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Marketing Strategy of Harry & David

Marketing Strategy of Harry & David

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Anjali Khurana
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Marketing Strategy of Harry & David - December 13th, 2010

Harry & David is an American company that was founded in 1910, when Seattle hotelier Samuel Rosenberg purchased 240 acres (1 km) of pear orchards in Medford, Oregon.[1] His sons, Harry and David, took the company over upon his death in 1914.[1] The company is best known for beginning the business of mail order direct marketing of fruit, especially through its "Fruit-of-the-Month Club". Their "Harry & David" brand specializes in high-end gift baskets and holiday gift towers.

Harry and David added Jackson & Perkins, a mail-order rose marketer, to its brands in 1966. However, Jackson and Perkins was sold to an outside group of investors for $49 million in 2007.[2]

In 2008, Harry and David announced its acquisition of Wolferman's[3] and Cushman's.[4]


Statistics:
Wholly Owned Subsidiary of Shaklee Corporation
Incorporated: 1972
Employees:1,600
Sales: $368.9 million (1999)
NAIC: 45411Electronic Shopping and Mail-Order Houses; 111339 Other Non-Citrus Fruit Farming; 111422 Floriculture Production; 111421 Nursery and Tree Production; 44411 Nursery and Garden Center-Retail


Company Perspectives:

To be as successful as we have--for as long as we have--a company has to be based on some pretty sound, basic rules: Start with the world's finest, freshest ingredients. From fruit to nuts and everything in between, don't cut corners and don't make compromises, because just when you think no one will notice the difference, someone will. Pack each gift with pride and personal attention to detail. In short, you need to be a stickler for perfection, every step of the way. Treat the customer the way you'd want to be treated. The people who answer our phones are a helpful lot--friendly, informative, never in a hurry. Guarantee satisfaction 100 percent. Not just the condition of the package. Not just on-time arrival. Our guarantee goes one step further to cover the unconditional satisfaction of everyone involved. If the giver and the receiver aren't delighted, we'll make it right with either a replacement gift or a full refund--whichever you think best. No delays. No questions asked.


Key Dates:

1910: Samuel Rosenberg purchases Bear Creek Orchards.
1916: Sons Harry and David (who eventually adopt the surname Holmes to avoid anti-Semitism) take over the family business.
1934: The company begins selling pears by mail.
1936: The brothers debut Harry and David's Fruit-of-the Month Club.
1939: Jackson & Perkins becomes the nation's first mail-order rose nursery.
1950: David Holmes dies.
1959: Harry Holmes dies; David Holmes, Jr., assumes leadership of the company.
1966: Bear Creek Orchards acquires Jackson & Perkins.
1968: John Holmes heads the family business.
1972: The company forms Bear Creek Corporation.
1976: Bear Creek Corporation goes public.
1986: Shaklee Corporation acquires Bear Creek.
1988: Jackson & Perkins merges with Armstrong Roses and Bear Creek Gardens is born; William B. Williams becomes CEO of the company.
1989: Yamanouchi Pharmaceutical Co., Ltd. acquires Shaklee Corporation, including Bear Creek; Bear Creek acquires Orchids Only, Inc.
1991: Harry and David opens its first outlet store in Oregon.
1992: Harry and David debuts its stores division.
1993: Bear Creek Corporation founds Northwest Express.
1996: Company begins online marketing.


Company History:

Bear Creek Corporation is one of the nation's leading direct-mail marketers with facilities in Oregon's Rogue River valley; Wasco and Somis, California; and Hebron, Ohio. The company includes Harry and David, a direct marketer of fruit and gift foods; the Harry and David Stores division; Jackson & Perkins, a mail-order supplier of roses and other plants; Bear Creek Gardens, a nursery and wholesale distributor of roses and other plants, marketing products under the Jackson & Perkins, Armstrong Rose, and Heritage labels; and Northwest Express, a products lifestyle mail-order business focusing on the styles and trends of the Pacific Northwest. The company owns nearly 2,000 acres of land throughout the fertile Rogue River valley, where Harry and David Rosenberg first tended their peach and pear orchards, and rose growing fields in the San Joaquin valley.

Bear Creek Orchards: 1910s

The story of family-run Bear Creek Corporation traces its roots back to Sam Rosenberg, a prosperous clothier and hotel owner, who built the luxury Seattle Hotel Sorrento in Seattle in the early 1900s and traded it in 1910 for 240 acres of pear trees in southern Oregon's Rogue River valley. The orchard cost $300,000; the pears were Doyenne du Comice, a thin-skinned, easily bruised fruit hybridized in France in the 1700s and renowned for its fine texture and flavor. The Rogue River valley, with its rich volcanic soils and sunny microclimate free of frost, proved better suited to the Comice pear than its birthplace in France. Under Rosenberg's manager, the pears took first place twice at the annual New York pear show.

After Rosenberg died in 1916, his sons, David and Harry, 27 and 26, who had studied agriculture at Cornell University, took over the family business. Bear Creek Orchards flourished. The Rosenberg growers were able to raise larger-than-average pears, weighing approximately one pound apiece. They sold their pears--renamed Royal Riviera to set them apart from similar varieties grown in Oregon, California, and France--to the grand hotels and restaurants of Europe. Their harvesters were migrant workers, who lived in tents in the orchards and drove carts pulled by mules. Local women labored as packers, hired seasonally to fill the wooden boxes of fruit and ice that were transported by rail to the East Coast and to San Francisco, and, ultimately, to Europe.

Throughout the 1920s, the fame of the Royal Riviera pear grew. Harry and David increased their land holdings and planted more pear trees. They built the first cold storage warehouse in their river valley in 1924 to reduce fruit spoilage and extend the selling season. After the stock market crash in 1929, however, and the subsequent worldwide depression, the brothers' business slumped. But when other pear growers in the region began to rip out their Comice orchards in favor of more mainstream crops such as apples, corn, and potatoes, Harry and David Rosenberg, instead, took samples of their pears to business acquaintances in Seattle and San Francisco. They hoped to offset the loss of their export business with increased sales closer to home.

By 1934, the brothers were enjoying a modest success with their fruit baskets, mailed 'right from the orchard,' and Harry set off for New York City with 15 boxes of his prized pears. He checked into the Waldorf-Astoria, but after one week had sold nothing. Not certain what to do with his ripening pears, he consulted an advertising executive, G. Lynn Sumner, who wrote out 15 letters from Harry and David Rosenberg on hotel stationery and sent each one, accompanied by a box of pears, to a top Manhattan business executive. Recipients included Walter Chrysler, David Sarnoff, and Alfred Sloan. This first direct-mail effort yielded orders for 489 boxes of pears.

The 1930s: Launching a Mail-Order Business

Back home, the brothers worked up a four-page flyer, which they themselves mailed. Their strategy worked and, all in all, the business sold 6,000 boxes of pears in 1934. By 1935, shipments surpassed 15,000 boxes. In May 1936, David Rosenberg traveled to New York to discuss further marketing plans with Sumner. This trip produced a full-page ad in Fortune magazine, which played on the theme of making a 'royal' delicacy available to the common man. The award-winning ad set the tone that identified Harry and David for years to come: 'Imagine Harry and me advertising our pears in Fortune!' read the headline for the ad, which went on to say, 'Out here on the ranch we don't know much about advertising, and maybe we're foolish to spend the price of a tractor on this space, but ... we believe you folks who read Fortune are the kind of folks who'd like to know ... our story.'

With similar ads in National Geographic, Time, the New York Times, and other publications, Harry and David reached a broad consumer base, and sales really took off. To satisfy the flood of mail orders, Harry and David had to increase pear production, and enlarge their storage and order processing facilities. In 1937, they began construction of a large, modern packing plant, and in 1938, they bought the Hollywood Orchard, nearly doubling their acreage. That year, the brothers also started their Fruit-of-the Month Club, which soon became their best-known offering. For $14.95, customers could sign up to send or receive a different fruit gift six times a year: pears in December, apples in January, preserves in April, nectarines in August, peaches in September, and grapes in October. The response to the club yielded a further increase in business; orders shot up to 87,000 in 1938.

Business remained surprisingly strong throughout World War II. However, it was a challenge to find the labor to harvest the hundreds of acres of pears each October, and Harry and David, themselves the target of anti-Semitism, decided to change their last name to Holmes to hide their identity as Jews. One year, Harry and David convinced Congressional and military authorities to allow 600 soldiers from nearby Camp White to bring in the crop. Another year, they relied upon the help of German prisoners of war to pick the fruit. Women and children also became part of the wartime labor force.

Following the war, business blossomed. The brothers built a new warehouse, packing house, cold storage, and office, and invested in IBM's latest data processing technology, the punch card, to handle mail orders, mailing lists, and the payroll. The company expanded its product offerings as sales continued to climb, and fruit cakes, fruit preserves, ceramic candy-filled Santas, miniature Christmas trees, dried flowers, and holly came to grace the pages of the Harry and David catalog.

The company's attention to quality and detail became a well-publicized part of their business. Glenn Harrison, later executive vice-president, 'would look for things,' according to one company publication, 'like crooked labels or the square knots on ribbons. If they weren't right, he'd rip them out ... they did not want fingerprints on the [preserve] jars, so we all learned to handle them by the lids,' said one retiree. When express shipping charges climbed to prohibitive amounts in 1947, the firm began a system of loading straight cars for a given city, then delivering the packages directly to the post office to avoid delays en route.

The Next Generation of Leadership: 1950s-80s

Glenn Harrison took over the day-to-day decision making for the $5 million business, along with David Holmes, Jr., in 1953, after Harry Holmes withdrew from active participation in the business because of a heart condition. David Holmes had died in a fatal car accident in 1950. When David Holmes, Jr., assumed leadership of the company in 1959, he shifted corporate headquarters to Newport Beach, California, where he cultivated an entrpreneurial bent, creating a number of subsidiaries--selling jewelry, toys, clothing, travel trailers--which met with only modest success. However, the company's core business continued growing; by 1961, the company was bringing in $8 million. Two years later it had its own fleet of refrigerated cars and trucks to carry Harry and David fruit packages to 39 mailing points throughout the United States.

In 1966, Bear Creek Corporation acquired Jackson & Perkins, one of the world's largest suppliers of new rose varieties. A.E. Jackson and Charles Perkins had begun their business in Newark in 1872, wholesaling strawberry and grape plants. The duo also sold directly to customers who stopped by their farm. Later the partners also began growing roses and, by the early 20th century, roses had become Jackson & Perkins' main product.

Jackson & Perkins, like Bear Creek Corporation, was a family-run business, and, in the early days, Charles Perkins himself sold and personally guaranteed all his roses. In time, the company ventured into breeding new roses, and in 1901, it introduced its first hybrid, the Dorothy Perkins Climber. Under the continuing direction of hybridizer Dr. J.H. Nicolas and, later, Eugene Boerner, Jackson & Perkins became one of the foremost producers of new roses worldwide. Boerner especially gained a reputation for hybridizing many of the early varieties in the class of floribunda, so-named by a cousin of Charles.

In 1939, quite by accident, Jackson & Perkins became the world's first mail-order rose nursery. At that year's New York World's Fair, the company set up a garden display called 'A Parade of Modern Roses.' When a number of out-of-state visitors wanted to buy roses, but did not want to carry the plants home themselves, Jackson & Perkins agreed to mail them the plants. The following season, the same customers and others returned to order more roses by mail. Over the next several years, the mail-order portion of the company grew so much that Jackson & Perkins began publishing a spring catalog of roses.

By the early 1960s, the very successful company had outgrown its New York location. It headed west, relocating its growing fields first to Pleasanton, California, for the long growing season, and then, in 1966, to the San Joaquin valley of California where the loamy soil, abundant water, and 262-day growing season made it ideal for rose cultivation. The company's headquarters relocated to Medford, Oregon, at the time of the acquisition, so that the company's storage, packaging, and order processing facilities could be shared with Bear Creek Orchards. Jackson & Perkins' research facility was also moved to California, where hybridizers William Warriner and then Keith Zary continued to manufacture new varieties of rose.

In 1968, David Holmes, Jr., stepped down from active management of Harry and David and John Holmes, Harry Holmes's son, took over the business. He formed Bear Creek Corporation as an umbrella organization for the company's several functions in 1972, and, in 1976, took the corporation public. Although considered a 'reluctant' president, according to company literature, John Holmes led his company through a time of exponential growth. He invested in completely computerizing Bear Creek, not only for processing orders and bookkeeping, but to develop the practice of direct mail.

Throughout the 1980s, Harry and David continued to publish its 'honest-to-gosh' full color catalogues. The company still had a country store, produce stand, and flower market at its compound gate, but within those gates the business was very much of its time. Under the direction of John Holmes, Harry and David now transported its food to major cities in temperature-controlled trucks and railway cars. Jackson & Perkins dominated American rose production with its approximately 24 million roses per year.

The 1990s: Continued Growth As a Bouncing Subsidiary

As a result of its success, Bear Creek began to attract offers from interested buyers, and in January 1984, R.J. Reynolds Development Corporation acquired Bear Creek Corporation for $74 million as part of its own effort to generate growth through acquisition. Nearly three years later, in November 1986, Shaklee Corporation, a vitamin, household goods, and personal care products company, purchased Bear Creek from R.J. Reynolds for $123 million. Bear Creek earned between $12 million and $13 million in 1986, and $11.4 million in 1987, helping out the stalled Shaklee. In 1988, Shaklee named William B. Williams president and chief executive officer of Bear Creek Corporation and senior vice-president of the parent corporation. Williams brought with him nearly 20 years of general retailing and mail-order experience at Neiman-Marcus, Inc. He remained in charge of Bear Creek when, in 1989, Yamanouchi Pharmaceutical Co., Ltd. acquired Shaklee Corporation.

During Williams's early years at Bear Creek, the company achieved growth through the acquisition of related businesses. In 1988, Jackson & Perkins merged with Armstrong Roses and the wholesale operations of both companies were combined into a single marketing, sales, and administrative unit called Bear Creek Gardens. In 1989, Bear Creek Corporation acquired Orchids Only Inc., a Portland, Oregon-based direct marketer of orchids and other floral gifts. Williams viewed this acquisition as part of Bear Creek's commitment to expand the company's direct marketing business.

The 1990s spawned new ventures from within at Bear Creek. In 1991, the company opened its first Harry and David outlet store near Medford, Oregon, featuring catalog items plus frozen foods and picnic and kitchen accessories. By 1994, the company's store division oversaw 11 outlet stores. In 1993, Bear Creek founded a separate business, Northwest Express, a catalog company offering apparel, lifestyle accessories, and home accessories 'in the spirit of the outdoors' with golf-themed items, fishing accessories, and decorative items featuring the flora and fauna of the Pacific Northwest.

The family-run business had grown into a sophisticated operation. By 1997, Harry and David achieved $300 million in sales. By 1998, that number had reached $325 million. Gone were the original pear trees, replaced with dwarf Comice stock, easier to spray, prune, and harvest. Harry and David stores numbered 50 and had achieved a national presence, and Harry and David's award-winning web site was chosen by Catalog Age for its first Gold Award. Bear Creek's other ventures were successful as well. In 1998, Jackson & Perkins won top prize in international rose competitions in England, Germany, and The Netherlands. The business in Medford was still fronted by a fruit stand and the fruitcake recipe was still the 1957 original, but behind all this stood a hangar-sized packing house, a huge cold-storage facility, a network of kitchens, machines shops, and offices, and several hundred acres of orchards.

True to its homespun beginnings, Bear Creek Corporation still engaged in little traditional advertising, relying on its award-winning catalogs to spur sales, but the company had developed a knack for capturing media moments by designing products that were 'newsworthy,' for example, the Jackson & Perkins' Veterans' Honor Hybrid Tea Rose, unveiled at Arlington National Cemetery in 1999, or the Princess Diana Memorial Rose, promoted in 1997, a few months after the princess's death. When the Wall Street Journal picked Harry and David's truffle heart as the best Valentine's Day box of chocolates, the company sold its entire supply of hearts on the day that story appeared in print.

Building on more than a half century of direct marketing experience, the move to the Internet was a natural extension of the company's catalog sales, although Bear Creek waited until 1996 to go on the Web. In 1999, e-commerce sales topped $25 million, and the company created a new Internet division. The company's web site offered services in addition to products--gift reminder services and electronic gift certificates as well as gift suggestions, an online gift registry, real-time inventory, verification of shipment, and package tracking.

The Internet also introduced Bear Creek Corporation to a younger customer base and posed the challenge of 'jazzing up' the company's brand appeal, according to the editorial director of Catalog Age. By the year 2000, with an expected $400 million in sales, Bear Creek was looking to add 'an element of fashion,' according to CEO Williams, overhauling its catalog to include more appetizing shots of prepared foods. Looking to the future, it aimed to make a quarter of its sales online by 2005, and was opening stores at the rate of about 75 a year.

Principal Divisions: Bear Creek Development Corporation; Bear Creek Gardens; Harry and David; Jackson & Perkins; Northwest Express; Orchids Only Inc.

Principal Competitors: 1-800-FLOWERS, Inc.; Garden.com; Martha Stewart Living.
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