Rose Prices WILL Rise—So What Should You DO?
A few weeks ago, U.S. florists might have impacted whether the American government would renew the Andean Trade Preference and Drug Eradication Act (ATPDEA). Florists might have banded together to pressure their political representatives—who were to vote July 31 on the act—on supporting or voting down the agreement. The act would have affected florists by eliminating tariffs on rose imports from Ecuador (worth about $250 million a year).
But, today? Your opinion on the issue no longer matters. A former National Security Agency (NSA) staffer named Edward Snowden inadvertently determined the outcome for you when he leaked NSA documents outlining a massive effort by the agency to track American citizens’ cell-phone calls and monitor their e-mail and Internet traffic. When Ecuador considered giving Snowden asylum, the Obama administration put the vote on indefinite hold. In response, Ecuador flat out rejected the act.
That means, at this point, it is an almost certainty that the prices of Ecuadorian roses and other flowers will start increasing as of Aug. 1.
How will this rise in prices impact American florists? FlowerChat put that question—and a few others—in front of O. Stanley Pohmer Jr. Stan is CEO of Pohmer Consulting Group (Minnetonka, Minn.) and executive director of the Flower Promotion Organization (www.flowerpossibilities.com). Stan is well-known for his industry insight and prognostications on what to expect each New Year for the next 12 months. Knowing he’s got his pulse on the industry, FlowerChat knew Stan could provide some hands-on guidance to help florists prepare for Aug. 1 and beyond.
FlowerChat (FC): Now that it seems inevitable that the trade pact we have with Ecuador will not be renewed due to the Snowden issue, what can florists do to prepare for the price increases? How high exactly do you think florists can expect the increases to go?
Stan Pohmer (SP): As you suggested, it doesn’t look good that the ATPDEA will be renewed for Ecuador (which was probably not going to happen even before the Snowden issue), and the adding of roses to the GSP (the Generalized System of Preferences, a mechanism meant to encourage development in lower-income countries) is, at least for now, a very remote possibility. So, duties of 6.8 percent will be assessed on roses and spray roses, 3.2 percent on mini carnations and 6.4 percent on all other flower types from Ecuador, effective on 8/1/13. Note that these are the duties that would be assessed on the first cost (at point of entry into the U.S.). By the time the flowers work their way through the distribution system, it’s likely that the incremental cost to the florist will be somewhat higher than these assessed percentages.
Florists can prepare for the impending cost increases by doing what they should be doing 52 weeks a year: reviewing and cost-analyzing the components of all of their arrangement and bouquet recipes to see whether there are viable flower alternatives that strike their desired balance between design, quality statement, real/perceived retail price points and profit needs/goals. In some cases, they may be able to swap out an Ecuadorian rose with a lower-cost stem from another global growing area; but, in other cases, design demands or specific requests from customers will dictate that they’ll need to use the higher-price rose, and then they may need to adjust their price point upwards to compensate for the higher cost.
FC: Should florists try to educate their customers about the price increases (i.e. with signage in their shops, notices on their websites, blogs, e-newsletters)? Or is it too complex for consumers to understand and, thus, not worth the time to spend on explanations?
SP: Unless a florist is selling only Ecuadorian product and using this as a marketing statement (I don’t know any shops that fit this scenario), it doesn’t make any business sense to try to explain a reason for a retail increase to customers. In most shops, Ecuadorian flowers are mixed with flowers from other growing regions, and it would be extremely difficult to rationalize any price increase to the consumer based on a single component-cost increase. Most consumers really don’t care about the origin of their flowers or the cost challenges their retailers face; they’re more concerned with the overall appearance and the perceived value of the complete package (i.e. the arrangement or bouquet).
FC: Are there other areas of their business that you would recommend florists take a closer look at to reduce costs to keep overall prices as close as possible to current levels—or is this wishful thinking?
SP: Hopefully, florists are continuing the strong focus on cost management that they employed over the past four to five years that allowed them to survive the economic downturn. As we’ve learned, there are no silver bullets; we just need to continue to manage our businesses and expenses effectively in an ever-changing environment.
FC: What do you expect will happen to the prices of Colombian flowers? Do you anticipate those farms will increase their prices, as well, simply because they can to keep their prices competitive with Ecuador’s prices?
SP: The cut-flower industry has been, and will continue to be, a highly competitive business. Personally, I believe farms in Colombia and other growing areas will look at this situation as an opportunity to gain market share and add volume, so I don’t see them increasing selling costs significantly as a result of these newly assessed duties on Ecuadorian flowers.
FC: Any other information you believe is important for florists to understand regarding this issue?
SP: While florists may see the imposed duties on Ecuadorian flowers as their prime concern, because that is what will directly impact them, it’s important to understand that many other product categories from Ecuador are affected by the nonrenewal of the ATPDEA and GSP situation; it’s a bigger problem than just flowers. Though we may not like the implications on our businesses or the impact these duties may have on the flower farms in Ecuador, the decisions made by the U.S. and Ecuadorian governments are geo-political and at a far higher level than a single product category. We can voice our opinions to our legislators when there’s legislation before them to vote on. But, until then, we’ll have to deal with the nonpolitical realities.
Have questions for Stan? You can reach him at 612-605-8799 or [email protected].
What Are YOUR Thoughts?
How do you feel about the impact of the tariffs on Ecuadorian products? Share your comments below.
A few weeks ago, U.S. florists might have impacted whether the American government would renew the Andean Trade Preference and Drug Eradication Act (ATPDEA). Florists might have banded together to pressure their political representatives—who were to vote July 31 on the act—on supporting or voting down the agreement. The act would have affected florists by eliminating tariffs on rose imports from Ecuador (worth about $250 million a year).
But, today? Your opinion on the issue no longer matters. A former National Security Agency (NSA) staffer named Edward Snowden inadvertently determined the outcome for you when he leaked NSA documents outlining a massive effort by the agency to track American citizens’ cell-phone calls and monitor their e-mail and Internet traffic. When Ecuador considered giving Snowden asylum, the Obama administration put the vote on indefinite hold. In response, Ecuador flat out rejected the act.That means, at this point, it is an almost certainty that the prices of Ecuadorian roses and other flowers will start increasing as of Aug. 1.
How will this rise in prices impact American florists? FlowerChat put that question—and a few others—in front of O. Stanley Pohmer Jr. Stan is CEO of Pohmer Consulting Group (Minnetonka, Minn.) and executive director of the Flower Promotion Organization (www.flowerpossibilities.com). Stan is well-known for his industry insight and prognostications on what to expect each New Year for the next 12 months. Knowing he’s got his pulse on the industry, FlowerChat knew Stan could provide some hands-on guidance to help florists prepare for Aug. 1 and beyond.
FlowerChat (FC): Now that it seems inevitable that the trade pact we have with Ecuador will not be renewed due to the Snowden issue, what can florists do to prepare for the price increases? How high exactly do you think florists can expect the increases to go?
Stan Pohmer (SP): As you suggested, it doesn’t look good that the ATPDEA will be renewed for Ecuador (which was probably not going to happen even before the Snowden issue), and the adding of roses to the GSP (the Generalized System of Preferences, a mechanism meant to encourage development in lower-income countries) is, at least for now, a very remote possibility. So, duties of 6.8 percent will be assessed on roses and spray roses, 3.2 percent on mini carnations and 6.4 percent on all other flower types from Ecuador, effective on 8/1/13. Note that these are the duties that would be assessed on the first cost (at point of entry into the U.S.). By the time the flowers work their way through the distribution system, it’s likely that the incremental cost to the florist will be somewhat higher than these assessed percentages.
Florists can prepare for the impending cost increases by doing what they should be doing 52 weeks a year: reviewing and cost-analyzing the components of all of their arrangement and bouquet recipes to see whether there are viable flower alternatives that strike their desired balance between design, quality statement, real/perceived retail price points and profit needs/goals. In some cases, they may be able to swap out an Ecuadorian rose with a lower-cost stem from another global growing area; but, in other cases, design demands or specific requests from customers will dictate that they’ll need to use the higher-price rose, and then they may need to adjust their price point upwards to compensate for the higher cost.
FC: Should florists try to educate their customers about the price increases (i.e. with signage in their shops, notices on their websites, blogs, e-newsletters)? Or is it too complex for consumers to understand and, thus, not worth the time to spend on explanations?
SP: Unless a florist is selling only Ecuadorian product and using this as a marketing statement (I don’t know any shops that fit this scenario), it doesn’t make any business sense to try to explain a reason for a retail increase to customers. In most shops, Ecuadorian flowers are mixed with flowers from other growing regions, and it would be extremely difficult to rationalize any price increase to the consumer based on a single component-cost increase. Most consumers really don’t care about the origin of their flowers or the cost challenges their retailers face; they’re more concerned with the overall appearance and the perceived value of the complete package (i.e. the arrangement or bouquet).
FC: Are there other areas of their business that you would recommend florists take a closer look at to reduce costs to keep overall prices as close as possible to current levels—or is this wishful thinking?
SP: Hopefully, florists are continuing the strong focus on cost management that they employed over the past four to five years that allowed them to survive the economic downturn. As we’ve learned, there are no silver bullets; we just need to continue to manage our businesses and expenses effectively in an ever-changing environment.
FC: What do you expect will happen to the prices of Colombian flowers? Do you anticipate those farms will increase their prices, as well, simply because they can to keep their prices competitive with Ecuador’s prices?
SP: The cut-flower industry has been, and will continue to be, a highly competitive business. Personally, I believe farms in Colombia and other growing areas will look at this situation as an opportunity to gain market share and add volume, so I don’t see them increasing selling costs significantly as a result of these newly assessed duties on Ecuadorian flowers.
FC: Any other information you believe is important for florists to understand regarding this issue?
SP: While florists may see the imposed duties on Ecuadorian flowers as their prime concern, because that is what will directly impact them, it’s important to understand that many other product categories from Ecuador are affected by the nonrenewal of the ATPDEA and GSP situation; it’s a bigger problem than just flowers. Though we may not like the implications on our businesses or the impact these duties may have on the flower farms in Ecuador, the decisions made by the U.S. and Ecuadorian governments are geo-political and at a far higher level than a single product category. We can voice our opinions to our legislators when there’s legislation before them to vote on. But, until then, we’ll have to deal with the nonpolitical realities.
Have questions for Stan? You can reach him at 612-605-8799 or [email protected].
What Are YOUR Thoughts?
How do you feel about the impact of the tariffs on Ecuadorian products? Share your comments below.
