Baby Bloomers
Baby Bloomers is a family enterprise specializing in floral arrangements. With its reputation as a high-quality florist, it has been immensely profitable. The success of the company led the family to expand into several businesses: restaurant, automobile. Dealership, wine importation, and other unrelated ventures. Saddled with debt problems, Baby Bloomers sought the services of Gabby Fernando, a management consultant. For more details on the company’s operations beyond the family circle, Gabby decided to pursue some “detective work” by having casual chats with the office secretary.

Author: Arturo Benedicto M. Ilano
Discipline: Strategic Management
Industry: Flower Shops
Issues: Expansion Strategy, mission and vision, rightsizing strategy
Setting: Philippines 1987
Level of Difficulty: Undergraduate/MBA
Case Number: 7-1994-02
Teaching Note: 7-1994-02T

Prepared by Arturo Benedicto M. Ilano, Assistant Professor, University of the Philippines, as a basis for class discussion. The case is not designed to illustrate effective or ineffective handling of managerial situations. Names of persons and places have been change. The University of the Philippines Business Research Foundation, Inc. supported the writing of this case study.

Baby Bloomers is a family enterprise specializing in floral arrangements. Having successfully established itself as a high-quality florist, it is widely known to the market and has been immensely profitable. However, problems had cropped up in the company operations. As a management consultant, Gabby Fernando’s job was to scrutinize the company’s history. To gather more details on the company’s operations, Gabby decided to pursue some “detective work” by having casual chats with the office secretary.

Company Background

Mr. Oscar Picache and his wife Felisa own the Baby Bloomers chain of stores. The company was founded in 1977 by Mrs. Picache, who has had sufficient experience in the florist trade. Mrs. Picache’s mother was the venerable Mrs. Paula Romero, who was the founder of Three Flowers Florist, Incorporated. Three Flowers Florist was the leading supplier of flower arrangements during Mrs. Romero’s time.
Baby Bloomers was envisioned to be novel way of selling floral arrangements, offering imported materials such as ribbons, baskets, and colorfully printed plastic wraps to complement choice floral cuts. The outlets were standardized, with lush interiors and an overall air quality. This enabled the firm to ask for prices that were much higher than had been previously being charged in the floral trade. In return, buyers were assured of the prestige that came with the “Baby Bloomers” brand name.

With this concept, the company became a tremendous success. In fact, the company practically pioneered the prestige florists industry. The company became a “cash cow,” experiencing a large amount of cash inflows, particularly because of its high markups. And this led Mr. and Mrs. Picache into considering a program of expansion.

Unabated Company Expansion

The Picaches decided to form the Baby Bloomers Commercial Corporation (BBCC), which they established along with a couple of family friends, Bobby and Linda Tolentino. BBCC was to undertake Baby Bloomers’ expansion, opening several more Baby Bloomers shops in key residential areas.
In order to finance BBCC’s expansion plans, the couple sought loans from a nearby development bank. Entering their personal real estate holdings as additional capital into the company, Mr. and Mrs. Pichahe were able to place these as collateral under the name of the corporation. Aside from these, they also mortgaged other personal lands, along with the piece of property belonging to Mr. and Mrs. Tolentino. Because of the large cash flows that the company was experiencing, the loans were granted almost immediately.
Noting that the cash flows from BBCC were more than necessary to pay for the loans acquired, Mr. Picache began to consider several of his dream projects, most of which were not necessarily related to the company’s base trade of floral arrangements.
With funds available from BBCC’s operations, Mr. Picache opened the Baby Bloomers restaurant in Makati’s “restaurant belt.” The restaurant featured lush, floral surroundings, Philippine cuisine, and all-mahogany interiors. The restaurant was a modest success.
Enlightened by the success of his restaurant, Mr. Picache then opened an automobile dealership, also near the area, that imported strictly German luxury automobiles. The company was simply called “Picache.” Further pursuing his other dreams, Mr. Picache opened, in rapid sequence, a wine importation business, a cocktail lounge, a jewelry shop, a delearship of European sporting goods, a distributorship of British-made audio equipment, and a store specializing in remote-controlled toys.

The Bubble Burst

Soon, it became apparent that the company’s holdings were being stretched too thinly. Much of the funds available for the servicing of the loans were being diverted for use as working capital in the other enterprises. Unfortunately, not all of Mr. Picache’s enterprises were doing too well. The auto dealership, for one, ran into direct competition with already established dealers of German automobiles, and was charged with being a “gray marketer.” Besides, the market for these automobiles turned out to be narrow, with the clients preferring to deal with authorized local dealers. Picache could not offer any substantial competitive advantage and in fact had higher markups than established competitors.
The biggest blow to the enterprises came in 1983, when devaluation of the dollar exchange rate set in. The devaluation increased the expenses of Baby Bloomers, further tightening its cash flows. Moreover, the operations of other import-oriented businesses, which were not doing too well in the first place, became an even greater liability to the money-generating Baby Bloomers flower shops.
By 1985, the pending loans under the names of BBCC, the Picaches, and the Tolentinos, amounted to about P12.5 million. To complicate matters, it seemed that Mr. Picache simply vanished. When asked about her husband’s whereabouts, Mrs. Picache told Fernando that Mr. Picache had gone to the US for “brain treatment.” The absence of Mr. Picache led to the default of BBCC on many of its loans, simply because nobody was able to follow up on the required payments. Mrs. Picache insisted that Mr. Picache should be responsible for the payment follow-ups, and that the bank should simply wait for his return since she felt overwhelmed by the numerous enterprises that were borne from BBCC funds.
Eventually, Mrs. Picache sought the services of Gabby Fernando in July 1987 with the intent of seeking help in the management of the businesses. Gabby’s first task was to oversee the settlement of the business empire’s outstanding debts.
Based on Gabby’s examination of company records, the mortgaged items were placed under litigation by December 1986. The real estate properties, along with specific merchandise such as flower arrangements and ornaments, were foreclosed. Auctions for the merchandise held in the middle of 1987 generated some P100,000.
Among the agreements reached was that a partial payment of P1.5 million was to be made, the source of which would be outside of any sale of property from the collateral pool. Thus, at the end of September, Mrs. Picache remitted the amount of P1.56 million. However, it was found out that the funds came from the sale of one of the mortgaged lots in Pasong Tamo. Nevertheless, because Mrs. Picache’s personal funds were not sufficient to meet tha payment, the development bank conceded to the transaction. In exchange for the funds, the bank issued a Certified of Partial Redemption and released the land title to the buyer.
Since the bank will no longer restructure the accounts of BBCC and the Picaches, it was decided that the best way to settle the problems was to tell the other foreclosed properties as well. The troubled businesses of the Picaches were eventually sold off, leaving only the flower shops and the moderately successful restaurant.

The Conversation with the Secretary

“Let me tell you what I know,” Mrs. Conchita Bengco, secretary at Baby Bloomers’s main office, whispered in Gabby’s ear during one of their frequent coffee breaks. “Do you know why Mr. Picache had practically vanished? It’s because he ran away with another women! They’re now living together in the United States.”
“No, I don’t think Kaka [Mr. Picache] spends much time with these other businesses,” Mrs. Bengco noted. “In fact, I think he places too much trust in the people he leaves behind to run them. I mean, he would be very active with a newly established company, nut after a while, when everything has been set up, he would leave it alone.
“On the other hand, Mrs. Picache is one heck of a devoted lady. She would be in the Baby Bloomers office from 8 a.m. to 5 p.m., taking note of every little thing that happens. Just yesterday, she was running around fixing up the details for the uniforms of the sales ladies, because she noticed that their present uniforms made them blend with the walls. I mean, that’s not bad person who is around sixty-something,’ no?
“You were wondering whatever happened to Boss Kaka? I’ll tell you what happened. Mr. Picache fell in love with one of his client’s secretaries at the car dealership. Her name was Melody Sena, who was the secretary of a construction magnate in Tarlac. At any rate, she had always wanted to go abroad to become a fashion model. Of course, Mr. Picache had to leave everything behind. Poor Mrs. Picache was rather upset about all this, so she sort of left the business to run itself for a while. Besides,” pouted Mrs. Bengco, “it is only the flower shops that she was really concerned about.”
“How do you now feel about working for the company? Do you intend to stay on or are you moving to another company?” asked Gabby.
“Well, I’m glad that things are now more or less back to normal,” sighed Mrs. Bengco.”At least, with Mrs. Picache back on the job, I guess it would be smooth sailing from now on. In fact, I think that the family is sticking to what it knows best. Expansion plans are now limited to floral boutiques alone. Mrs. Picache’s daughters, Cherry, Apple, and Tina, for example, are set to open their own flower shops under the Baby Bloomers family brand name. And the company is toying with the idea of selling off the restaurant business. I’ll still be around. I’ve been working for almost ten years now.”
She continued, “As for Mr. and Mrs. Picache, a settlement was already under way. Mrs. Picache refused to have anything to do with her husband anymore. It’s just well; Mrs. Picache can very well manage on her own. I mean, we’re down to just the flower anyway, and it’s something that Mr. Picache hardly knows anything about in the first place. Which gets you thinking,’ no? Was Mr. Picache more a liability than an asset to the company?”
Mrs. Bengco released a grin, signifying her snugness over having managed to namedrop a few business terms.
Gabby Fernando then digested the salient points of the conversation and noted some points to be considered in turning the company around. He also took note of other information to be granted before he made his recommendations to Mrs. Picache.

Study Questions: 1) Discuss BBCC’s “policy of expansion.” What criteria had the corporation used in venturing into new businesses? 2) What was the “mission” of BBCC, as per view of Mr. Oscar Picache? 3) If Mrs. Felisa Picache had been the one in charge of the corporation in the first place, what criteria may have been appropriate for the company’s expansion policies? 4) Discuss what may be an appropriate strategy for the new, down-scaled BBCC and for Mrs. Picache.