State of the State (Flower Industry) over the past 24 months

[FlowersellerUSA]

Was thinking that it might be interesting to put together an overall summary of all the changes that have occurred in the past 24months.  I.e. Sunburst/Dole purchase, Agriflor banko, Superior out of wholesale, blah blah.

Willie, rather than a string of threads, is there a way that each person could contribute what they know and somehow compiled into and overall F&C list?  Might be interesting to see how the industry has changed in the past 24 months.

If not, how about if we just start by listing what we remember.

 

[blackmagic_82]

If a list is be compiled, that's fine.  But what I think would be interesting is to discuss the trends in the floral industry (apart from the recession).  There seem to be trends regarding the financial pressures on growers (both California and South America), Miami (which has resulted in some of the changes that will be on the list), wholesalers (a number have gone out of business or filed chapter 11 - while the recession certainly has contributed to these, it was just the straw the broke the camel's back, I think), the traditional retailer (whose numbers are shrinking in most parts of the company) etc.

I am interested in people's opinion about any of these trends. 

Where will we be in 5 years?  Any insight ino that question would be of interest and possibly help to many of us.

[Direct_usa]

Good point Magic and If I had that kind prescience I would be playing Wall Street and trying to break into the top 5%  
As one who deals with a lot of tradional retailer's I can tell you the future looks bleak.  

[FlowersellerUSA]

The future is a great topic as well.  Not saying that the past will equal the future, but If we look back at the last 24 months, we might be able to use the info as a basis for discussing the future.  For years I have heard that "soon" many farms will be out of business, yet there are more flowers in the marketplace than ever and there seem to be plenty of price sellers. So really how many farms were there and how many are left today?  Same with wholesalers and non-Mass Market retailers.  I can remember 20 years ago when there were the "Big 8" public accounting firms....then the Big 6, then the Big 5 and now the Big 4.  Let's look at where we were and then were we are....and maybe guess as to where we will be.

[blackmagic_82]

Flowerseller,

What you say does point out an interesting recurring theme.  A farm may go out of business but the land is bought by someone else so there is no reduction in the number of flowers grown.  Or a wholesaler might go out business but the operation may be taken over by another wholesaler.  So going out of business often does not mean reduced production or distribution, but maybe more efficient production or distribution.  What may be a better way to look at the industry is from the consumer end.  What is the dollar volume of purchases of flowers by consumers? And through whom are these flowers bought?  The answer would indicate changes in volume and distribution. 

I have tried to look at this from the perspective of the 4 large order gatherers - FTD, Teleflora, 1-800 Flowers, and Proflowers.  But only 2 (FTD and 1-800) are public companies.  They each have their own method of distribution.  Teleflora is entirely through retail florists (I think) while 1-800 Flowers has a number of methods.

[MGLEISER]

Blackmagic´s last is most probably the wisest post in F&C since its inception. If the current status, reasons and trends are not identified and accepted on a timely basis there will be little chance to correct them.It is time to stop the denial attitude.

It should be clear, by now,to every visitor whether active member or just lurker that the flower industry as a whole is facing its worst crisis ever.

As Black guessed, I totally agree that recession in USA (and I add the USD vs Peso in Colombia) are the last straws...
The European flower market has not suffered to any extent in a similar way,even though they have their own Euro zone enormous challenges(Greece,Portugal,Spain,etc).

This was coming back from 1997, when unit prices peaked and start going steadily down, together with a noticeably shrinking consumer base.

Supermarkets are taking over retail in USD terms and much more in stem terms. Makes sense since other than design, their product is not very different that that supplied via wholesalers/florists. Yet this cost reduction has not truly grown the total size of the market, as happened in other countries.

Wholesalers functions are substituted by internet, except in few cases when adding value and not only costs.

Internet means added convenience but not value to the consumer.They are growing at conventional distributor´s expense but not growing market nor appeal to consumers.

Smaller/medium size growers are closing and large ones are swallowing them.One medium grower just commented to me that this was not only the worst crisis but probably "the last one"...

Power concentration is the game and vertical integration follows. This has been going on for years already.
Freight forwarders,independent importers/handlers and even airlines/trucking companies as we have seen them will no longer be necessary.
 

[FlowersellerUSA]

Excellent posts Magic and MG.  Thank you!

[Direct_usa]

Question is, WHAT, if anything, can be done about it? AND no Hopeful...its not all about the cold chain.

[blackmagic_82]

A few observations to add to the mix.

Social and practical trends have significantly cut into the floral funeral business.  Fewer funeral home hours, etc.

Supermarkets present another issue.  First, there has been consolidation in this segment, including the acquisition of smaller chains that did more business with wholesalers than do larger chains.  Second, there is no established model for supermarkets regarding the quality of flowers, who runs the floral department within a store (designer, low-paid nondesigner, or outsourced to bouquet company or retail florist) or method of distribution (distribution center v. store-door).  These issues affect which segment gets the business.

Trend to consolidate retail florists.  It seems there are more multiple shop companies than before.  Again, this affect the buying.

[FlowersellerUSA]

Well let's see:

1) Dole got out of the business after losing money for years.  Sold building, then business to Sunburst.
2) Agriflora/Agriwest. Banko (or something) and sold assets to Falcon/Polo farms
3) USA Bouquet purchases Cal-America
4) Brand Flowers - ongoing rumors of trouble
5) Sunburst - employee issues and subsequent rumors of a possible sale
6) FTD, Teleflora, 800 Flowers and Pro-flowers continue to post increases (some unconfirmed info here)
7) Falcon received AIG money

Just a few that rolled off the top of my head.  So, what do we know. Not much more than we already knew.  Some areas are consolidating, price sellers eventually fall, and....?

[blackmagic_82]

Regarding the Order Gatherers, both 1-800 Flowers and FTD have shown significant decreases in flower business (as distinct from selling nonfloral gifts).  These increases are greater than I would have expected and exceed the level of decreases generally experienced in our industry from the recession.  Perhaps the difference is a loss in market share to the private order gatherers, or perhaps the order gatherers as a group are suffering more.  Anyone have an opinion?

[thinkflowers]

FTD has also made a push into the fresh flower wholesale business. They are shipping flowers from both the south american farms and miami importers directly to florists.this has to be eating away at the "local" wholesalers.

[Williee Armellini]

Hot damn an actual Floral discussion. We do have a decent list of what has happened over many years in the floral history tab.

As we type there is no doubt serious discussions going on in many closed door meetings. The glory days of Miami are over and now only the most efficient will survive. The presure is on every segment and that is just the way it is. Everyone is being forced to find value and savings while trying not to abandon their ideals.

I was surprised to see you mention Sunburst as a possible sale candidate? I guess based on my own words above the spotlight is on them as well.

Thanks to all partisipating inthe valuable discussion!

[blackmagic_82]

Well it could be that Proflowers is growing at the expense of the others and that total business through order gatherers, adjusted for the recession, is level or increasing.  Or, the aggregate business might be shrinking even if the recession is adjusted out.  I can't tell from the partial picture painted by the public companies.

[MGLEISER]

Question is, WHAT, if anything, can be done about it? AND no Hopeful...its not all about the cold chain.

It might not be ALL about the cold chain but ,certainly, disregarding it (while claiming full compliance) explains most of the problems. Denial rates second.

Shrinking consumer base and following price/margin decreases resulted out of consumer´s discontent due to short vase life vs cost.

Failure to solve the above while business was growing precluded a culture of self consumption to develop.

The ratio of VD vs any other day sales grew bigger.Not a problem if in the nuts&bolts business but a nightmare when dealing with farm grown perishables that depend on a limited infrastructure.This might be at the core against growing year around consumption.

Lack of sufficient cold chain in regular days turns into a hot chain during holidays and very little if any vaselife available to consumers, while they have to pay the highest prices.Why should they buy flowers again?

Not even cost reduction alone ,through supermarkets,has helped substantially to develop self consumption.

With regard to WHAT to do,that has a short answer:
first, just handle flowers properly and consistently,as any other perishable.
Second, copy the UK model:
-enforce proper handling(from farm to shelf),
-provide a motivation to try(guarantee and usual price)
-add an impulse to buy(direct advertising to householders)
 
That model took UK to sell as many flowers as all USA, with just a fraction of it population,after less than 10 years.