Ceres Gardening Company Case Study
1. How has the company grown? What is its basic strategy + how has it evolved? What have been the key factors in the company's growth?
The growth of the company has been fueled by the market demand growth in organic products. Ceres increased their revenues by over 75% in just five years, while growing profits by over 25% (based on Exhibits 2, 3 & 4).
Ceres’s basic strategy started with its founder, Jonathan Wydown, to promote sustainable organic gardens and landscapes to environmentally conscious consumers. Mr. Wydown has been a proponent of soil preservation, biodiversity, and natural fertilizers and pest control. Mr. Wydown was ...view middle of the document...
To keep up with the increased demand, Ceres developed a network of small, independent organic farms, offering them a commitment to purchase goods in exchange for an exclusive supplier relationship. These further strengthened Ceres’ production capability.
* Distribution Channel – In the early years, Ceres operated primarily as a mail-order catalog company. This was their main distribution channel. The operation was ran well and valued for its quality, reliability, and hands-on customer service. Moreover, Ceres provided a free bimonthly company newsletter, which included gardening tips, introduced new products, and created a sense of community among the expanding customer base. This alternative marketing expanded Ceres’ channel from one time purchase to future incremental (post-sale) revenues. Eventually, Ceres expanded its channels to include retail channels, and direct sale through a sales force model.
* GetCeres™ Program – enabled the average nursery or garden center to stock a sufficient inventory of Ceres’ products to meet the seasonal demands of the customer. If a retailer ran out of seasonal products, the customer would probably not return later, thus a potential loss of sale. Essentially the program meets the challenge of having the plenty of stock of the right product in the store at the right time based on consumer attitudes, behaviors, and preferences. The program also provided incentives to retail storeowners by offering deep discounts to carry inventory and extended payment plans.
3.1. How is Ceres’ financial health? Which specific items in the supplemental financial statements + which ratios might you calculate/research to help you assess its financial health?
The financial health of Ceres is excellent and continues to show a positive trend from 2002 to 2006. (Please refer to Table 1)
* Current Ratio shows Ceres’ ability to pay short-term obligations. The current ratio indicates that the company would be able to cover its liabilities in 2002 2 times over.
* Quick Ratio measures Ceres’ ability to meet its short-term obligations with assets excluding inventory. The quick ratio indicates that Ceres would be able to cover liabilities 1.6 times over.
* Debt Equity shows Ceres’ financial leverage and its aggressive posture in financing its growth with debt. The company could potentially generate more earnings than it would have without this outside financing. This indicates that even with Ceres’ expansion of distribution channels, extension of payment terms, and the creation of a direct sales force, Ceres was able to manage to stay below 1 with a mean average of .74.
* Inventory Turnover shows an efficient turnover of inventory. Ceres does not hold inventory for long periods of time, which can incur additional costs by having assets sit without revenue generation. It shows Ceres’ ability to manage inventory in a seasonal cycle and further indicates their...