet committed Calyx & Corolla to
these programs.
The last, and considered one of the most important, communications efforts was an active
public relations initiative which Owades herself led.  Considerable positive press, including articles in
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Calyx & Corolla
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Time magazine, the Wall Street Journal, and the International Herald Tribune, had been generated, which
had resulted in both new catalog and corporate customers (see Exhibit 10 for a partial list of media
attention to Calyx & Corolla and copies of selected articles).
Calyx & Corolla’s Ultimate Positioning
It was in this context that Owades and other members of the top management team were
assessing their options for growing the business.  One option was for Calyx & Corolla to capture more
gift business from traditional florists and possibly even increase total flower sales.  The idea would be
to sell also to customers who ordinarily did not buy much of anything by mail order.
One experiment under consideration was a test advertising campaign prior to at least one
major holiday in the Minneapolis/St. Paul market.  The following table summarizes demographic
information.
Table A
Minneapolis/St. Paul TV Market Area—Estimates
Population
3,610,700
Households
1,352,400
Age
Over 50
873,100
35-49
737,400
25-34
655,600
Less than 25
1,344,600
After-tax disposable income
Median
$30,800
$10-20,000
17.9%
20-35
26.9%
35-40
21.9%
50+
21.3%
Source: 
Reprinted by permission of Sales Marketing Management.
Copyright:  Survey of Buying Power Part II, November 13, 1989
This campaign was planned, if it lasted 12 months, to at least double the annual FTD
advertising budget of 21¢ per household ($24 million ÷ 114,000,000 households in the United States).
The second year would taper to one and a half times the FTD budget and remain at parity thereafter.
For the test to be successful, Calyx & Corolla management thought that the cost to acquire a new
customer using this medium should not exceed the cost of current methods.  Television advertising
would emphasize the freshness and longevity of Calyx & Corolla flowers, with an 800 number to call
to order either a specifically promoted floral arrangement or the catalog.  Newspaper and magazine
advertisements would consist of inserting “mini-catalogs” into Sunday newspaper supplements and
run-of-press (ROP) promotions for a $34 seasonal bouquet.  Printing costs for the mini-catalogs would
cost about 9¢ each.  What sort of response, Calyx & Corolla executives questioned, would they have
to generate in order to justify expanding the advertising program beyond the test area?  What would
be the value of the names generated?  Should Calyx & Corolla time the campaign to coincide with a
holiday and confront FTD head on, or choose a less-competitive season and promote everyday floral
purchases?
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In the opinion of Ruth Owades and the other members of the top management team, Calyx &
Corolla was an exceptionally promising, yet still only partly proven, start-up venture.  Given the
skills, values, and aspirations of the entrepreneurs and the investors, and the externalities which
confronted them, what changes in their current strategy and positioning should Calyx & Corolla
undertake?  What might be the financial and organizational implications of a much more aggressive
growth strategy, especially if they had to approach external financial markets to fund the advertising
program under consideration?
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Calyx & Corolla
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Exhibit 1
Five-Year Summary P&L Statements and Projections for the Fiscal Years Ending on
January 31, of the Succeeding Year (in thousands of dollars)
a
Actual FYI
1988-1989
Actual FY2
1989-1990
Actual FY3
1990-1991
Projected FY4
1991-1992
Projected FY5
1992-1993
Sales
$  756
4,01810,259
15,16324,431
Cost of goods sold
189
972
2,452
3,487
5,496
Gross margin
567
3,046
7,807
11,676
18,935
Sales and marketing
b
1,223
4,466
7,021
10,104
15,375
General and
administrative
c
374
752
1,213
1,459
2,263
Net profit (loss)
(1,030)
(2,172)
(   427)
113
1,297
aNumbers have been disguised
bSales and Marketing includes catalog production and mailing, list rental, and freight out (at approximately 9perorder).Orderprocessingandfulfillment,alsoincluded,averaged5 per order in 1990.
cGeneral and Administrative includes management salaries, depreciation, rent, and other miscellaneous expenses.
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592-035
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Exhibit 2
Letters to Calyx & Corolla from Customers
Dear Recipient,
I am 13 years old.  I found your catalog on the table and thought it would be a great idea for
Mother’s Day since I will be on a camping trip.
Sincerely,
P.S.  Forty dollars cash is enclosed as payment.  Please accept this.
*  *  *  *  *
Dear Calyx & Corolla:
In the beginning of December, I ordered a box of enchantment lilies for my parents to be
delivered on December 22nd, just in time for the holidays.
The flowers were in bud stage when they arrived, they opened within a few days, and lasted
for almost two weeks.
Your sales help was top notch on the phone when I placed my order, the flowers were
delivered on time, in perfect condition, exactly as advertised.  Congratulations on your terrific service
and product.  I will tell all my friends, and definitely be a repeat customer.
*  *  *  *  *
Dear Ms. Owades:
Since I’d long been given to understand that my mother-in-law prefers flowers to remain in
gardens, I purposely avoided sending cut bouquets.  But I decided to take a chance when your spring
catalog arrived and ordered the Pink-Fringed Carnations which she said looked almost like silk and,
more to the point, lasted several weeks—much to her delight and astonishment.  [She did mention
that her housekeeper changed the water and snipped the ends daily).  And these were sent from your
shop to Illinois!
I’m keeping your catalog for future surprises for her.  It’s sooo nice to know that for once
advertising lives up to its name, as your brochure and service attest!
Thank you again.
*  *  *  *  *
(continued on next page)
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Calyx & Corolla
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Exhibit 2
(continued)
Dear Calyx & Corolla:
I wish to compliment you on your fine packaging, of my lovely roses, that I received this
morning.
I am saving your address, so that I can use it as the occasion arises that I must send flowers.
They “made my day.”  They arrived on my 86th birthday and 66th wedding anniversary.
*  *  *  *  *
Dear Ms. Owades:
I live in a remote town in Northern Vermont—population 1,200.  We don’t even have house
numbers on our streets.  When I saw the Federal Express truck drive up yesterday, my neighbors and
I all came out to see who it was for.
Well, it was for me!  The driver followed the directions perfectly:  Go “Past the Church in the
Square, second street on the right, red brick house, third from the end.”  We’d never seen a Federal
Express truck on our street before—what excitement!
I certainly hope we see him again, the orchids are gorgeous!
*  *  *  *  *
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Exhibit 3
1987 Florists’ Transworld Delivery Operating Survey (all responding U.S. shops)
Typical
Middle Range
Income Statement ($ of total revenues)
Net sales from inventory
93.7%
90.3
-
99.8%
Total other operating revenues
6.3
0.2
-
9.5
Total revenues
100.0%
100.0
-
100.0
Cost of goods sold
39.4
33.3
-
45.1
Total gross profit on operations
60.6
54.9
-
66.6
Operating expenses:
Salaries and wages—owners, partners and officers
14.6
6.6
-
22.5
Other salaries, wages, bonuses and commissions
(excluding owners, partners and officers)
10.6
0.0
-
19.2
Occupancy (rent, utilities, maintenance, etc.)
7.0
4.0
-
9.4
Delivery expense
2.6
1.4
-
3.5
Telephone and transmission
1.8
1.0
-
2.2
Advertising and promotion
2.8
1.4
-
3.8
All wire service fees, dues, commissions
and expenses
4.2
0.9
-
5.8
General and administrative and other
11.1
6.1
-
14.9
Total operating expense
54.6
47.3
-
61.9
Operating profit
6.0
1.4
-
10.5
Nonoperating income/expense
-0.5
-0.7
-
0.0
Profit before tax
5.5
1.3
-
9.8
Profit after tax
4.6
1.2
-
7.6
Order and Delivery Charge Data
Average order size
a
$25.00
$20.00
-
28.00
Percentage of shops charging for delivery
90.9%
Average delivery charge (if charged separately)
$  2.25
$  2.00
-
3.00
Delivery charge revenues as a % of total
revenues (if charged separately)
3.2%
2.1
-
4.4%
Source: FTD Retail Florist Operating Survey, 1987.  (The last such survey was in 1987.)
aAverage order size reflects all orders.  Incoming and outgoing wire (FTD) orders represented 40% of member shop holiday orders
and 33% of nonholiday orders.  The average order for FTD orders was $39 including transmission and delivery service fees.  By
1990, the average of all orders had grown to over $32.
(continued on next page)
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Calyx & Corolla
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Exhibit 3
(continued)
January
Source: 1990 FTD Member Census
U.S. FTD Member Shops
1989 Typical Revenues by Month
5.7%
11.0%
7.5%
8.6%
14.0%
7.0%
5.4%
5.6%
6.0%
6.7%
8.1%
14.3%
February
March
April
May
June
July
August
September
October
November
December
Source: 1990/91 FTD Flower Business Fact Book
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Exhibit 3
(continued)
January
Source: 1990 FTD Member Census
U.S. FTD Member Shops
Average Advertising Spending by Month
U.S. FTD Member Shops
Average Percentage Advertising Expenditures By Medium
5.9%
10.4%
7.1%
8.7%
12.5%
6.6%
5.4%
5.6%
6.0%
7.0%
10.2%
14.5%
February
March
April
May
June
July
August
September
October
November
December
Source: 1990 & 1985 FTD Member Census
Yellow Pages
Newspaper
Radio
Product Donations
Direct Mail
Calendars
School Newspaper
Church Bulletin
Television
Fliers/Handouts
Pens & Giveaways
Outdoor Billboard
Other
Total Advertising
35%
22
10
8
8
3
2
2
2
2
1
1
4
100%
%
%
%
%
%
%
%
%
%
%
%
%
32%
32
13
–
7
5
–
–
2
–
–
1
8
100%
%
%
%
%
%
%
%
%
%
%
%
%
Medium
All Shops
1990
All Shops
1985
Source: 1990/91 FTD Flower Business Fact Book
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Calyx & Corolla 
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Exhibit 4    Sample Advertisements of FTD 
 
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592-035
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Exhibit 4
(continued)
TELEVISION
VIDEO
AUDIO
OPEN ON ANIMATED SUN RISING ON THE
HORIZON. THE SUN IS FROWNING AND HAS
A THERMOMETER IN ITS MOUTH. THE
CHICKEN SOUP BOWL BOUQUET APPEARS.
 SUPER: CHICKEN SOUP BOWL BOUQUET.
MUSIC: (UP)
SINGERS: Send a hug from far away.
THE SUN SMILES AS PUFFY CLOUDS FORM
AND IT BEGINS RAINING. THE PICK-ME-UP
BOUQUET APPEARS. SUPER: PICK-ME-UP
BOUQUET.
Brighten up a rainy day.
Flowers say what words can’t say.
CLOUDS CHANGE INTO A STORK CARRYING
 BABY. THE BUNDLE OF JOY BOUQUET
APPEARS. SUPER: BUNDLE OF JOY
BOUQUET
It’s as easy as FTD
THE ANIMATION BREAKS UP FORMING THE
TICKLER AS THE TICKLER BOUQUET
APPEARS. SUPER: TICKLER BOUQUET
MERLIN: Whatever you need to say…
A BALLOON AND CONFETTI MOVE AROUND
MERLIN AS HE HOLDS THE BIRTHDAY
PARTY BOUQUET.
Your FTD Florist can send the right bouquet. And
remember…
THE ANIMATED LOGO SWIRLS PAST MERLIN
AND ONTO THE SCREEN AS THE THEME “IT’S
AS EASY AS FTD APPEARS.”
SINGERS: It’s as easy a FTD.
RADIO
SINGER:
SEND A HUG FROM FAR AWAY
BRIGHTEN UP A RAINY DAY
FLOWERS CAN SAY WHAT WORDS CAN’T SAY
IT’S AS EASY AS FTD
(MUSIC GOES DOWN UNDER)
MERLIN:
Now your FTD Florist has more ways than ever to show you care. Introducing the new
FTD Affecton Collection. Show your love with the Big Hig Bouquet. Show your
appreciation with yhe Thanks a Bunch Bouquet. Or say way to go with the Congrats to
You Bouquet … It’s never been easier to expres all your affection. Just ask for these
or any of the other bouquets from the new FTD Affection Collection.
(MUSIC BACK UP)
SINGER:
IT’S AS EASY AS FTD
AS THOUGHTFUL AS A GIFT CAN BE
FROM ME TO YOU
FROM YOU TO ME
IT’S AS EASY AS FTD
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Calyx & Corolla
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Exhibit 5
1990 North American FTD Monthly Advertising Media Expenditures
Jan
Feb
Mar
Apr
May
Jun
0.0
0.0
0.0
0.0
0.4
14.0
26.0
15.7
20.7
Percent (%)
13.0
8.8
1.4
Jul
Aug
Sep
Oct
Nov
Dec
Source: D’Arcy, Masius, Benton & Bowles
1990 North American  FTD
Monthly Advertising Media Expenditures
Source: 1990/91 FTD Flower Business Fact Book
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592-035 
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Exhibit 6    Selected Pages from Catalogs 
 
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Calyx & Corolla 
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23 
Exhibit 6    (continued) 
 
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592-035 
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24 
Exhibit 6    (continued) 
 
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Calyx & Corolla 
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25 
Exhibit 6    (continued) 
 
 
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592-035
Calyx & Corolla
Exhibit 7
Graph of Calyx & Corolla Monthly Sales for the Year Ending June 30, 1990
$1,400
1,2001,000
800MonthlySalesinthousandsJulAugSepOctNovDecJanFebMarAprMayJun600
400200
$0
26
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Calyx & Corolla
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 Exhibit 8
Bloomingdale’s Advertisement in the New Yorker
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592-035 
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Exhibit 9    Newspaper Freestanding Insert Coupons of SmithKline Beecham 
 
 
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Calyx & Corolla
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Exhibit 10
Partial List of Media Attention to Calyx & Corolla
“A Scripps Education Goes to Work”
Scripps College Bulletin, Summer 1989
“Hot People”
Metropolitan Home, February 1990
“Fortune People—A Harvard Study
Fortune, November 5, 1990
“Hearts and Flowers:  The Nosegay Express”
Wall Street Journal, February 14, 1991
“Just Picked Flowers:  A Fresh Idea Pays”
International Herald Tribune, February 9-10, 1991
“The Truth About Ruth”
Entrepreneurial Woman, July/August 1990
“Stamping Out Mail-Order Misbeliefs”
Los Angeles Times, May 4, 1990
“Bouquet of the Month”
Detroit Free Press, July 1, 1990
“Floral Catalog Blooms with Exotic, Hard-to-
Find Greenery”
Rocky Mountain News, January 25, 1990
“Of Wreaths and Flowers”
San Francisco Chronicle, November 29, 1989
“Flower Power”
Business Week, February 19, 1990
“Flowers, Fresh from the Growers to You”
Gannett Westchester Newspapers, August 24, 1989
“What’s Hot:  Flowers, Fresh and Fast”
San Jose Mercury News, August 29, 1989
“Fresh Flowers by Catalog”
San Francisco Chronicle, October 18, 1989
“Catalog Bazaar”
Harper’s Bazaar, June 1991
“Business is Blooming”
Catalog Age, January 1991
“News Break”
ELLE Magazine, February 1991
“Profits in Bloom”
TIME Magazine, February 18, 1991
“Growing a New Market Niche”
Working Woman, February 1991
Television interview
Business Marketplace, ABC TV
San Francisco, California
September 15, 1991
Television interview
The Morning Exchange, ABC TV
Cleveland, Ohio
October 9, 1991
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592-035
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Exhibit 10
(continued) - Wall Street Journal article, February 14, 1991.
Hearts and Flowers:  The Nosegay Express
by Patti Hagan
Here we are, V-Day 1991, and a flowery mail-order
catalog has saved me from the lists of Valentine’s procrastinators.
Otherwise, I might have made my valentine flower arrangements
on the subway yesterday, humored by a supposed New York Post
story blown up on a poster.  “300 LB. QUEENS MAN MOVED BY
800 FLOWERS,” and bylined Iris Inavase.  “A 300 lb. Queens man,
52, was reduced to tears today by 800 Flowers,” Ms. Inavase
wrote.  “To look at him, you would have thought it would take a
professional moving company to budge him.  But all it took was a
$29.95 floral arrangement sent by 1-800-Flowers, the 24-hour-
anytime-to-anyone floral delivery service.”  Amusing as I found
the teary-eyed Ferdinand, hankie in one hand, 800 Flowers
nosegay in the other, I’d long since dialed another floral 800 (1-
800-877-7836) to reach Calyx & Corolla, in California.
A few months ago a friend had slipped me the catalog,
figuring I’d appreciate the botanical name and the upscale
difference.  Calyx & Corolla does not ride the subway; C&C uses
no weepy fat men.  Calyx & Corolla instead runs 32 pages of
flower pictures, only, on the theory that flowers best sell flowers,
quite unassisted by kittens, Dalmatians, golden retrievers, Snoopy
or Snow White and the Seven Dwarfs.  Calyx & Corolla relies on
flowers whose ancient good design makes them virtually fashion-
proof:  roses, daffodils, tulips, lilies (395forayearoflilies),orchids(450 a year), protea.  (“Botanists tell us that protea are
one of the oldest flowers on the earth,” the C&C care card informs.
“Known to exist in prehistoric times, they survived the trials of
evolution far better than the dinosaur.”)
Something about the catalog reminded me of Eden-
Gardener’s Eden, the upscale gardening catalog-and sure enough
Calyx & Corolla, which now operates at the cutting edge of the
cut-flower business, is the latest eureka of floral entrepreneuse
Ruth Owades, the Harvard MBA.  Her alma mater immortalized
her in a widely taught 1982 Business School case study of her
travails, in 1978, in founding Gardener’s Eden (one Jeremiah told
her:  “Gardening is a blue-collar hobby, it’ll never fly.  There is no
way in the world that people will buy things for their garden.  If
this was such a good idea, dearie, some man would have already
done it.”).
In 1982 she sold Boston-based Gardener’s Eden to
Williams-Sonoma for a cool million but stayed on for five years to
manage G. Eden out West.  By 1987, she had noticed an empty
horticultural niche in the cut-flower industry.  Her idea was to
make possible a fast, fresh, FedExed flower valentine any time of
the year by brokering a computer marriage of convenience
between two industries that had heretofore never even been
engaged:  mail-order catalogs and fresh cut flowers.  Though her
research told her the U.S. cut-flower industry had been growing
about 10% a year since the mid-80s, she found “an industry still
stuck in the ‘50s.”
She persuaded 25 flower growers to sign on to her
computer network.  She got them to install computers, modems
for talking to the C&C mainframe in San Francisco, fax machines.
And she taught them to cut flowers to order and pack them with
aesthetic TLC.  Roses would be dethorned by hand and travel with
“ice pillows under their heads.”  Wood excelsior would cushion
their every blow.  “What we go through with gerberas is pretty
amazing,” Ms. Owades admits.  “First of all they are capped with
net caps in the fields where they’re grown.  Then because their
stems tend to be weak, the grower puts [each of] them in thick
straws.”
Then, to deliver the critical Freshness Dividend, Ms.
Owades prevailed on Federal Express to add Calyx & Corolla’s
natural brown boxes to its “brown box business,” and fly the fresh
cut flowers direct from grower to customer, guaranteeing arrival
on the exact day requested.  FedEx was the crucial link in Ms.
Owades’s new floral-delivery short-circuit service.  In her catalog
she explains that Calyx & Corolla “fresh” means “five to 10 days
fresher than any other flowers you can buy!”  Her research had
revealed that “most flowers that we buy at a florist or certainly at
a Korean grocer are at least seven to 10 days old.”  For her
business, “I knew that the benefit had to be FRESHNESS.  We cut
to order.  You receive a flower that was cut 24 to 48 hours
previously.  You get the seven to 10 days in your vase, instead of
on a truck or in a distributor’s warehouse.
Though this is Calyx & Corolla’s biggest day of the
year, Americans are floral underconsumers.  Ms. Owades believes
she’s still battling the Puritan ethic.  “It’s not only that we’re
puritanical and feel that we don’t deserve flowers on a regular
basis, I also think that we are quite intimidated by flowers.”
However, this may be changing thanks to the puritanical
American capacity for guilt.  A spring 1990 Gallup Poll,
“Americans on Gift Giving,” found that for 51% of Americans
“when feeling guilty, flowers and plants are the likely gift.”  Ms.
Owades says of subscribers to Calyx & Corolla’s flowers by the
year, half-year and quarter:  “That’s for someone who either loves
flowers or else it’s a gift from someone who feels really guilty
about what he did.” And in fact C&C offers a sort of rescue service
for the guilty, volunteering on the order form “if you forget or
have waited until the last minute...call us, we will do whatever we
can to rescue you.”  And then the Calyx & Corolla Plant Doctor is
on call to help survivors baby their plants and flowers.  “People
call back and say “it works!  My gardenia is thriving!” Ms.
Owades notes.  “They’re so happy they want to send him things.
They’re all trying to bake him chocolate cakes.  We’ve had to limit
it.  They can send recipes.”  Others simply write:  “If only your
catalog had existed five years ago, my wife wouldn’t have left
me!”  They send color snapshots of week-old bouquets still fresh.
“I’m writing to thank you for giving me ‘points’ with my mother-
in-law,” one California woman wrote.  “I’d long been given to
understand that she prefers flowers to remain in gardens, I
purposely avoided sending out bouquets.”  But the Pink Fringed
Carnations bouquet changed everything.
Last Feb. 14 an irate Philadelphian wrote in the
accusative:  “Dear Calyx & Corolla:  You’ve ruined my love life!
How could you not have shipped the Valentine’s Day tulips to my
girlfriend?!”  An apology followed two days later:  “I guess ‘polite
thank yous’ are no longer a way of life.  But at least I am no longer
in the doghouse.”
In January Ms. Owades sent her flower catalog to war,
addressing a special message to American servicemen and women
in the Persian Gulf:  “As Valentine’s Day approaches, we would
like to help you remember those that you love back home.
Although the distance to your loved ones may be great, you can
surprise them by sending them fresh, beautiful flowers this
Valentine’s Day.”  Wishing them all home soon, she asked,
“Please identify yourself as a part of Operation Desert Storm in
order to receive your discount.”  20%.
On Jan. 16, the day the U.S. began bombing, Calyx &
Corolla received a fax from a soldier on duty in Saudia Arabia.  He
requested that “Love” cards and bouquets be dispatched to five
valentines in five different towns in three states:  Lori, Melissa,
Dee, Beth and Georgeanne.  Once again Calyx & Corolla gave new
meaning to the word fresh
This article first appeared in The Wall Street Journal of February 14, 1991.  It is reprinted with the permission of Patti Hagan, WSJ
Gardening Columnist..
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Calyx & Corolla
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Exhibit 10
(continued) - International Herald Tribune article, Business/Finance, Saturday-Sunday,
February 9-10, 1991
Just-Picked Flowers:  A Fresh Idea Pays
by Lawrence Malkin
NEW YORK - Recession may be deepening and war fears
rising, but the animal spirits in some American businesses
show no signs of wilting yet.  Think flowers.  Think
phone or fax to order them, picked the same day by their
growers.  Then think Federal Express to deliver them
overnight.
Two years ago Ruth M. Owades assembled all
these disparate elements and created a brand new
business that is definitely greater than the sum of its parts.
Calyx & Corolla, as she named her company
with floral terminology, grossed $10 million last year and
is growing by about 10 percent a month against the
slumping U.S. business tide.
A staff replying to a toll-free number in San
Francisco takes an average of about 25,000 orders a
month, collates them by computer and then forwards
them on-line to computers at the company’s contract
growers in California and Florida.
The flowers are packed in specially insulated
boxes and accompanied by the sender’s greetings, done in
calligraphy.  At peak times such as Valentine’s Day and
Mother’s Day Federal Express has to send 18-wheel
trucks to move the orders from flower farm to airport.
Current specials range from 24 miniature
carnations for $32.50 to 25 daffodils for 47,toadozenlong−stemmedrosesfor68.  Prices include delivery of
flowers that are 24 hours old instead of several days old -
as they would be after going through middlemen in the
retail delivery chain.
The catalogue also offers tropical flowers,
special wreaths, bonsai trees, and even monthly
subscriptions for the business person too busy to
remember.  The trade publication Catalog Age rates Ms.
Owades one of the best in the mail-order business.
Calyx & Corolla has sent flowers to celebrities
including Henry Kissinger and Ivana Trump, and one of
Rose Kennedy’s great grandchildren orders one hundred
flowers from the company for Mrs. Kennedy’s centenary.
Never one to miss a market opportunity, Ms.
Owades also shipped catalogs to military personnel in
Saudi Arabia offering them a 20 percent discount.  A
_____________________________________
The flowers are packed in insulated boxes, with the
sender’s greetings in calligraphy.  At peak times, 18-wheel
trucks move the flowers from farm to airport.
_____________________________
score of orders from troops in Operation Desert Storm
have already been dispatched to loved ones at home.
Calyx & Corolla and Federal Express are
waiting at least until more customs barriers come down in
1992 to consider deliveries within Europe, where the
logistics would be even more complex than they were in
the United States.
Ms. Owades, 44, had already made her first
million creating a mail-order firm selling high-priced
garden 
equipment 
to 
upmarket 
buyers; 
the
imponderables of starting up Gardener’s Eden is now a
case study at her alma mater, Harvard Business School.
She sold out to a big catalog firm and moved to
California to run the business for the new owners.  Her
husband, Joseph Owades, who creates special beer recipes
for large companies, moved from Boston with her, and
she started looking for another start-up as ominous signs
appeared in the U.S. economy.  “I discovered that
chocolates, ice cream, beer, and flowers are relatively
recession-proof,” Ms. Owades said.
“People send flowers in recession to apologize
for the vacation they have to cancel,” she said.  Corporate
clients have also boosted their orders to make up for
canceling company parties and, Ms. Owades said, to help
lift the war blues in the office.
Five years ago, not enough of the elements
would have been in place with enough sophistication to
make Calyx & Corolla work.  She needed absolutely
reliable airfreight service, an inexpensive computer
network, special packaging such as iced bud-holders for
roses, and, she says, “consumer confidence in the
reliability of mail order.”
Most of all, she said, the industry had to have
confidence that it could improve on its traditional
flowers-by-wire delivery system.
The single most important link in the chain was
Federal Express, which had to help design the packaging,
devise a special rate structure and install a computer
tracking system at each of the contract growers.
Dick Metzler, the airfreight company’s U.S.
marketing chief, acknowledges that he was reluctant at
first to gamble with an untried business to make the kinds
of adjustments that Federal Express provides its regular
clients.
“But we rolled the dice with Ruth, and we’re
not sorry,” he said.  “She has carved out a very clever
niche for herself, and she’s going to own it for a long time
to come.”
Walter Salmon, professor of retailing at
Harvard Business School, says Calyx & Corolla is a
perfect example of how to look at an industry as a whole
and develop a new way of selling.
In fact, he’s thinking of making Ms. Owades’s
second business start-up into another case study.
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Harvard Business School
9-592-035
Rev. October 6, 1995
David Wylie prepared this case under the supervision of Professor Walter J. Salmon as the basis for class discussion rather
than to illustrate either effective or ineffective handling of an administrative situation. Certain numbers have been
disguised.

1
Calyx & Corolla
Well, it’s two botanical parts of the flower—the calyx (the guard leaves that protect
the bud) and the corolla (the flower itself).  It was on the very first list of names that a good
friend and I brainstormed and we liked it right away.  I liked the way it sounded and the way
it looked and its uniqueness.  But a lot of people didn’t like it—too hard to pronounce and
nobody would know what it meant.  So we went back to the drawing board, and brainstormed
a second and third and fourth list.  Each time we’d get a consensus on a name, we couldn’t
clear it with the trademark office.  Finally, so much time had elapsed, we were ready with a
catalog layout but had no company name and no logo . . .
One Friday evening, we all unenthusiastically agreed on using the name: “The First
Flower Company.”  That Sunday, I was leafing through some trade magazines and turned to
a full-page ad by a new consortium of South American flower growers: “The First Flower
Corporation”!
That was it—I walked in on Monday morning, showed the ad to my staff and said:
“We’re going to be Calyx & Corolla.”
—Excerpt from Owades speech
It had been two and a half years since Calyx & Corolla had pioneered the concept of selling
fresh flowers by mail.  During 1990, it had consummated over 150,000 transactions, yielding revenues
in excess of $10 million.  The company’s results had surpassed the plan that Ruth Owades, its
founder, had presented to the 18 investors who had provided the original $2 million in capital.  In
fact, the results were sufficiently positive to enable Owades and her management group to raise
another $1 million in the Spring of 1991, mainly from the original investors.  (See Exhibit 1, Five-Year
Summary Financial Statements and Projections.)
Nevertheless, stimulated by their success in introducing a new distribution channel for
flowers, Owades and her two key associates, Fran Wilson and Ann Lee, were reassessing the firm’s
long-term growth strategy.  Was Calyx & Corolla more a mail order operation or should it compete
directly against more traditional outlets, such as retail florists, and wire services, such as Florists
Telegraph Delivery (FTD)?  How fast did it have to grow to protect its initial success?  What would be
the financial implications of various growth strategies?  How should its personal objectives and those
of its investors and employees influence the character and pace of growth?
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Calyx & Corolla was an exceptionally innovative direct mail concept.  Besides mailing six
yearly color catalogs and having an 800 telephone number, its distribution and transportation
arrangements were unique.  Orders from customers were received by telephone, fax, or mail at the
central office in San Francisco and then sent via fax or computer to the 30 flower growers who
supplied Calyx & Corolla.  They, in turn, packed and shipped individual orders and sent them
directly to consumers by Federal Express.  Calyx & Corolla customers thus received much fresher
flowers, often fresher by as many as seven to ten days, than were available through conventional
retailers.  Prices, which included the cost of delivery, were competitive with conventional florists.
(See Exhibit 2, letters from customers.)
If the goal of most entrepreneurs is to build a business that’s better than what’s
already out there, Ruth Owades has done it in spades.  In fact, you could say she has created a
new market. . . .
Until Calyx & Corolla came along, the hugely lucrative $8.4 billion American flower
industry had encountered few innovations.  There had been flowers by wire, but not garden-
fresh, exotic flowers displayed in a beautiful catalog (you actually get to see what you’re
ordering), with a money-back guarantee.
But as Owades realized early on, having a revolutionary idea is one thing; executing
it is something else again.  To make her brainchild work, she had to get major industry players
to disrupt their established routines and see things her way.
- Working Woman Magazine, February 1991
The Calyx & Corolla Management Team
Ruth Owades was no stranger to the mail order business.  Upon graduation from the
Harvard Business School in 1975, she joined the CML Group as director of marketing.  The CML
group then owned a number of retail and direct mail businesses.  Within two years, Owades
proposed to CML executives that they launch a direct mail business focused on garden implements
and accessories.  When they declined, Owades resigned and, under her own auspices, launched
“Gardener’s Eden.”  Very quickly, the business grew and prospered.
In 1982, Owades sold Gardener’s Eden to Williams-Sonoma, an upscale direct mail and retail
seller of cookware, serving pieces, and other merchandise associated with the kitchen.  For four and a
half years Owades directed the Gardener’s Eden division of Williams-Sonoma, during which time it
continued to grow and prosper.  Since the price Williams-Sonoma paid for Gardener’s Eden was
based in part upon a multiple of sales in the years subsequent to the purchase, the funds Owades
ultimately received for Gardener’s Eden reflected her stewardship during these years.
After about a year of relaxation and rejuvenation following her resignation from Williams-
Sonoma, Owades decided to establish Calyx & Corolla.  This time, she enlisted Fran Wilson, a 1983
graduate of the Harvard Business School and a former employee of Williams-Sonoma, as vice
president of operations.
After about a year of operation, Ann Hayes Lee joined Calyx & Corolla as vice president of
marketing.  Lee was a veteran of the catalog business.  She had spent almost twenty years in the
industry, most recently with the Roger Horchow Company, a catalog seller of both home goods and
apparel, where she was creative director.
I was fortunate to convince two of the most talented and experienced people
in our industry to join the Calyx & Corolla start-up team—Fran Wilson became vice
president of operations and created the unique yet crucial systems that make this
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Calyx & Corolla
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business work.  Ann Hayes Lee became vice president of marketing, creating six
spectacular catalogs a year, while overseeing all merchandising and other marketing
programs.
- Excerpt from Owades speech
As in many small businesses, titles did not fully define responsibilities at Calyx & Corolla.
Owades herself took a major hand in the selection and pricing of flowers and other merchandise that
appeared in the catalog.  She also set the critical strategy for the catalog mailing plan.  Wilson was
responsible for customer orders and service, day to day communications with growers, systems
development and management, and finance and accounting.  Lee took responsibility for merchandise
development and catalog creation and production.  She was also responsible for a number of
nondirect mail initiatives aimed at accelerating the growth of the business (described in more detail
later).
The entire management team of Calyx & Corolla was dedicated to the success of the business.
Owades realized that the ultimate success of Calyx & Corolla would hinge on the efforts of this team.
They had adapted their lifestyles to the rigors of a start-up venture but each executive appreciated the
congenial corporate culture and found job satisfaction and the promise of a substantial payout at
some future date to be powerful incentives.
The Fresh Flower Industry
Retail flower and plant sales were almost a $9 billion business in the United States in 1990,
having grown at a rate of 7.7% since 1985.  While most flowers were grown domestically, over half of
the carnations, almost a third of the roses, and a variety of other flowers were imported from over 50
countries around the world.  Colombia was the major source of imported flowers, representing over
60% of the total.
The horticulture industry was extremely fragmented at all levels, with small, family-operated
companies dominant among growers, distributors, wholesalers, and retail florists.  Although there
were some larger organizations, they did not represent a major share of the business.  The typical
channel of distribution was from growers to distributors located in the growing regions to
geographically dispersed wholesalers who sold to florists, supermarkets, and other retailers in
geographic proximity to them.  Of the retailers, the 25,000 florists had the largest market share, selling
59% of all floriculture products (flowers, seeds, and potted plants) in 1987, the last year for which
government retail statistics were published.  Supermarkets had about 18% of this market, while
nurseries, mail order companies (such as seed companies), and other miscellaneous retailers
accounted for the balance.  In most major cities there were flower markets in which a number of
wholesalers would gather to sell their goods to retailers.
Often industry participants would not confine themselves to a single role.  For example, most
growers distributed some flowers directly to local or more distant wholesalers and retailers.  Many
distributors and wholesalers engaged in some of their own production.  In addition, direct purchasing
relationships often existed between growers and distributors and larger retailers such as supermarket
chains.
Distributors generally paid growers in 60 to 90 days and then extended the same terms to
wholesalers.  Retailers usually paid wholesalers in cash.  They shopped for availability, quality, and
freshness from the many wholesalers who serviced them.  Distributors typically marked up flowers
50% on cost to wholesalers who in turn marked them up, on cost, 100% to retailers.  Florists took a
markup of another 150% to 200% on cost.  A flower that a grower would sell for approximately $5, for
example, would thus cost the ultimate consumer about $40.  Exhibit 3 includes summary financial
data for FTD affiliated florists as well as additional data on their sales and advertising expenditures.
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592-035
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Retail florists were very service oriented.  Often they prepared custom bouquets and, for
major events such as weddings, provided flower arranging services, usually as part of the cost of the
product.  It was not unusual, for example, for the bill for flowers used in a large wedding to amount
to several thousand dollars.
Flowers were purchased by consumers for a variety of occasions.  Flowers were an essential
part of most weddings and funerals and were often given as manifestations of love and caring for
occasions such as birthdays, anniversaries, convalescence, Valentine’s Day, and Mother’s Day.  Cynics
often claimed that flowers were given to assuage guilt rather than to demonstrate affection.  Many
Americans also bought flowers for occasions such as dinner parties or regularly kept fresh flowers or
plants in their homes.
Fresh flowers were more ubiquitous in Europe than in the United States.  Per capita
consumption of flowers and plants in the United States was $36 annually, whereas in Holland it was
$60, which approximated the average in Europe.  Americans were only beginning to acquire the
European propensity to purchase flowers for themselves year round.
Flowers varied in their perishability.  Roses, for instance, could last as long as one to two
weeks from the time they were picked until they would have to be discarded, while anthurium could
still be acceptable for sale two to three weeks after picking.  Time, however, was not kind to flowers,
and quality deteriorated steadily from the time of picking.  Each day a flower remained unsold
diminished its remaining value.
Efficient distribution was thus key to the flower industry.  The almost infinite variety of
species, colors, and growing locations on the supply end, however, and fragmentation within the
channels of distribution resulted in a rather inefficient distribution system.  A flower might, therefore,
be as much as seven to ten days old before it was available for sale in a retail store.
Although some flowers were bought and taken from the store by purchasers, most were
delivered to the recipient.  Typically, florists made deliveries themselves for an extra charge within a
radius of several miles from their store.  For delivery beyond their own service areas, florists usually
used FTD or one of the several competing service organizations that had cloned FTD.
FTD was a member-owned, worldwide cooperative of 25,000 florists.  Its members took
orders from local customers for delivery by member florists at other locations.  Although there was a
catalog of “FTD Bouquets” at each member florist, there was no guarantee that the delivery florist
would deliver the freshest flowers in inventory.  The consumer to whom FTD historically had
appealed represented a wide cross-section of households with incomes in excess of $35,000.  Typically
a consumer would pay an extra $3.50 order transmission fee and, depending on location and distance,
an additional $6.50 for delivery.  During holiday periods, incoming wire orders accounted for 21.7%
of the revenues of FTD florists, while outgoing wire orders accounted for another 18.7% according to
a 1989 FTD survey.  During nonholiday periods, these proportions were 17.9% and 15.1%
respectively.  FTD processed almost 21 million orders in 1990, including more than 500,000 orders
and messages daily during holiday periods.  Of the total order (including flowers, transmission fee,
and delivery charge), the florist who originated the order received 20%, the florist who delivered the
order 73%, and FTD 7%.
In addition to its clearing service, FTD offered its members promotional and advertising
support, supplies, educational programs, marketing research, publications, and credit card
processing. With the total value of orders from U.S. florists of over $700 million (almost three times its
nearest competitor) and revenues of approximately $49 million, FTD spent over $24 million on
advertising in 1989, 55% of which was concentrated in holiday periods.
According to Leading National Advertisers, an Arbitron publication, FTD concentrated most of
its advertising on network television spots (73%), newspaper advertising (14%), and network radio
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Calyx & Corolla
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(8%).  The balance was spent on a mixture of magazines (4%), outdoor advertising, and cable and
local television spots.  The image promoted in electronic media had been “FTD, the feeling never
ends,” featuring ex-Ram’s defensive tackle, Merlin Olsen.  FTD was shifting, however, to a theme of
“It’s as easy as FTD” and shifting the percentage spent on more costly prime time television to news-
hour spots.  The intention was also to reallocate significant advertising dollars to magazines and
major regional newspapers.  Print advertising was much more product oriented.  FTD even planned
to put a mini-catalog in magazines featuring six everyday products and a selection of seasonal
bouquets.  (See Exhibit 4 for sample FTD advertisements and Exhibit 5 for monthly advertising
media expenditures of FTD itself.)
One of the largest FTD members was a 1984 start-up called “800-Flowers,” which was
becoming increasingly popular.  When customers called 1-800-FLOWERS, one of 300 salespeople in
its telemarketing center would take an order and transmit it by FTD or another service to a network
of florists around the country.  Minimum orders were $35 and went up in $5 increments.  The retail
customer was charged a $2.96 relay fee and a $5.99 handling fee in addition to the price of the
flowers.  800-Flowers received as its fee 25% of the flower order from the delivering florist.  Revenues
of 800-Flowers in 1990 were about $16 million.  800-Flowers advertised primarily through billboards,
subway posters, and on CNN television.  Its advertising expenditures in 1990 totaled $5 million.
Supermarkets were also becoming increasingly important flower retailers.  Recently their
florist departments were moving price points upwards from under $10 to compete more with florists
whose average order was over $32.  In addition, larger supermarket chains were purchasing directly
from growers, distributors, and importers.  Although many florists considered supermarkets to be a
serious threat, they felt that supermarket employees lacked the sensitivity and expertise required to
handle, package, maintain, and sell flowers effectively.  Flower shops in supermarkets often, for
example, were placed next to produce departments where fruit, as it ripened, produce ethylene gas, a
chemical which hastens the deterioration of flowers.  Sixty-five percent of the nation’s 17,460 chain
and 35% of the nation’s 13,290 independent supermarkets sold flowers in 1990.  The average annual
sales for supermarket floral departments was $104,950, having grown almost fourfold in the past 10
years.
Calyx & Corolla
Calyx & Corolla represented a true departure from traditional channels of distribution by
directly linking the consumer with growers and, through Federal Express, growers with consumers.
Calyx & Corolla was able to reduce very substantially the time it took to deliver flowers to the
consumer’s door.  Calyx & Corolla typically delivered roses to the consumer within one to two days
from the time they were cut.  Anthuriums were delivered within three to four days.  FTD deliveries of
roses and anthuriums, in contrast, often occurred one to two weeks and two to three weeks,
respectively, following cutting.
Owades and her colleagues realized that Calyx & Corolla was an entirely new concept which
revolutionized the distribution of flowers.  In order to succeed, however, they also had to understand
the emotions that consumers tried to convey with flowers and to maintain critical relationships with
both growers and Federal Express.  Owades said in a speech about the Calyx & Corolla concept:  “I
envisioned a table with three legs, and Calyx & Corolla was only one of them.  The second was the
best flower growers available, and the third was Federal Express, the number one air carrier.”
Owades herself took responsibility for maintaining these relationships.  She often telephoned or
visited growers to overcome problems that had arisen, to negotiate seasonal prices, or simply to
further strengthen healthy relationships.  She also maintained direct contact with Federal Express
representatives to maintain and improve their service.
Although Calyx & Corolla was by far the most successful of the “new wave” of mail order
flower retailers, other companies with slightly different concepts were arising.  The most direct
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592-035
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6
competitor, a very well financed venture capital-backed start-up called “Floral Gift Express,” had
recently failed and Calyx & Corolla had acquired some of its assets.  “Stillwater,” another yet-
unproven competitor, had recently entered the market.  It was a division of a large, well-capitalized
Japanese conglomerate.
Calyx & Corolla was not without problems, either.  As Owades suggested:
Did we have problems?  Of course.  How about the coldest December on
record for our first Christmas?  Where even our California and Florida growers were
in a deep freeze (not to mention our customers in Minneapolis and Boston).  Did we
deliver their holiday bouquets?  Of course.  How?  With numerous sleepless nights
and with the extraordinary combined efforts of that strong partnership I spoke
about—of Calyx & Corolla, our growers, and Federal Express, a partnership getting
stronger and more solid with each challenge.
—Excerpt from Owades speech
Calyx & Corolla Operations
The headquarters of Calyx & Corolla were in modest offices just south of downtown San
Francisco.  Four thousand square feet housed the three senior executives, middle management,
computers and fax machines, and all supporting functions, including the sales and customer service
staff that took orders and answered customer inquiries or complaints respectively.  Because the
number of sales and customer service staff could rise from a normal complement of 5 to as many as
60 (full-time equivalents) before Mother’s Day and other holidays, the company was squeezed for
space at peak periods.
Apart from these offices, the company also occupied about 6,000 square feet of nearby
warehouse space.  Vases, wreaths, and dried flowers plus other nonperishable items and packaging
supplies used by growers were kept there.
Owades and her colleagues recognized that the sales staff and customer service
representatives were key components of the entire Calyx & Corolla system.  For these positions they
hired service-oriented people who demonstrated a real interest in flowers and plants.  Their
remuneration, which was about average for equivalent positions in the Bay area, was supplemented
by various contests and incentive programs to reward them for exceptional quantitative and
qualitative performance.  Senior management maintained a very personal role in training and
working with these individuals.
Relationship with Growers
She provided an answer to what growers perceived as a problem.  The industry and
market needs had changed.  Flower importing had greatly increased, as had domestic
production.  But although supply, and thus competition, had increased, consumption hadn’t
kept up.  What Owades offered was a new—and needed—outlet for selling flowers.  “We had
toyed with mail order, and even tested it.  But we’re growers, not marketers” (said a grower).
—Working Woman Magazine, February 1991
Initially convincing growers to support Calyx & Corolla was one of Owades’ toughest tasks.
She faced the challenge of recruiting growers whose business for generations had
consisted of packing 500 or 1,000 stems in large cartons and shipping them by truck across
the country.  They were being asked to carefully pack 11 perfect stems in special cartons,
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Calyx & Corolla
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packaged according to stringent aesthetic specifications, and to include a neatly handwritten
gift card.
—Working Woman Magazine, February 1991
She had, however, become acquainted with several growers through her previous work.
Together we worked through the logistics of how we might make Calyx &
Corolla happen.  We tested flowers for longevity and shipability and packaging.  We
tested various packing materials that would protect the flowers, keep them cool, keep
them wet, maintain a constant temperature, and that would look good and be
environmentally sound.
—Excerpt from Owades speech
Owades’ relationships with the growers, combined with a lot of hard work, had resulted in
the current network of 30 quality flower suppliers.  For these growers, Calyx & Corolla represented
an exciting new distribution opportunity that could increase sales and help offset the seasonality of
their business.
Calyx & Corolla’s growers were located primarily in California, Florida, and Hawaii.
Although most were smaller operations with sales of under $1 million, several had sales of over $5
million.  The largest had sales of $100 million.  The eight largest growers combined supplied 80% of
Calyx & Corolla’s product.  Sales to the company represented no more than 25% of any one grower’s
business.  Calyx & Corolla had contracts with the growers that prohibited them from supplying any
other mail order retailers.
The Sunbay Company was typical of the larger growers.  Located about two hours south of
San Francisco, this family-operated grower/distributor/wholesaler had sales of $6 million and
carried 300 items.  Of those, it grew 90, representing 20% of its revenues.  The balance were flowers
purchased from other local growers, imported, or purchased from other distant distributors, to
complete the selection they offered local florists.  Calyx & Corolla purchased only locally grown
flowers from Sunbay.
In addition to educating growers to execute their retail responsibilities accurately and
quickly, Calyx & Corolla provided growers with shipping boxes, cards, labels, vases, etc., and also
sent them demand forecasts.  The growers, in turn, notified Calyx & Corolla of low stock positions so
substitute suppliers could be utilized or alternate selections offered at or after the time of customer
ordering.  Growers also informed Calyx & Corolla of excess stocks so special offers could be
communicated by supplementary selling when taking incoming orders or by outbound
telemarketing.
Two or more times daily, depending on the season and the grower, Calyx & Corolla
transmitted orders by modem to its growers.  There, the Calyx & Corolla account manager employed
by the grower would supervise the printing of orders, selection and packing of flowers, handwriting
of gift messages, and preparation of Federal Express shipping manifests.  Although during the slow
seasons several people could handle the volume, during peak holidays such as Mother’s Day, up to
50 workers might be dedicated to fulfilling Calyx & Corolla orders at a particular grower.
The price Calyx & Corolla paid to growers was really a combination of two factors.  While
Calyx & Corolla was a big volume purchaser, it had to reimburse growers for the additional retail
functions which they performed.  As a consequence, Calyx & Corolla paid growers wholesale prices
plus a surcharge to cover extra labor and other added costs associated with their orders.  Despite this
premium, Calyx & Corolla was able to achieve gross margins of almost 80% of sales.
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Other expenses incurred by Calyx & Corolla included Sales and Marketing and General and
Administrative expenses (G&A).  Sales and Marketing expenses mainly consisted of catalog
production and mailing ($.32 per catalog), mailing list rental ($.08 per name), freight out ($9.00 per
order), and order processing and fulfillment ($5 per order).  G & A included management salaries,
depreciation, rent, and office supplies and other miscellaneous expenses.
Relationship with Federal Express
Owades knew that her next challenge would be winning an overnight-delivery
service to her side.  Ideally, she wanted the industry giant Federal Express Corporation, since,
Owades says, customers feel it has the most reliable service.  And without quality service,
Calyx & Corolla would not be able to do business.  But Owades knew that Federal Express
had rigid operating procedures, and she would need exceptions for her start-up.
—Working Woman Magazine, February 1991
Well, the Calyx & Corolla concept epitomized time-sensitivity.  Here was the
first mail order business in America that would promise exact-day delivery.  The
most important question we ask our customers is “When would you like that
delivered?”...
But, my objective from the start was to establish a relationship where they
would work with us—a partnership, together we would create and execute this novel
means of marketing and distributing fresh flowers.
—Excerpt from Owades speech
Pricing was certainly one important issue, but such subjects as dealing with several seasonal
peaks and deliveries on freezing days when flower recipients were not home were critical as well.
Calyx & Corolla used Federal Express exclusively for shipping perishable products. For less-
perishable products such as dried flowers or vases, it sometimes used United Parcel Service.
The relationship with Federal Express had matured over several years.  At first, Federal
Express considered Calyx & Corolla a minor account that required special attention.  By 1991,
however, the relationship had vastly improved.  Owades had negotiated a price that varied little by
weight.  During peak periods, Federal Express now left trailers at the various growers to be filled and
replaced when full.  Many delivery drivers had also become aware of Calyx & Corolla and when no
one was at home, would not leave packages to freeze on a cold day.  Frozen flowers did not
encourage customer repeat orders from Calyx & Corolla.  Saturday deliveries were now offered as
well, although Sunday and holiday deliveries were still an unresolved issue.  Since few conventional
florists delivered on Sundays and holidays, this service could represent a major competitive
advantage for Calyx & Corolla.  Federal Express had even placed computer terminals in the Calyx &
Corolla offices and at the major growers to allow on-line tracking of shipments.  This equipment
permitted Calyx & Corolla customer service representatives to respond immediately to customer
inquiries concerning the whereabouts of an order.
The Calyx & Corolla Product Line
The Calyx & Corolla catalog included fresh and dried flowers, a selection of plants such as
bonsai, and a variety of vases and other floral accessories. (See Exhibit 6 for selected pages from
catalogs.)  Prices for fresh flowers, including delivery, ranged from $23 for a single stem of protea to
$60 or $70 dollars for bouquets of several dozen flowers.  In addition, Calyx & Corolla offered vases
and accessories starting at $12.  The catalog also included continuity programs such as “a Year of
Orchids” for $450, which included a selection of orchids to be delivered the first week of every
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Calyx & Corolla
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month.  Continuity programs comprised a significant portion of Calyx & Corolla sales.  Most single
items ranged from $30 to $60.
Although Calyx & Corolla did a substantial everyday business, seasonality was pronounced.
Summer was slow and holiday spikes big.  (See Exhibit 7 for a graph of monthly sales for the year
ending June 30, 1990.)  Continuity programs were, however, less seasonal, since they were usually
gifts for the regular delivery of flowers over a number of months.  Calyx & Corolla and its growers
favored this business because it helped offset peaks and valleys.
Owades took an active role in developing the product line and the content of each catalog.
She worked closely with Ann Lee and with the growers to create new and exciting bouquets to reflect
changing tastes, seasonal variation, or to introduce new products.
Customers and Communication
If the catalog format offered Calyx & Corolla a leg up on the competition, the flowers
and arrangements pictured still had to look appealing, “like they belong in your home,” says
Owades, “or you would be proud to give them as gifts.”  Because flowers are “emotional,” her
presentation was all the more challenging.  “Poets throughout the ages have known that when
words don’t communicate, flowers do.”
Yet no matter how beautiful the photographs, Owades feared that page after page of
flowers and vases could get boring fast.  So in addition to the cost and color choices in each
selection’s accompanying copy, she hit on the strategy of weaving in some educational trivia
(“The curled _flower_ of the petite calla lily is actually a modified leaf”); consumer
information (“Protea stay fresh in water for up to two weeks; after that, they dry
beautifully”); and arrangement suggestions (“_Glads_ are especially striking when displayed
in a tall vase”).
—Working Woman Magazine, February 1991
Seventy percent of Calyx & Corolla’s revenues were derived directly from the catalog, while
20% were derived from corporate clients and promotional “tie-ins.”  The remaining 10% was from
outgoing telemarketing to previous flower recipients and existing customers.
The catalog was the main form of advertising.  Six catalogs were produced every year and
mailed out under eight to nine covers.  In fiscal 1991 one hundred thousand prior customers received
one catalog per month, which provided 60,000 orders.  Recipients of Calyx & Corolla flowers and
others who had called to inquire about Calyx & Corolla flowers, who cumulatively totaled 500,000,
received six catalogs each per year.  The balance of the 12,055,000 catalogs mailed in fiscal 1991 were
to 7,855,000 rented mailing-list names.  Response rates varied significantly.  Prior customer mailings
yielded about 5% to 10%, while recipient and rented mailing lists only yielded between 1% and 2%.
The recent rise in postal rates added materially to the expense of obtaining the attention of consumers
who already received an avalanche of catalogs from other retailers.
Ann Lee characterized active buyers as those who had purchased at least two times a year,
although she added that some purchased as many as 10 times a year.  Eighty five percent of these
customers were women, mostly ranging in age from 30 to 55.  Most worked and had substantial
disposable income.  Sophisticated information systems allowed Calyx & Corolla executives to analyze
and manipulate the extensive database of customers, recipients, and prospects, allowing them to
understand better their customers and to target their mailings more precisely.  The largest group of
potential buyers, however, were people who patronized florists or other retailers and were
unaccustomed to buying anything by mail order.
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Lee, in addition to her other responsibilities, marketed flowers to corporate clients who used
them for reception areas, conference rooms, incentive programs, and customer gift programs.  But by
far the greatest proportion of corporate flower purchases were for promotional tie-ins, a segment of
the business which management considered a major opportunity for incremental sales, and, more
important, new mail order customers.
Promotions and incentives, corporate gifts, joint marketing approaches with
specific partners and consumer brands—all these offer exciting potential both for
revenues, for generating new customers, and for expanding awareness of our service
and our product.
—Excerpt from Owades speech
Lee maintained a frequently referred-to list of objectives for proposed promotional programs.
Each program had to (1) coincide with available resources, (2) fit with the Calyx & Corolla image, (3)
open doors for new business opportunities, (4) be profitable, (5) not aggravate seasonal peaks, and (6)
permit Calyx & Corolla to do a good job.  Several such programs are described below.
Bloomingdale’s used Calyx & Corolla flowers to help promote a selection of vases on
Mother’s Day.  Advertised at Bloomingdale’s expense through a full-page advertisement in the New
Yorker (Exhibit 8) and other upscale regional publications, five dendrobium orchids were offered free
with the purchase of any vase.  A point-of-sale display greeted customers at each store, featuring a
variety of vases complete with flowers.  The vases were priced between $150 and $1,000.  When
purchasing a vase, the customer designated the recipient of the bouquet.  Calyx & Corolla provided
the flowers, which normally sold in the catalog for $34, at a discount to Bloomingdale’s.
The program was a success.  Lee believed that it opened the door for similar opportunities
with other upscale retailers.
Another tie-in program was with SmithKline Beecham (SB) for a Mother’s Day promotion of
Contac 12-hour caplets for allergy relief.  This program comprised four stages: (1) flowers were sent
to SB retailers to spruce up stores and to promote Contac; (2) $10 coupons usable for discounts on
purchase of Calyx & Corolla flowers were offered to store employees to generate excitement; (3)
newspaper freestanding insert coupons were placed (see Exhibit 9) to gain exposure to 50 million
readers, with coupons for $5 off an order to Calyx & Corolla without a Contac purchase and two
coupons at $10 each for discounts on two different flower orders with proof of purchase of Contac  (a
special 800 number with a telemarketing agency was used for Calyx & Corolla orders), and (4) at its
conclusion, SB purchased and sent bouquets to all distributors and key store personnel for
contributing to the program’s success.
The program was very profitable.  Three out of four stages performed well, while sales from
the consumer stage missed plan.  The experience of creating and implementing this complex multi-
level program was a valuable education and created a foundation for future promotions of this type.
Discussions were currently under way with other consumer product manufacturers for future
programs.  Other types of programs were being considered as well.  A major mail order retailer was
committed to including several pages of a forthcoming catalog to a selection of Calyx & Corolla
flowers.  Also under consideration was what was termed an “affinity group promotion.”  This
program would offer discounts on flowers to doctors who were members of the Voluntary Hospitals
of America (VHA), a trade organization that, among other services, arranged for discounts to doctors
on the purchase of office and other supplies.  Lee had, however, not yet committed Calyx & Corolla to
these programs.
The last, and considered one of the most important, communications efforts was an active
public relations initiative which Owades herself led.  Considerable positive press, including articles in
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Calyx & Corolla
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Time magazine, the Wall Street Journal, and the International Herald Tribune, had been generated, which
had resulted in both new catalog and corporate customers (see Exhibit 10 for a partial list of media
attention to Calyx & Corolla and copies of selected articles).
Calyx & Corolla’s Ultimate Positioning
It was in this context that Owades and other members of the top management team were
assessing their options for growing the business.  One option was for Calyx & Corolla to capture more
gift business from traditional florists and possibly even increase total flower sales.  The idea would be
to sell also to customers who ordinarily did not buy much of anything by mail order.
One experiment under consideration was a test advertising campaign prior to at least one
major holiday in the Minneapolis/St. Paul market.  The following table summarizes demographic
information.
Table A
Minneapolis/St. Paul TV Market Area—Estimates
Population
3,610,700
Households
1,352,400
Age
Over 50
873,100
35-49
737,400
25-34
655,600
Less than 25
1,344,600
After-tax disposable income
Median
$30,800
$10-20,000
17.9%
20-35
26.9%
35-40
21.9%
50+
21.3%
Source: 
Reprinted by permission of Sales Marketing Management.
Copyright:  Survey of Buying Power Part II, November 13, 1989
This campaign was planned, if it lasted 12 months, to at least double the annual FTD
advertising budget of 21¢ per household ($24 million ÷ 114,000,000 households in the United States).
The second year would taper to one and a half times the FTD budget and remain at parity thereafter.
For the test to be successful, Calyx & Corolla management thought that the cost to acquire a new
customer using this medium should not exceed the cost of current methods.  Television advertising
would emphasize the freshness and longevity of Calyx & Corolla flowers, with an 800 number to call
to order either a specifically promoted floral arrangement or the catalog.  Newspaper and magazine
advertisements would consist of inserting “mini-catalogs” into Sunday newspaper supplements and
run-of-press (ROP) promotions for a $34 seasonal bouquet.  Printing costs for the mini-catalogs would
cost about 9¢ each.  What sort of response, Calyx & Corolla executives questioned, would they have
to generate in order to justify expanding the advertising program beyond the test area?  What would
be the value of the names generated?  Should Calyx & Corolla time the campaign to coincide with a
holiday and confront FTD head on, or choose a less-competitive season and promote everyday floral
purchases?
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592-035
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In the opinion of Ruth Owades and the other members of the top management team, Calyx &
Corolla was an exceptionally promising, yet still only partly proven, start-up venture.  Given the
skills, values, and aspirations of the entrepreneurs and the investors, and the externalities which
confronted them, what changes in their current strategy and positioning should Calyx & Corolla
undertake?  What might be the financial and organizational implications of a much more aggressive
growth strategy, especially if they had to approach external financial markets to fund the advertising
program under consideration?
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Calyx & Corolla
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Exhibit 1
Five-Year Summary P&L Statements and Projections for the Fiscal Years Ending on
January 31, of the Succeeding Year (in thousands of dollars)
a
Actual FYI
1988-1989
Actual FY2
1989-1990
Actual FY3
1990-1991
Projected FY4
1991-1992
Projected FY5
1992-1993
Sales
$  756
$4,018
$10,259
$15,163
$24,431
Cost of goods sold
189
972
2,452
3,487
5,496
Gross margin
567
3,046
7,807
11,676
18,935
Sales and marketing
b
1,223
4,466
7,021
10,104
15,375
General and
administrative
c
374
752
1,213
1,459
2,263
Net profit (loss)
(1,030)
(2,172)
(   427)
113
1,297
aNumbers have been disguised
bSales and Marketing includes catalog production and mailing, list rental, and freight out (at approximately $9 per order).  Order
processing and fulfillment, also included, averaged $5 per order in 1990.
cGeneral and Administrative includes management salaries, depreciation, rent, and other miscellaneous expenses.
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592-035
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14
Exhibit 2
Letters to Calyx & Corolla from Customers
Dear Recipient,
I am 13 years old.  I found your catalog on the table and thought it would be a great idea for
Mother’s Day since I will be on a camping trip.
Sincerely,
P.S.  Forty dollars cash is enclosed as payment.  Please accept this.
*  *  *  *  *
Dear Calyx & Corolla:
In the beginning of December, I ordered a box of enchantment lilies for my parents to be
delivered on December 22nd, just in time for the holidays.
The flowers were in bud stage when they arrived, they opened within a few days, and lasted
for almost two weeks.
Your sales help was top notch on the phone when I placed my order, the flowers were
delivered on time, in perfect condition, exactly as advertised.  Congratulations on your terrific service
and product.  I will tell all my friends, and definitely be a repeat customer.
*  *  *  *  *
Dear Ms. Owades:
Since I’d long been given to understand that my mother-in-law prefers flowers to remain in
gardens, I purposely avoided sending cut bouquets.  But I decided to take a chance when your spring
catalog arrived and ordered the Pink-Fringed Carnations which she said looked almost like silk and,
more to the point, lasted several weeks—much to her delight and astonishment.  [She did mention
that her housekeeper changed the water and snipped the ends daily).  And these were sent from your
shop to Illinois!
I’m keeping your catalog for future surprises for her.  It’s sooo nice to know that for once
advertising lives up to its name, as your brochure and service attest!
Thank you again.
*  *  *  *  *
(continued on next page)
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Calyx & Corolla
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15
Exhibit 2
(continued)
Dear Calyx & Corolla:
I wish to compliment you on your fine packaging, of my lovely roses, that I received this
morning.
I am saving your address, so that I can use it as the occasion arises that I must send flowers.
They “made my day.”  They arrived on my 86th birthday and 66th wedding anniversary.
*  *  *  *  *
Dear Ms. Owades:
I live in a remote town in Northern Vermont—population 1,200.  We don’t even have house
numbers on our streets.  When I saw the Federal Express truck drive up yesterday, my neighbors and
I all came out to see who it was for.
Well, it was for me!  The driver followed the directions perfectly:  Go “Past the Church in the
Square, second street on the right, red brick house, third from the end.”  We’d never seen a Federal
Express truck on our street before—what excitement!
I certainly hope we see him again, the orchids are gorgeous!
*  *  *  *  *
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592-035
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Exhibit 3
1987 Florists’ Transworld Delivery Operating Survey (all responding U.S. shops)
Typical
Middle Range
Income Statement ($ of total revenues)
Net sales from inventory
93.7%
90.3
-
99.8%
Total other operating revenues
6.3
0.2
-
9.5
Total revenues
100.0%
100.0
-
100.0
Cost of goods sold
39.4
33.3
-
45.1
Total gross profit on operations
60.6
54.9
-
66.6
Operating expenses:
Salaries and wages—owners, partners and officers
14.6
6.6
-
22.5
Other salaries, wages, bonuses and commissions
(excluding owners, partners and officers)
10.6
0.0
-
19.2
Occupancy (rent, utilities, maintenance, etc.)
7.0
4.0
-
9.4
Delivery expense
2.6
1.4
-
3.5
Telephone and transmission
1.8
1.0
-
2.2
Advertising and promotion
2.8
1.4
-
3.8
All wire service fees, dues, commissions
and expenses
4.2
0.9
-
5.8
General and administrative and other
11.1
6.1
-
14.9
Total operating expense
54.6
47.3
-
61.9
Operating profit
6.0
1.4
-
10.5
Nonoperating income/expense
-0.5
-0.7
-
0.0
Profit before tax
5.5
1.3
-
9.8
Profit after tax
4.6
1.2
-
7.6
Order and Delivery Charge Data
Average order size
a
$25.00
$20.00
-
28.00
Percentage of shops charging for delivery
90.9%
Average delivery charge (if charged separately)
$  2.25
$  2.00
-
3.00
Delivery charge revenues as a % of total
revenues (if charged separately)
3.2%
2.1
-
4.4%
Source: FTD Retail Florist Operating Survey, 1987.  (The last such survey was in 1987.)
aAverage order size reflects all orders.  Incoming and outgoing wire (FTD) orders represented 40% of member shop holiday orders
and 33% of nonholiday orders.  The average order for FTD orders was $39 including transmission and delivery service fees.  By
1990, the average of all orders had grown to over $32.
(continued on next page)
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Calyx & Corolla
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Exhibit 3
(continued)
January
Source: 1990 FTD Member Census
U.S. FTD Member Shops
1989 Typical Revenues by Month
5.7%
11.0%
7.5%
8.6%
14.0%
7.0%
5.4%
5.6%
6.0%
6.7%
8.1%
14.3%
February
March
April
May
June
July
August
September
October
November
December
Source: 1990/91 FTD Flower Business Fact Book
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Exhibit 3
(continued)
January
Source: 1990 FTD Member Census
U.S. FTD Member Shops
Average Advertising Spending by Month
U.S. FTD Member Shops
Average Percentage Advertising Expenditures By Medium
5.9%
10.4%
7.1%
8.7%
12.5%
6.6%
5.4%
5.6%
6.0%
7.0%
10.2%
14.5%
February
March
April
May
June
July
August
September
October
November
December
Source: 1990 & 1985 FTD Member Census
Yellow Pages
Newspaper
Radio
Product Donations
Direct Mail
Calendars
School Newspaper
Church Bulletin
Television
Fliers/Handouts
Pens & Giveaways
Outdoor Billboard
Other
Total Advertising
35%
22
10
8
8
3
2
2
2
2
1
1
4
100%
%
%
%
%
%
%
%
%
%
%
%
%
32%
32
13
–
7
5
–
–
2
–
–
1
8
100%
%
%
%
%
%
%
%
%
%
%
%
%
Medium
All Shops
1990
All Shops
1985
Source: 1990/91 FTD Flower Business Fact Book
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Calyx & Corolla 
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19 
Exhibit 4    Sample Advertisements of FTD 
 
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592-035
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Exhibit 4
(continued)
TELEVISION
VIDEO
AUDIO
OPEN ON ANIMATED SUN RISING ON THE
HORIZON. THE SUN IS FROWNING AND HAS
A THERMOMETER IN ITS MOUTH. THE
CHICKEN SOUP BOWL BOUQUET APPEARS.
 SUPER: CHICKEN SOUP BOWL BOUQUET.
MUSIC: (UP)
SINGERS: Send a hug from far away.
THE SUN SMILES AS PUFFY CLOUDS FORM
AND IT BEGINS RAINING. THE PICK-ME-UP
BOUQUET APPEARS. SUPER: PICK-ME-UP
BOUQUET.
Brighten up a rainy day.
Flowers say what words can’t say.
CLOUDS CHANGE INTO A STORK CARRYING
 BABY. THE BUNDLE OF JOY BOUQUET
APPEARS. SUPER: BUNDLE OF JOY
BOUQUET
It’s as easy as FTD
THE ANIMATION BREAKS UP FORMING THE
TICKLER AS THE TICKLER BOUQUET
APPEARS. SUPER: TICKLER BOUQUET
MERLIN: Whatever you need to say…
A BALLOON AND CONFETTI MOVE AROUND
MERLIN AS HE HOLDS THE BIRTHDAY
PARTY BOUQUET.
Your FTD Florist can send the right bouquet. And
remember…
THE ANIMATED LOGO SWIRLS PAST MERLIN
AND ONTO THE SCREEN AS THE THEME “IT’S
AS EASY AS FTD APPEARS.”
SINGERS: It’s as easy a FTD.
RADIO
SINGER:
SEND A HUG FROM FAR AWAY
BRIGHTEN UP A RAINY DAY
FLOWERS CAN SAY WHAT WORDS CAN’T SAY
IT’S AS EASY AS FTD
(MUSIC GOES DOWN UNDER)
MERLIN:
Now your FTD Florist has more ways than ever to show you care. Introducing the new
FTD Affecton Collection. Show your love with the Big Hig Bouquet. Show your
appreciation with yhe Thanks a Bunch Bouquet. Or say way to go with the Congrats to
You Bouquet … It’s never been easier to expres all your affection. Just ask for these
or any of the other bouquets from the new FTD Affection Collection.
(MUSIC BACK UP)
SINGER:
IT’S AS EASY AS FTD
AS THOUGHTFUL AS A GIFT CAN BE
FROM ME TO YOU
FROM YOU TO ME
IT’S AS EASY AS FTD
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Calyx & Corolla
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Exhibit 5
1990 North American FTD Monthly Advertising Media Expenditures
Jan
Feb
Mar
Apr
May
Jun
0.0
0.0
0.0
0.0
0.4
14.0
26.0
15.7
20.7
Percent (%)
13.0
8.8
1.4
Jul
Aug
Sep
Oct
Nov
Dec
Source: D’Arcy, Masius, Benton & Bowles
1990 North American  FTD
Monthly Advertising Media Expenditures
Source: 1990/91 FTD Flower Business Fact Book
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592-035 
Calyx & Corolla 
22 
Exhibit 6    Selected Pages from Catalogs 
 
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Calyx & Corolla 
592-035 
23 
Exhibit 6    (continued) 
 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


592-035 
Calyx & Corolla 
24 
Exhibit 6    (continued) 
 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


Calyx & Corolla 
592-035 
25 
Exhibit 6    (continued) 
 
 
This document is authorized for use only by Zhuojun Yi in BUSN 37000 03,02,01 (Autumn 2023) Marketing Strategy at University of Chicago, 2024.


592-035
Calyx & Corolla
Exhibit 7
Graph of Calyx & Corolla Monthly Sales for the Year Ending June 30, 1990
$1,400
$1,200
$1,000
$800
Monthly Sales in
thousands
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
$600
$400
$200
$0
26
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Calyx & Corolla
592-035
27
 Exhibit 8
Bloomingdale’s Advertisement in the New Yorker
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592-035 
Calyx & Corolla 
28 
Exhibit 9    Newspaper Freestanding Insert Coupons of SmithKline Beecham 
 
 
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Calyx & Corolla
592-035
29
Exhibit 10
Partial List of Media Attention to Calyx & Corolla
“A Scripps Education Goes to Work”
Scripps College Bulletin, Summer 1989
“Hot People”
Metropolitan Home, February 1990
“Fortune People—A Harvard Study
Fortune, November 5, 1990
“Hearts and Flowers:  The Nosegay Express”
Wall Street Journal, February 14, 1991
“Just Picked Flowers:  A Fresh Idea Pays”
International Herald Tribune, February 9-10, 1991
“The Truth About Ruth”
Entrepreneurial Woman, July/August 1990
“Stamping Out Mail-Order Misbeliefs”
Los Angeles Times, May 4, 1990
“Bouquet of the Month”
Detroit Free Press, July 1, 1990
“Floral Catalog Blooms with Exotic, Hard-to-
Find Greenery”
Rocky Mountain News, January 25, 1990
“Of Wreaths and Flowers”
San Francisco Chronicle, November 29, 1989
“Flower Power”
Business Week, February 19, 1990
“Flowers, Fresh from the Growers to You”
Gannett Westchester Newspapers, August 24, 1989
“What’s Hot:  Flowers, Fresh and Fast”
San Jose Mercury News, August 29, 1989
“Fresh Flowers by Catalog”
San Francisco Chronicle, October 18, 1989
“Catalog Bazaar”
Harper’s Bazaar, June 1991
“Business is Blooming”
Catalog Age, January 1991
“News Break”
ELLE Magazine, February 1991
“Profits in Bloom”
TIME Magazine, February 18, 1991
“Growing a New Market Niche”
Working Woman, February 1991
Television interview
Business Marketplace, ABC TV
San Francisco, California
September 15, 1991
Television interview
The Morning Exchange, ABC TV
Cleveland, Ohio
October 9, 1991
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592-035
Calyx & Corolla
30
Exhibit 10
(continued) - Wall Street Journal article, February 14, 1991.
Hearts and Flowers:  The Nosegay Express
by Patti Hagan
Here we are, V-Day 1991, and a flowery mail-order
catalog has saved me from the lists of Valentine’s procrastinators.
Otherwise, I might have made my valentine flower arrangements
on the subway yesterday, humored by a supposed New York Post
story blown up on a poster.  “300 LB. QUEENS MAN MOVED BY
800 FLOWERS,” and bylined Iris Inavase.  “A 300 lb. Queens man,
52, was reduced to tears today by 800 Flowers,” Ms. Inavase
wrote.  “To look at him, you would have thought it would take a
professional moving company to budge him.  But all it took was a
$29.95 floral arrangement sent by 1-800-Flowers, the 24-hour-
anytime-to-anyone floral delivery service.”  Amusing as I found
the teary-eyed Ferdinand, hankie in one hand, 800 Flowers
nosegay in the other, I’d long since dialed another floral 800 (1-
800-877-7836) to reach Calyx & Corolla, in California.
A few months ago a friend had slipped me the catalog,
figuring I’d appreciate the botanical name and the upscale
difference.  Calyx & Corolla does not ride the subway; C&C uses
no weepy fat men.  Calyx & Corolla instead runs 32 pages of
flower pictures, only, on the theory that flowers best sell flowers,
quite unassisted by kittens, Dalmatians, golden retrievers, Snoopy
or Snow White and the Seven Dwarfs.  Calyx & Corolla relies on
flowers whose ancient good design makes them virtually fashion-
proof:  roses, daffodils, tulips, lilies ($395 for a year of lilies),
orchids ($450 a year), protea.  (“Botanists tell us that protea are
one of the oldest flowers on the earth,” the C&C care card informs.
“Known to exist in prehistoric times, they survived the trials of
evolution far better than the dinosaur.”)
Something about the catalog reminded me of Eden-
Gardener’s Eden, the upscale gardening catalog-and sure enough
Calyx & Corolla, which now operates at the cutting edge of the
cut-flower business, is the latest eureka of floral entrepreneuse
Ruth Owades, the Harvard MBA.  Her alma mater immortalized
her in a widely taught 1982 Business School case study of her
travails, in 1978, in founding Gardener’s Eden (one Jeremiah told
her:  “Gardening is a blue-collar hobby, it’ll never fly.  There is no
way in the world that people will buy things for their garden.  If
this was such a good idea, dearie, some man would have already
done it.”).
In 1982 she sold Boston-based Gardener’s Eden to
Williams-Sonoma for a cool million but stayed on for five years to
manage G. Eden out West.  By 1987, she had noticed an empty
horticultural niche in the cut-flower industry.  Her idea was to
make possible a fast, fresh, FedExed flower valentine any time of
the year by brokering a computer marriage of convenience
between two industries that had heretofore never even been
engaged:  mail-order catalogs and fresh cut flowers.  Though her
research told her the U.S. cut-flower industry had been growing
about 10% a year since the mid-80s, she found “an industry still
stuck in the ‘50s.”
She persuaded 25 flower growers to sign on to her
computer network.  She got them to install computers, modems
for talking to the C&C mainframe in San Francisco, fax machines.
And she taught them to cut flowers to order and pack them with
aesthetic TLC.  Roses would be dethorned by hand and travel with
“ice pillows under their heads.”  Wood excelsior would cushion
their every blow.  “What we go through with gerberas is pretty
amazing,” Ms. Owades admits.  “First of all they are capped with
net caps in the fields where they’re grown.  Then because their
stems tend to be weak, the grower puts [each of] them in thick
straws.”
Then, to deliver the critical Freshness Dividend, Ms.
Owades prevailed on Federal Express to add Calyx & Corolla’s
natural brown boxes to its “brown box business,” and fly the fresh
cut flowers direct from grower to customer, guaranteeing arrival
on the exact day requested.  FedEx was the crucial link in Ms.
Owades’s new floral-delivery short-circuit service.  In her catalog
she explains that Calyx & Corolla “fresh” means “five to 10 days
fresher than any other flowers you can buy!”  Her research had
revealed that “most flowers that we buy at a florist or certainly at
a Korean grocer are at least seven to 10 days old.”  For her
business, “I knew that the benefit had to be FRESHNESS.  We cut
to order.  You receive a flower that was cut 24 to 48 hours
previously.  You get the seven to 10 days in your vase, instead of
on a truck or in a distributor’s warehouse.
Though this is Calyx & Corolla’s biggest day of the
year, Americans are floral underconsumers.  Ms. Owades believes
she’s still battling the Puritan ethic.  “It’s not only that we’re
puritanical and feel that we don’t deserve flowers on a regular
basis, I also think that we are quite intimidated by flowers.”
However, this may be changing thanks to the puritanical
American capacity for guilt.  A spring 1990 Gallup Poll,
“Americans on Gift Giving,” found that for 51% of Americans
“when feeling guilty, flowers and plants are the likely gift.”  Ms.
Owades says of subscribers to Calyx & Corolla’s flowers by the
year, half-year and quarter:  “That’s for someone who either loves
flowers or else it’s a gift from someone who feels really guilty
about what he did.” And in fact C&C offers a sort of rescue service
for the guilty, volunteering on the order form “if you forget or
have waited until the last minute...call us, we will do whatever we
can to rescue you.”  And then the Calyx & Corolla Plant Doctor is
on call to help survivors baby their plants and flowers.  “People
call back and say “it works!  My gardenia is thriving!” Ms.
Owades notes.  “They’re so happy they want to send him things.
They’re all trying to bake him chocolate cakes.  We’ve had to limit
it.  They can send recipes.”  Others simply write:  “If only your
catalog had existed five years ago, my wife wouldn’t have left
me!”  They send color snapshots of week-old bouquets still fresh.
“I’m writing to thank you for giving me ‘points’ with my mother-
in-law,” one California woman wrote.  “I’d long been given to
understand that she prefers flowers to remain in gardens, I
purposely avoided sending out bouquets.”  But the Pink Fringed
Carnations bouquet changed everything.
Last Feb. 14 an irate Philadelphian wrote in the
accusative:  “Dear Calyx & Corolla:  You’ve ruined my love life!
How could you not have shipped the Valentine’s Day tulips to my
girlfriend?!”  An apology followed two days later:  “I guess ‘polite
thank yous’ are no longer a way of life.  But at least I am no longer
in the doghouse.”
In January Ms. Owades sent her flower catalog to war,
addressing a special message to American servicemen and women
in the Persian Gulf:  “As Valentine’s Day approaches, we would
like to help you remember those that you love back home.
Although the distance to your loved ones may be great, you can
surprise them by sending them fresh, beautiful flowers this
Valentine’s Day.”  Wishing them all home soon, she asked,
“Please identify yourself as a part of Operation Desert Storm in
order to receive your discount.”  20%.
On Jan. 16, the day the U.S. began bombing, Calyx &
Corolla received a fax from a soldier on duty in Saudia Arabia.  He
requested that “Love” cards and bouquets be dispatched to five
valentines in five different towns in three states:  Lori, Melissa,
Dee, Beth and Georgeanne.  Once again Calyx & Corolla gave new
meaning to the word fresh
This article first appeared in The Wall Street Journal of February 14, 1991.  It is reprinted with the permission of Patti Hagan, WSJ
Gardening Columnist..
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Calyx & Corolla
592-035
31
Exhibit 10
(continued) - International Herald Tribune article, Business/Finance, Saturday-Sunday,
February 9-10, 1991
Just-Picked Flowers:  A Fresh Idea Pays
by Lawrence Malkin
NEW YORK - Recession may be deepening and war fears
rising, but the animal spirits in some American businesses
show no signs of wilting yet.  Think flowers.  Think
phone or fax to order them, picked the same day by their
growers.  Then think Federal Express to deliver them
overnight.
Two years ago Ruth M. Owades assembled all
these disparate elements and created a brand new
business that is definitely greater than the sum of its parts.
Calyx & Corolla, as she named her company
with floral terminology, grossed $10 million last year and
is growing by about 10 percent a month against the
slumping U.S. business tide.
A staff replying to a toll-free number in San
Francisco takes an average of about 25,000 orders a
month, collates them by computer and then forwards
them on-line to computers at the company’s contract
growers in California and Florida.
The flowers are packed in specially insulated
boxes and accompanied by the sender’s greetings, done in
calligraphy.  At peak times such as Valentine’s Day and
Mother’s Day Federal Express has to send 18-wheel
trucks to move the orders from flower farm to airport.
Current specials range from 24 miniature
carnations for $32.50 to 25 daffodils for $47, to a dozen
long-stemmed roses for $68.  Prices include delivery of
flowers that are 24 hours old instead of several days old -
as they would be after going through middlemen in the
retail delivery chain.
The catalogue also offers tropical flowers,
special wreaths, bonsai trees, and even monthly
subscriptions for the business person too busy to
remember.  The trade publication Catalog Age rates Ms.
Owades one of the best in the mail-order business.
Calyx & Corolla has sent flowers to celebrities
including Henry Kissinger and Ivana Trump, and one of
Rose Kennedy’s great grandchildren orders one hundred
flowers from the company for Mrs. Kennedy’s centenary.
Never one to miss a market opportunity, Ms.
Owades also shipped catalogs to military personnel in
Saudi Arabia offering them a 20 percent discount.  A
_____________________________________
The flowers are packed in insulated boxes, with the
sender’s greetings in calligraphy.  At peak times, 18-wheel
trucks move the flowers from farm to airport.
_____________________________
score of orders from troops in Operation Desert Storm
have already been dispatched to loved ones at home.
Calyx & Corolla and Federal Express are
waiting at least until more customs barriers come down in
1992 to consider deliveries within Europe, where the
logistics would be even more complex than they were in
the United States.
Ms. Owades, 44, had already made her first
million creating a mail-order firm selling high-priced
garden 
equipment 
to 
upmarket 
buyers; 
the
imponderables of starting up Gardener’s Eden is now a
case study at her alma mater, Harvard Business School.
She sold out to a big catalog firm and moved to
California to run the business for the new owners.  Her
husband, Joseph Owades, who creates special beer recipes
for large companies, moved from Boston with her, and
she started looking for another start-up as ominous signs
appeared in the U.S. economy.  “I discovered that
chocolates, ice cream, beer, and flowers are relatively
recession-proof,” Ms. Owades said.
“People send flowers in recession to apologize
for the vacation they have to cancel,” she said.  Corporate
clients have also boosted their orders to make up for
canceling company parties and, Ms. Owades said, to help
lift the war blues in the office.
Five years ago, not enough of the elements
would have been in place with enough sophistication to
make Calyx & Corolla work.  She needed absolutely
reliable airfreight service, an inexpensive computer
network, special packaging such as iced bud-holders for
roses, and, she says, “consumer confidence in the
reliability of mail order.”
Most of all, she said, the industry had to have
confidence that it could improve on its traditional
flowers-by-wire delivery system.
The single most important link in the chain was
Federal Express, which had to help design the packaging,
devise a special rate structure and install a computer
tracking system at each of the contract growers.
Dick Metzler, the airfreight company’s U.S.
marketing chief, acknowledges that he was reluctant at
first to gamble with an untried business to make the kinds
of adjustments that Federal Express provides its regular
clients.
“But we rolled the dice with Ruth, and we’re
not sorry,” he said.  “She has carved out a very clever
niche for herself, and she’s going to own it for a long time
to come.”
Walter Salmon, professor of retailing at
Harvard Business School, says Calyx & Corolla is a
perfect example of how to look at an industry as a whole
and develop a new way of selling.
In fact, he’s thinking of making Ms. Owades’s
second business start-up into another case study.
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