Auction in Mississauga is struggling to survive

The Ontario Flower Growers Co-operative, the plant and flower auction in Mississauga, was pretty much dead five years ago. Since then, changes were made and things have improved. The ‘af-tuin veilen’ auctioning system for example, is already a fact in Mississauga.

When Ben Vellekoop became CEO of the Ontario Flower Growers Co-operative (OFG) five years ago, the Board of Management told him that the auction probably wouldn’t exist any more six months later. It didn’t scare Vellekoop in the slightest; he got down to business and the second largest auction of Canada (after the one in Vancouver and ahead of the one in Montréal) is currently doing better than before. Turnover has been increasing by 1.5-2% each year. Last year’s turnover reached 21 million Canadian dollars.

Drastic cost-cuttings

One of Vellekoop’s measures was to cut costs. Labour costs for example, went down drastically. In 2011, the auction still had 85 employees, nowadays there are only 45 left.

There were other changes too, such as the introduction of auction presales, multi-transaction auctioning, the launch of two virtual clocks, image auctioning, ‘af-tuin veilen’ and remote buying (KOA). Vellekoop explained all this to this trade magazine and a group of growers from the Dutch Westland region, who recently got a tour at the auction.

Two of the four clocks are virtual. One of these is for the local growers. There weren’t too many people making use of it when we were there. After ten minutes of auctioning, sales through this clock were over. The other virtual clock is for imports. Both virtual clocks work on the basis of ‘af-tuin’ delivery of the products to buyers. Local plants and flowers that are purchased through the virtual clock are received by the buyers two days later. For imports, it takes a week.

Potted and bedding plant grower Andy Kuyvenhoven of Kuyvenhoven Greenhouses in Brampton, is one of the suppliers who uses the virtual clock. He says it’s an advantage that he only needs to deliver the plants that he has sold. He doesn’t have to worry about collecting or auctioning the plants that weren’t sold in the first round. Instead, he can sell them straight from the nursery, via different distribution channels.

50% KOA

The Bleiswijk seats in the auction room were mostly occupied by buyers when we visited. And numerous buyers were taking part remotely. Vellekoop said that remote buying (KOA) is rapidly increasing. Last year, 50% of the sales was realised through remote buying. In winter, when the roads are all blocked, KOA might even go up to 80%.

Auction presale is popular too. Around a third of the supply is sold in advance. The plants and flowers that were sold beforehand are removed from the trolley. OFG started with this six months ago. Vellekoop explained that “the half-empty trolleys put pressure on the prices; they show buyers that there isn’t much left.”

As for the physical clocks, all products are still presented at the clock. Buyers get to see a live photograph of the plants and flowers, which is taken at, and by, the auction.  It ensures that all images have the same format and quality, said Vellekoop.

What also contributes to better price formation is multi-transaction auctioning, according to Vellekoop. Up to nine button pushes ocurring more or less at the same time, can all be approved. It also speeds up the auctioning process.

No obligation to supply to the auction

OFG never imposed an obligation to supply to the auction. Having said that, some measures were taken in order to maintain a stable supply and avoid that the auction becomes a dumping place. “The dumping is a thing of the past”, said Vellekoop firmly.

Members pay a fee that’s based on the average supply of the previous five years. Vellekoop: “Members are always allowed to supply a bit more. Especially if there’s a need for it, but they can’t simply dump whatever they like.” If a member sells more produce than the quantity that his fee is based on, he doesn’t immediately pay for it. As time goes on, the first year is dropped and the last year is added. So, a fifth of the additional amount you bring in this year, is reflected in the commission that you pay the year after. Members pay their commission fees at the beginning of the month.

This system means that members who supply more and more produce during the year, see their commission going down, compared to the previous year. Members who supply less and less, see their commission going up, compared to the previous year. The idea behind this is to encourage growers to sell more products through OFG instead of through direct sales.

OFG, which is open five days per week, works with guest members too. A guest member can only supply products requested by OFG’s supply manager. Vellekoop: “So, dumping is never allowed.”

Growers have left

If a supplier delivers less in a certain month, he actually pays a fine, because he still needs to pay his fee. Some growers have left. But Vellekoop thinks that that had nothing to do with the auction’s management. The main reason was that growers had reached retirement age. And they could sell or let their nurseries for good money to cannabis growers.

The fees that members and guest members pay are high. Members pay 13.5%, guest members 18.5%. Vellekoop realises that these percentages are hefty, but he pointed out that if growers have to manage their own sales, that’s expensive too.

Another interesting feature at this auction is the ‘buy back’ option. A supplier can put a minimum price (buy back price) on the products that he delivers. If his plants or flowers aren’t sold for that minimum price, the supplier buys them back. Buyers are still given the opportunity to buy those plants or flowers, for 10% more than the buy back price. If that doesn’t happen, the supplier can auction his products again the next day. And again the day after that. Different colour labels indicate how old products are. White is fresh, yellow is one day old and orange is two days old.

Vulnerable

Buyers – florists, garden centres and landscapers – pay 1% on their purchases through the clock and 800 dollars to be able to buy via all systems (remote buying, auction stand, auction presale and web shop). Buying online costs 3% because of the increased costs.  Seats at the auction stand are sold by bid. Buyers no longer pay for a seat, when they reach a certain turnover.

Despite all the changes and improvements, the auction remains a vulnerable organisation. It has no more than 46 members, plus 80-90 guest members. From the moment it was founded in 1972, OFG has only played a modest role in the distribution market of local plants and flowers. Ontarian growers sell only a small part of their produce through the auction. There’s only one member that sells 100% of his production through the auction. According to Vellekoop, the auction in Mississauga has 2,200 registered buyers. Half of them are active buyers. The auction’s mediation service between buyers and growers contributes another small amount to the turnover.

Vellekoop expects that the clocks will disappear in the near future and that all auction sales will be virtual. But he won’t be there in his role as director, to see that happen. He resigned to take a job with FleuraMetz.