Monday, April 4, 2011

Message to our customers about the upcoming holidays.

We are rapidly approaching our largest holiday season of the year, and I would like to take the time to inform you all about the upcoming conditions we will face.   This year Easter, Secretary's Day/Week, and Mother's Day all fall into a two week period.  This seems like it will just make for a very busy time for us all, but there are much larger concerns ahead.

This past February, the ATPDEA  (Andean Trade Promotion and Drug Eradication Act) expired and a 6.4% to 6.8% duty (TAX) has been leavied on all cutlfowers entering into the US from South America.  Congress has yet to renew this trade agreement, and presently have no indication when this will or will not occur.  We have been absorbing this duty on your standing orders for the time being, but we have been incorprating this cost into open market pricing.

Today oil futures trading for around 107.00 - 108.00 a barrel.  Last year oil was trading between 85.00 to 90.00.  As a biproduct of this, jet fuel has been rapidly increasing in price.  As importers, we pay for freight as a separate cost, and freight represents anywhere between 15% to 25% of cost.  Freight from South America to Miami has gone up approximately 15% in the past 3 months and almost 30% over the same time period last year.

It is estimated that supermarkets and mass market represent over 50% of the overall sales in our industry.  Though we all look at easter as a semi-throwaway holiday, these other outlets are still doing significant business.  This means that the farms who are devoting product to the mass market will be under great stress to supply them necessary volume for a very concentrated period.

What does this mean for us for this holiday season and beyond?

1.      For the holidays coming up you can expect south american cutfloral prices will be up over last year by anywhere from 10% to 35% depending on the product.

2.     This means that farms who account for the traditional open market will have severely diminished additional product available.   This raisies the value (and therefore the price) of any open market product available from the week of easter (and even possibly the week before) till the end of mother's day.

3.      Items that are either featured in wire serices, or are seasonably appropriate will see first preference given to the mass market, and direct shippers (such as proflowers, 1-800 flowers, or FTD' direct to the public sales).  This creates no room for error or delay.  There will inevitably be prebooks cut on these types of items as farms try to figure out how to distribute what they have. 

4.      Beyond the holidays our industry will finally see more significant effects of inflation.  Over the years, retail florists have enjoyed somewhat unrealistic protection from more serious inflation occuring in the US.  This has been due in part to the shift of supply moving from the Domestic US to South America.  It has also been a result of fierce competition between farms, importers, and local wholesalers, forcing the price to stay down.  Over the past 10 years or so, wholesalers began to import flowers directly from the farms extending cheaper prices even further.   Over the past 7 years, many farms and importers have closed their doors, tightening the supply chain.   Farms do not have the sales and importing resources to sell directly to retailers. making the wholesaler the final end of pricing.   Under present economic conditions, competition levels and rising cost of freight,  overall cost of goods for your cutflower expense will inevitably rise.

What does this mean for you?

i would absolutely recommend adding 5% - 10 % to all of your wedding quotes, and be prepared to begin to raise prices, delivery charges, and the like.   Don't worry, you won't be alone as all consumer products will being to creep up as a result of projected overall inflation in the US.   I see that these conditions will continue to force the traditional retail florist to become more and more of a specialty store, rather then a place to come in and pick up a small bouquet.   We are in a time period where we need to cultivate floral enthusiasts rather then hope to just bring in the bargain customer.   Making the proper adjustments will ensure profitability and growth for the future.