“Ninety days! Ninety days!!” That was the clear answer from a Canadian grower, when a group of growers visiting from the Dutch Westland region asked him about his experience with direct sales, without a dominant role for the auction. Payment terms are what keeps growers in Canada awake at night. “We are divided. You are all allied thanks to the auction system and that’s extremely important.”
When Jaap van Staalduinen, originally from Lier in the Netherlands, emigrated to Canada and made his way to the bank over there a few years later, to apply for a loan to start growing container plants, he wasn’t sure he would get any money at all. He had no experience as a grower. Back in the Netherlands, he’d been working as a sales representative with Brinkman and Pöppelman. But when the bank heard this, they actually considered it an advantage. “If you don’t know how to find customers or how to approach them, you won’t get anywhere”, said Staalduinen.
Yes, there are auctions in Canada. Some growers in Ontario make use of the auction in Mississauga or the one in Montreal. But typically only for part of their production. Auctions have never played a major role in Canada; it’s just one of several channels to distribute plants and flowers. In large part, growers need to manage their own sales, is what a group of eight Westland growers plus myself witnessed during our tour around Ontarian floricultural companies (see text box).
From trucks
The main distribution channels that growers in Ontario make use of, in addition to the auctions, include wholesalers, garden centres, DIY stores, supermarkets, florists and the food terminal in Toronto. The food terminal started out as a large fruit and vegetable market, where plants and flowers were sold as well. From trucks or on the street.
From the various growers we visited during our trip, we learned that they all tackle the issue of sales in their own way. On one end of the spectrum are the growers who leave the entire sales process to wholesalers or fellow growers. On the other end are the growers who developed their business into a wholesale company with its own production. For many of those types of growers, there’s no place for the auction in their sales strategy. In the middle of the scale are the growers who sell part of their production to wholesalers, another part directly to garden centres and smaller supermarket chains and a small part through the auction.
Westland Greenhouses in Jordan Station is an example of a company that doesn’t manage its own sales. Owner Peter van Beurden started his pot and bedding plant nursery in 1976 and he claimed that he’s never sold anything directly to an end customer. The grower, originally from Schipluiden in the Netherlands, sells his entire production through wholesalers. And that isn’t going to change now that his two sons have joined the business. They aren’t salesmen, said Van Beurden. “Sales is a totally different profession. I’d have to employ a sales manager. But when spring is over, there’s always a period when production comes to a standstill. What would I do with my sales manager during that time?” Van Beurden isn’t interested in buying the necessary additional lorries, either.
Ed Feenstra from Feenstra Flowers is another example of a grower who prefers to leave the sales process to someone else. He distributes his 1 million Orientals and 400,000 LAs through Rosa Flora, the Bulk family’s nursery. Feenstra did however start trading in plexiglass. He’s a distributor for a German company.
An example of a company at the other end of the spectrum is Bayview Flowers. 80% of the plants and flowers sold through Stuart and Clarence van Staalduinen’s nursery isn’t produced at their own nursery. Bayview employs seven sales people and four marketing managers. And another three people who support the marketing department. 85% of the company’s trade is distributed to supermarkets in the USA and in Canada, 15% goes to wholesalers, and the company manages their own logistics too. The Van Staalduinen brothers sit down to negotiate with the large supermarkets themselves.
Westbrook Floral in Grimbsby is another example. The company of the Vermeer family has a 13-ha production, they import flowers, build greenhouses and they’ve also got a distribution centre, where they make bouquets. Their annual turnover is 140 million Canadian dollars. They grow their own tulips and pot roses and they buy lots of products from other growers.
Own sales force
Distributing your own plants and/or flowers to end customers requires a sales force. Van Beurden was quick to point this out. The size of Bayview’s sales and marketing team says enough. Compared to the Netherlands, the marketing costs in Ontario are pretty high.
Considering there isn’t a place to ‘dump’ their produce, it’s important that growers’ production is in line with the market’s demand. They’ve got to customise their production. If they don’t, they won’t be able to sell their plants and flowers. That’s exactly what Jaap van Staalduinen experienced during his first six months – there wasn’t anyone to sell his container plants to. He was lucky in the sense that he could still repot them and sell them a year later, but often, when there’s no demand, plants and flowers will have to be thrown away. These days, Van Staalduinen sells 80% of the produce that he’s going to start off, in advance. It’s not uncommon for growers to sell before they’ve set up production. And sometimes they learn what the demand is from past experience.
This type of customised cultivation means that growers tend to have a large assortment, because that’s what the market demands. There aren’t too many companies that are specialised in one particular plant or flower. A large assortment ensures customer loyalty as customers can get everything they need in one place (one stop shopping).
The plant and flower market in Canada and the USA is very much driven by days like Valentine’s Day, Mother’s Day and Easter. This means that demand is the biggest in spring. Some greenhouses are completely empty in summer – because there’s no demand and also because it’s too hot for production. For perennial crops, it can sometimes be difficult to meet market demand. A popular choice around Valentine’s Day is red gerbera. Around Mother’s Day, consumers want pink. So growers need to produce both, in equally large plots.
No dumping place
The fact that there isn’t a real ‘dumping place’, also means that growers can’t expand without constraints. There has to be a market for it. Neil and Mike van Steekelenburg’s CosMic Plants in Beamsville, expanded from 8,000 to 15,000 m2, but not after very thorough preparations. The brothers had already been hiring a small nursery for a number of years, so they could gradually expand, step by step. Now that they’ve finalised their extension, the Van Steekelenburg brothers are looking for a marketing manager for their sales activities and for added value, trends and social media. Mike used to do everything by himself. Compared to other growers, CosMic gets a fair amount of same-day orders. And despite the fact that they distribute partially through the auctions in Missisissauga and Montreal, this can sometimes be stressful. Mike described how he sometimes feels as if he’s about to sit an important exam. Always wondering how sales will go the next day.
Getting paid
An advantage of the auction in the Netherlands, is that growers who sell their plants and flowers through the auction, will always get paid. Within a few days, that is. When you’re trading outside the auction, that’s totally different. Sjef van den Berg had a bad experience when a big customer, who used to buy two-thirds of his produce, went bankrupt. In fact, this led to Van den Berg’s own bankruptcy. With his new company, Van den Berg makes sure he supplies to several different wholesalers.
Several other companies also pointed out that they’re spreading the risk; nobody wants to depend on one large customer. It’s expensive to take out insurance against non-paying customers. Someone mentioned a percentage of 5%. We got the impression that this isn’t something many growers do and that most growers generally do receive their money anyway. One of Westbrook’s owners said that each year, less than 1% of the invoices isn’t paid. The company does hire a money collector, though. Van Beurden indicated that during his entire work life, he might have missed out on a 3,000 Canadian dollar payment, but that’s about it. Bart van Haaster of Sun Valley Niagara in St. Catharines (tulip and lily grower) on the other hand, got to learn his lesson the hard way. He now maintains a strict, 30-day payment period.
Growers do also check customers with regards to their creditworthiness. Or they ask someone else to do this on their behalf. In some cases, customers have to pay in advance. And for direct trade with the USA, potential adverse effects of a drop in the exchange rate of the American dollar, is usually offset by the purchase of dollars.
180 days
According to these Canadian growers, the payment period is the main problem of direct trade. It can end up being far too long. Andy Kuyvenhoven in Brampton seemed to be the record holder. He grows pot and bedding plants. Once, he didn’t get paid until after 180 days. He had supplied an order in spring and got paid for it just before Christmas. “This happened during the ten years that trade was really bad – in those days, you just accepted these things. But not anymore.” Kuyvenhoven said that his payment term is between 30 and 120 days.
One of the owners of Westbrook said that the period can be as long as ninety days sometimes. “Ninety days, ninety days! I’ve got to pre-finance all that time. It used to be 10-14 days, but it has become much longer. That’s because producers are divided in Canada. You’re all allied because of the auction system”, he said to the Dutch growers. “That’s extremely important. We are divided. If one of us sets a 30-day payment term, someone else will make it 40 days.” The Canadian growers don’t really engage in any price wars. “But they use their payment terms to attract customers. And that isn’t always pretty either!”
