1-800-FLOWERS grows with Plow & Hearth purchase

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With its purchase last week of a majority stake in cataloger Plow & Hearth, 1-800-FLOWERS has a platform from which it plans to enter the catalog business.

The world's largest florist, with $300 million in annual sales, is planning to draw on Plow & Hearth's experience in the catalog industry to help it put together its first branded catalog in time for this year's holiday season and branch into new product areas, such as gardening and home products.

1-800 FLOWERS, Westbury, NY, which until now had mailed only brochures to support its telemarketing operations, had considered entering the catalog business for several years. It began seriously weighing possibilities about a year ago, said Chris McCann, senior vice president at 1-800-FLOWERS. Plow & Hearth's management team, its home and garden product line and infrastructure synergies were the keys that solidified it as the partner to take 1-800 FLOWERS into cataloging, he said.

"Their management team wanted to stay on, which was important," McCann said. "It's not a team that is just capable of running their company, it's a team assembled for growth."

Plow & Hearth, which decided nine months ago to seek a larger partner to give long-time shareholders partial liquidity, saw immediate synergies.

"We were looking for a partner with a compatible culture," said Peter Rice, president and CEO of Plow & Hearth, Madison, VA. "FLOWERS has a compatible culture in that it is a dynamic company and it's a company without a lot of bureaucracy -- and when we found out the opportunities, we were delighted."

The amount of the investment in Plow & Hearth was not released, though Rice noted that many in the management team had sought only partial liquidity and will remain active and financially involved in the growth of the company. Rice will continue to run Plow & Heath and will serve on 1-800-FLOWERS' senior planning team. Plow & Hearth has annual sales of more than $40 million.

The 1-800-FLOWERS holiday book will be the first collaborative effort, with future acquisitions and spinoffs in the home and light gardening areas to be studied later. The initial catalog may offer a combination of cut floral arrangements and products in the light gardening area that 1-800-FLOWERS is eager to branch into, McCann said.

"We would like to have more gardening products in the catalog," he said.

However, as 1-800-FLOWERS is primarily gifts, with 40 percent of purchases delivered on the same day, McCann noted that there still is considerable work to be done to determine whether the business and other product lines could coexist in the same book.

"Peter Rice will study whether we can put cut floral arrangements and light gardening in the same book or whether they should, down the road, be spun off separately," he said.

1-800-FLOWERS has identified home and gardening -- gardening particularly -- as target areas for growth because research has shown that the categories are strong and have synergies with the customer base.

"We wanted to approach ways to embrace light gardening and home products, and we felt the way to do that was catalogs," McCann said, adding that future catalogs will be available as paper and electronic versions. "Looking at people who are predisposed to flowers as gifts, they also seem to be people who engage in gardening in one form or another. As the gardening phenomenon continues to grow in this country, we wanted to look to entering the market, but we didn't want to do it from the retail perspective."

The match with Plow & Hearth was found through Larry West, president of West Companies Inc., a consulting intermediary representing Plow & Hearth. West was familiar with 1-800-FLOWERS' acquisition strategies.

"[1-800-FLOWERS president] Jim McCann is a master at integrated marketing. He has retail, Internet, telemarketing and cross-promotions -- when you open up an envelope you'll see his cross-promotions in there," West said. "If there was something that needed to be beefed up in integrated marketing, it was catalogs, and this is it. Now he has the management team to do it."

List synergies and complementary busy seasons made the companies compatible, he said.

"1-800-FLOWERS is busy on Mother's Day, Valentine's Day and the days right before Christmas," West said. "They will build back and forth from the counter-seasonality."

Indeed, the two companies already are discussing using use each other's call centers for overflow in their busiest seasons, Rice said. In addition, tests of 1-800-FLOWERS' customer lists in Plow & Hearth's holiday and spring mailing worked well, and that was without careful modeling.

Plow & Hearth is looking forward to benefiting from 1-800-FLOWERS' technological expertise and Internet marketing experience. A current construction project to expand Plow & Hearth's distribution center by 60,000 square feet is an expected benefit as the companies jointly explore growth opportunities.

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