117. Cut Flowers

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• Advances in refrigeration and logistics have transformed the cut flower industry into a complex, global network that allows consumers to purchase flowers like peonies year-round by sourcing them from different hemispheres sequentially.  Copied to clipboard!
• Approximately 80% of cut flowers purchased by U.S. consumers are imported, primarily from South American countries like Colombia and Ecuador, which benefit from ideal climates and lower labor costs compared to domestic growers.  Copied to clipboard!
• The cut flower supply chain is highly time-sensitive, relying on rapid air freight and strict cold chain maintenance (around 42 degrees Fahrenheit) from harvest to wholesaler, with customs inspections adding significant cost and potential delays.  Copied to clipboard!

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Flower Demand and Global Sourcing

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(00:01:23)

• Key Takeaway: Consumer demand, exemplified by the desire for peonies in August, drives the global flower supply chain to find year-round availability across multiple continents.
• Summary: Americans buy flowers year-round for various occasions, creating demand that pushes the industry beyond seasonal domestic growing. Wholesalers source flowers like peonies globally, moving from Chile to Israel, then to domestic locations like Arkansas and North Carolina, depending on the local growing season. This global sourcing dictates what types of flowers farms grow and when they are available.

Milano Family History

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(00:04:13)

• Key Takeaway: The Milano family’s entry into the flower business involved an unconventional journey from Italy to Los Angeles via a cargo container carrying greens.
• Summary: Bob Milano’s grandfather immigrated in 1921 and initially worked picking indigenous greens. Dissatisfied, he stowed away on a cargo container to reach Los Angeles, eventually starting a flower farm and selling at the LA Flower Market. Historically, the lack of refrigeration meant flower sales were heavily dependent on locally produced flowers.

US Import Dominance and Competition

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(00:05:51)

• Key Takeaway: South American countries dominate the U.S. high-volume flower market due to ideal climates and lower labor costs, forcing U.S. growers out of commodity production.
• Summary: The U.S. began importing heavily from Colombia in the 1960s, and today, 80% of cut flowers bought domestically are imported, mainly from South America. U.S. growers found it difficult to compete with lower production costs for flowers like carnations and chrysanthemums. African countries like Kenya and Ethiopia are also large producers, though their exports often go to the Netherlands first.

Wholesaler Operations and Volume

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(00:07:41)

• Key Takeaway: A major West Coast wholesaler handles massive weekly volumes, receiving approximately 13 pallets of product from South America alone.
• Summary: Jasmine Gomez-Gonzalez of OC Wholesale Flowers services florists and event designers, handling hundreds of bunches of roses and thousands of stems of hydrangeas weekly. The company works with hundreds of different flower types weekly, sourcing from Japan, the Netherlands, the Pacific Northwest, and California. OC Wholesale prioritizes working with farms that are Rainforest Alliance certified to ensure baseline labor and environmental standards.

International Shipping Logistics

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(00:09:39)

• Key Takeaway: The international flower supply chain is optimized for speed, aiming to move perishable product from South American farms to U.S. wholesalers in about one week.
• Summary: The process involves harvesting, grading, hydrating, packing, flying, and clearing customs, ideally completing the journey in six days to reach Miami. Flowers entering the U.S. primarily use Miami International Airport, where USDA inspections can cause delays if pests are found, potentially leading to fumigation or destruction of entire shipments. Redundant state-level inspections, such as those required in California, further increase costs and handling time.

Cold Chain Integrity and Flower Longevity

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(00:13:22)

• Key Takeaway: Maintaining a consistent 42-degree cold chain from cutting to delivery is critical, as any failure causes immediate quality degradation, but proper maintenance allows flowers to last one to two weeks after blooming.
• Summary: Flowers must be kept cold throughout the entire logistics chain; failure in the cold chain results in molding, shedding, or blown-open blooms. Thermometers track the cold chain integrity from the farm, ensuring that when stems are re-clipped at the wholesaler, the flowers burst into bloom. The longevity of the flower post-purchase depends on its initial freshness and subsequent maintenance.

Holiday Spikes and Cost Factors

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(00:15:02)

• Key Takeaway: Valentine’s Day and Mother’s Day represent the ‘super bowls’ of the flower industry, causing consumption to spike five times the daily average, which strains infrastructure and increases freight costs.
• Summary: Holiday demand causes significant spikes in operational costs, with air freight rates increasing substantially (e.g., a 75-cent increase per kilo rate mentioned). While sea freight is slower (adding 10-14 days), air freight costs vary significantly, being much higher into Los Angeles ($2.50-$2.75/kilo) than into Miami ($1.75-$2.00/kilo). Forecasting demand for holidays relies on historical data, but day-to-day ordering remains extremely difficult.

Wholesaler Margins and External Pressures

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(00:22:00)

• Key Takeaway: Wholesalers typically operate on a 35% to low 40% margin, but this is increasingly threatened by rising global labor costs, tariffs, and unpredictable weather/disease events.
• Summary: Wholesalers mark up product to cover costs, but inputs like labor in California and South America are rising globally. Tariffs, such as the 16.8% cost imposed on Ecuadorian roses, significantly inflate the final cost of imported product. Unforeseen events like disease outbreaks or tariffs force suppliers to raise prices to recoup losses and maintain greenhouse operations.

American Growers’ Pivot to Specialty Blooms

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(00:23:44)

• Key Takeaway: To survive competition from low-cost imports, the 20% of U.S. cut flowers that are domestically grown have pivoted away from high-volume commodities toward unique, high-value specialty blooms.
• Summary: California growers have largely exited the production of roses, carnations, and hydrangeas due to cost pressures. They now focus on unique textured blooms that command top dollar from customers seeking variety and differentiation. However, domestic growers face ongoing challenges from rising labor costs and water scarcity, leading some to switch land use entirely, including to the marijuana industry.