Bear Creek - "King of the Hill"

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Bear Creek Corp. is going to be 65 years old when the Millenium rolls around and it is still the largest cataloger in the fresh food gifts segment. The story of Bear Creek and its primary title, Harry and David is probably one of the best known in cataloging: How Harry and David Rosenberg during the depression went to New York to try and solicit business from corporations.


With the aid of G. Lynn Summer, an advertising executive, they contacted 15 firms, mailing a letter and a "Royal Riviera" pear and had 11 orders within 24 hours. The business took off and the company never looked back.


Being astute businessmen, the brothers in 1938 adopted the Book of the Month Club concept to their offerings with the Fruit of the Month Club. During WW II, the brothers adopted their mother's name, Holmes because Rosenberg pears had suffered. After the war they continued to expand and were one of the very first catalogers to use the computer to manage the business. By 1959 the company had sales of $5 million and the founders had passed on, leaving the company to their two respective sons, David and John Holmes.


Selling and shipping fresh fruit had required the company to invest in large, refrigerated warehouses. Hoping to smooth the sales curve, use its warehouses and all other infrastructure, in 1966, David Jr., then president, acquired Jackson & Perkins, the country's leading rose catalog. Jackson & Perkins had gone into mail order after the 1934 New York World's Fair, where they had exhibited and gained the public's attention.


In 1971, John became president and took it public in 1976. Acquired by R. J. Reynolds for $74.1 million in 1984, the company underwent a rapid succession of ownership. 1986, Shaklee Corp. bought the company and in 1989 Shaklee was acquired by Ymanouchi Pharmaceutical Co. Ltd. However, the company considers Shaklee to be its parent.


In 1988, Bill Williams, formerly of Neiman-Marcus, joined the company as president. In 1989, the company bought Orchids Only, which has subsequently been closed, and in 1993 began Northwest Express catalog, which offers apparel, accessories, home furnishings and gifts. Finally in 1993 the company opened its first outlet stores on the West Coast and there are now 68 nationwide.


Recent results. 1998 sales were about $365 million, an increase of 9 percent from the previous year, and more than 100 million catalogs were mailed, all of which now make BCC the largest U.S. direct mail marketer of fruit and baked gifts. Unfortunately, since the company is a division of another firm, they are reluctant to divulge any additional financial information; however, they claim to be profitable.


Products and markets. The catalogs of BCC constitute 75 percent of net sales. The books Harry & David, Jackson & Perkins and Northwest Express catalogs have consistently won more annual catalog awards than nearly any other company. The H&D catalog has more than 2,000 exclusive products. In addition, BCC operates a robust business-to-business program, contracting with corporations and organizations to provide gift baskets to employees and others. BCC continues to grow about 85 percent of its pears and 65 percent of its peaches on 2,800 acres in Oregon. The rest of the food gifts are purchased from growers in the West, and other locations in the United States and abroad or produced by BCC, such as baked goods and candy.


Harry & David is still BCC's best-known and most profitable business, bringing in more than 50 percent of annual sales through its hybrid business model. The food-gift marketplace is about $1.75 to $2 billion and is highly fragmented. H&D's share is in the double digits per the company. The H&D customer is in her (less frequently his) mid 50s and comes from a household making more than $80,000 a year.


BCC publishes the Jackson & Perkins consumer catalog, selling J&P roses and other garden-related products. In addition, Bear Creek Gardens Inc., a wholesale division, markets J&P and Armstrong roses (Armstrong is a secondary wholesale brand) to U.S. garden centers. Also, with about 60 percent of cut roses now coming from offshore greenhouses, J&P is now a major supplier of patented varieties via licensing arrangements. While the company's market share of roses is less than that of H&D, it is still the largest rose supplier. The J&P customer is bit older and less affluent.


Northwest Express is still basically a start-up operation and has yet to prove itself. This market place is much more crowded. The NWX customer is mid 40s and is also affluent.


Across all three businesses, Internet customers average about 20 percent younger. BCC's Internet business is roughly tripling each year and an e-commerce group, tasked with its own P&L responsibilities, has been formed for each division. Currently, e-commerce accounts for about 5 percent of net sales.


Catalog operations. All catalogs for all divisions are designed and produced inhouse. Mailings average 1 million to 6 million per drop and per title. Orders are handled at phone centers in Medford, Oregon and Hebron, OH. A 400-seat center also is opened in Eugene for the peak holiday season when more than 1.25 million orders a month (as many as 75,000 a day) may be received.


Orders are shipped from Medford and Hebron, except for roses, which are also shipped from Wasco, CA. BCC still has many characteristics of a family-run firm, with many second- and third-generation employees now working for the company, and many with 25 or more years' employment.


Plans for growth. The company is looking for 10 percent to 15 percent growth this year and expects to sustain this rate for a number of years. H&D will continue to do the heavy lifting, with e-commerce and stores playing increasing roles (BCC expects to have 95 stores by year-end). BCC does not see serious national competition for H&D arising soon. Because of the perishability of its products and the narrow windows in which they must be released, it is an extraordinarily difficult business to manage and that in and of itself is a core competency for H&D and a barrier to entry by others.


Bill Dean is president of W.A. Dean & Associates (www.dean-assoc.com), San Francisco, which publishes monthly The Dean Report, cataloging's leading strategic and financial newsletter.

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