Ceres Case Study

Ceres Gardening Company

Case Answers

(Note: The attached Microsoft Excel spreadsheet is a derived statement of cash flows, which underscores the cash effect of rapid growth in accounts receivable and inventories. You will need to make assumptions about performance beyond 2006 in order to analyze the likely challenges with cash flow and debt covenants.)

1) How has Ceres built its business? What decisions have been behind its success?

Ceres has built its business initially on mail order catalogs. After growing slowley using mail order catalogs they decided that the industry research suggested a greater move into organic seeds and farming and decided to pursue a bigger presence in the retail space. The decisions to hire a new VP of marketing were one of the major drivers of the new found growing retail businesses. She decided to hire more independent sales reps and implement the Get Ceres program that has seen a substantial increase in revenues year over a year. Also, since she came on board the retail business now makes up 80 % of the company’s revenues.

2) What is Ceres’s marketing strategy (include the key elements)? What role has credit policy played in Ceres’s growth?

Ceres’s marketing strategy is to aggressively seek a bigger presence in retail stores and have retailers have a large supply of inventory at all times so as to no miss out on the casual seed and seedling shopper. Ceres has been able to aggressively sek new reatailers and convince them to expend a lot of capital on Ceres products by offering them 15% discounts if they purchased a larger amount of inventory than last season for existing cutomers. For new customers they offered them the 15% discount on a qualified order. The key to increasing the inventories of their retail customers was by offering them the discounts and allowing the customers 120 days to pay their bills. The revolving credit facility was what allowed the growth of Ceres and the Get Ceres program. By...