ROSI-researched some more last night and found an interesting article from the Washington Post dated March 15.
A Fresh Approach To Flowers
U.S.A. Floral to Cut Shipping Times to Stores
By Stephanie Stoughton
Washington Post Staff Writer
Monday, March 15, 1999; Page F14
At Robert J. Poirier's home in Washington, the dining room is most often decorated with fragrant lilies or roses. For him, a house without flowers is like a December without a Christmas tree.
But the chief executive of Washington-based U.S.A. Floral Products Inc. realizes that American families have long lagged behind Europeans in flower purchases, a phenomenon that has been blamed on cultural differences. Europeans buy more flowers, the thought goes, because they better appreciate the aesthetics of bringing nature's scented blooms into their homes.
Poirier doesn't buy it.
He believes only 20 percent of Americans buy flowers for themselves each year, compared with about 60 percent of Europeans, because of logistics. Simply put, European flowers are fresher and last longer because the floral distribution system overseas is much faster. And because their roses and tulips look better, Europeans buy more of them.
This year U.S.A. Floral Products hopes to establish itself as the biggest mass-market supplier of fresh flowers by becoming the fastest one. It will begin speeding up the system by eliminating many of the hands that touch the product on its way to stores. Its Miami operations are being consolidated into a new distribution center in Blytheville, Ark., the site of a former Air Force base. And next month, it will begin flying flowers directly from South America, where the company gets many of its blossoms, to the new center.
The company then plans to quickly ship packaged flowers by truck or overnight carriers such as Federal Express, which has a large hub about 60 miles away, to customers that include Wal-Mart Stores Inc., Safeway Inc. and Costco Cos.
The goal is to have flowers in the stores within three days of their being snipped -- a vast improvement over the eight- to 17-day trip each rose might now take before it ends up on display.
"The product will be cut on the first day, shipped to Blytheville on the same day or the next day, and then . . . into our customers' hands the next day by truck or by air," Poirier said.
Right now, a flower's trip from South American farms to U.S. florists is prolonged by geography. The French, Swiss and Germans are able to get fresh blooms within a few days simply because of their proximity to Holland, which provides most of Europe's flowers.
On Dutch farms, workers cut the flower stems and then often have them shipped to auctions by the next morning. Buyers representing florists bid on the product, which is then on its way to stores the same day.
"It can be in Italy the next morning," Poirier said.
The path to U.S. stores, on the other hand, is bumpy and slow. Colombian farmers send their flowers through Miami International Airport, where they are submitted to rigorous U.S. Customs checks. Importers then pick up the blooms and store them in nearby refrigerated warehouses, where they can remain for two to four days.
The packaged flowers are then taken to one of several trucking companies, which organize them according to their retail destinations in the United States. In the end, the trucking process can take another two to five days.
Speeding up the process will mean extra costs for U.S.A. Floral, but Poirier says that if the strategy works as expected, it will reduce overall expenses by cutting the number of entities touching the flowers, eliminating waste at every step of the way and ultimately increasing sales.
Poirier's plan has gotten a lot of attention among mass retailers, who know they won't have to toss out as many wilted, browned or bent flowers if they can find a better supplier.
"It's a perishable product, like bananas or oranges," said James D. Sinegal, chief executive of wholesale club operator Costco. "You not only have to be conscientious about wilting but also the expected life of the flower. You don't want to sell something that looks okay but will look like it's dead the following day. Your customers have an expectation that it will last."
Poirier took U.S.A. Floral public in October 1997 with a strategy of consolidating the fragmented floral industry. Since the initial stock offering, he has moved aggressively, buying 27 importers, wholesalers and bouquet companies to create a firm with $999.8 million in annual sales (on a pro-forma basis to reflect the acquisitions).
Along the way, U.S.A. Floral has tried to bring flowers to consumers in a more efficient manner. Earlier this month the company began selling its flowers under the Sunkist brand at several Winn-Dixie grocery stores in the Orlando market. Each bouquet carries a seven-day freshness guarantee.
"Flowers are sold, like everything else, on appearance," said Mickey Clerc, a Winn-Dixie spokesman. "Certainly we do everything we can to get the freshest product into our store."
U.S.A. Floral still has much to prove on Wall Street, which has been skeptical of fast-growing consolidators, believing many amass heavy loads of debt while failing to successfully weave new acquisitions into existing operations.
The company's stock has reflected those concerns. The firm went public in October 1997 at $13, but after shares peaked at $23.87 1/2 they plummeted to $5 on Oct. 1, 1998. The shares closed at $12.12 1/2 on Friday.
"I think one of their challenges is that they don't be distracted by the lack of visibility" in the stock market, said Brad Cohen, an analyst with Sands Brothers & Co. in New York. "They need to stick to their knitting."
Today, U.S.A. Floral and Dole Food Co. are the biggest names in the nation's $15 billion floral industry, which is fragmented and mostly made up of small players. Dole Food does not release its flower sales, though analysts say they likely amount to less than U.S.A. Floral's.
But Dole Food, the giant food grower based in California, is rapidly emerging as a formidable competitor. And it has the advantage of deeper pockets and a more mature balance sheet. Following U.S.A. Floral's lead, Dole began last year to consolidate the supply side of the flower industry, snatching up a large importer and South American grower.
Dole is unlikely to allow U.S.A. Floral to have the fastest route to retailers for long, especially when its flowers compete for space in many of the same grocery stores.
"You can't underestimate the expertise Dole brings to the cut flower market, given its success in the produce industry," said Keith Mullins, an analyst with Salomon Smith Barney in New York.
A Dole spokesman said in a statement that the company's ultimate goal is to "reduce the time from harvest to customer, and reduce the number of times a box of flowers is handled, as Dole has successfully done in its perishable businesses."
But Poirier of U.S.A. Floral said he doesn't mind having Dole as a competitor as long as it manages to make more Americans buy flowers.
"My hope is that my competition does in fact shorten the distribution channels," he said. "We have to destroy the myth that flowers are expensive and they don't last. If my competition finds a way to do that, I welcome it. We all win."
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