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Red Roses Economics.
We are currently in the process or trying to source our roses from Valentines Day. It’s amazing really how it all works. Everyone thinks Valentines Day is where florists make their fortunes but honestly it’s not all it’s cracked up to be. The growers certainly make a good cut of money during Valentines but it’s a risky business for them too.
So what happens?
In January, all the florists start thinking about Valentines Day and what they will do. They start to look at their sundries (Vases, Wraps, Hearts, Teddy’s etc) and they then go to their wholesale suppliers and ask them for prices for red roses.
This is where the price war starts. However most suppliers don’t have a price on red roses for Valentines Day until about the 4/5th of February so because of this 2 things happen.
1. Guessing Game – Wholesalers guess the price of Red Roses and hope they can buy them off the markets at a good price. This is dangerous for the wholesaler and the end customer. The wholesale can get stuck if there isn’t enough supply of roses which means they will pay more for them than they sold them for. This means at Valentines Day they can loose money. Also it means that to reduce this risk they might buy roses earlier and hold them in a very cold fridge (2 Degrees C) and ensure they reduce their exposure. This means that the flowers will blow (open really fast) once they hit room temperature which means the flowers won’t last. This is a nasty practice that some growers / wholesalers part take in. – Not all but it does happen and needs to be mentioned
2. High Prices – Wholesalers are offered a fixed price from their growers which is gerenally very high. They have no choice to to pass on this high price to their customers and sell them with a very low maring. This is what causes the price of roses to go through the roof. Growers will only give out a price if the price is high enough for them to hedge their bets of what price they think they will get for their roses if they were to wait and sell them at auction closer to the day, when the demand is high and hopefully the supply is reduced. By holding back on providing a price to wholesalers, they create a sense of panic amongst the florists.
2009 is going to be very interesting in relation to the economics of Red Roses. Lot’s has happened since last year which will certainly have an effect.
1. Supply & Demand –
Will Demand be down? Will less people buy red roses for Valentines Day? I don’t think so, well not massively. I think people will still buy, they may not may crazy prices but they will still mark the occassion. The question here though really is whether or not the growers will produce the right amount to ensure the supply equals the demand. If the growers get it right, the price will be more or less the same as other years.
2. OPEC Effect –
Will the reduction of the price of Oil bring down the price of Red Roses? Oil has dropped but dutch transport companies are still changing fuel levvies! I really don’t understand that. The question is how cheap could growers buy their oil to heat their green houses during the last few months. We know that their has been a really cold snap in Holland with all the Canals freezing over this winter, which hasn’t been seen for years. Did the cold snap increase the amount of oil used and what price was that oil purchased at? All of this will effect the end price of a red rose.
3. Sterling –
The Interflora Effect. Interflora has more florists in the UK and Ireland than anywhere else. They decide their prices 12 months in advance and the base their prices on sterling. This means that the price of a bouquet in Ireland is determined by an accountant 12 months in advance at an exchange rate which is 12 months old – Doh! Yes major Doh , because sterling is now above 0.85c and was above 0.90c last week. This means that the price of 12 red roses is nearly 20% cheaper in the UK than it should be if everything else was the same. That also means that the price of 12 roses is 20% cheaper in Ireland but the cost the flowers is the same. So who loses – Well Interflora does as do the florists. Having spoken to loads of interflora florists since December, most of them are simply not advertising interflora bouquets at all because they simply would loose way too much money.
The South American / East African Effect:
Globalisation has well and truly taken hold of the flower business. I suppose, when you think of what Columbus and his fellow sailors did back in Ye Olde Times, they went to lands never travelled in search of resources and products they could trade. A botanist was always on board taking samples and documenting new species. In 2009, it’s a little different we have flowers being mass produced in countries like Equador, Columbia and Keyna. These countries play a big role is the price of Red Roses on Valentines Day. With daily cargo flights filled with flowers flying from Columbia, to Miami, then on to London and finally into Amsterdam, flowers are travelling more than they ever did. There are positives and negatives of having flowers mass produced in these countries. One of the positives for the consumer is that they provide cheap roses into the market. But their can be a price to pay for cheap roses. It’s very hard to trace where they come from, what the working conditions are of the employees and what environmental practices the growers adheer to in these far off lands. I’m not saying they are all bad but there it’s certainly not always perfect.
So as you can see Red Rose Economics is complex and it certainly isn’t all rosey in the flower industry at the moment. There are lot’s of florists in serious trouble at the moment.
So what will Flowers Made Easy be doing?
Firstly we will be sourcing the very best quality products from the very suppliers who use the best growers who will ship the flowers to us the day after they are cut. They will provide us with a guarentee that they have been cared for correctly. They will be professionally handled all the way to our warehouse where we will store them in our cold room overnight, then prepare them and send them to your loved one on Valentines Day.
To be continued….
*This article has been ammended very slightly, due to the fact that it may inadvertertantly have suggested that Wholesalers in Holland were making large margins on Red Roses. They certainly don’t and if they feel I suggested they did, I apologise.
The point of the article was to explain what happens in relation to the price of red roses, to explain to people why there is such a varience in prices and why red roses go up in price.