DFG ready to ramp up the co-financing of flower farms at home and abroad

Author: Ron van der Ploeg

On 1 January 2021, Marco van Zijverden handed over the reins of Dutch Flower Group (DFG), the world’s largest wholesaler of flowers and plants, where he has gained a 21-year stint as CEO. In this exclusive interview he shares the knowledge of an outgoing chief executive and highlights the issues the company faces.

The announcement of Van Zijverden’s departure one year ago came quite unexpectedly as the industry presumed it would coincide with his 60^th birthday as he used to tell everybody. The 58-year old, freely admits that the time to quit arrived sooner than planned. He explains, “Q4 of 2019 marked quite a few changes to DFG’s executive leadership team with Ruud Knorr, director retail/plants and Marco Vermeulen, director of wholesale&sourcing leaving the company. The management of our 33 companies continued to report directly to their CFO Harry Brockhoff, and myself. The lines of communication worked well, but with two out of six of our executive staff leaving, things kept us busy. At the same time, our supervisory board member Jan van Dam retired from Ahold after running different divisions of the multinational for 23 years. He showed keen interest in joining the organisation he had already grown familiar with. So, we proposed his first steps into the role of CCO to succeed me in three years. Jan was showing drive and above all readiness, and he accepted on the sole condition of the succession date being forwarded to 1 January 2021.”

Likeability factor

Marco van Zijverden (Photo credit: Melinda-Lou van der Linden).

Van Zijverden is the son of the illustrious Klaas van Zijverden who founded OZ in 1959. He joined after an assignment as a graduate student in 1985 and started to do a feasibility study about the possibility of importing flowers from Zimbabwe.

He officially joined DFG in 1986 after graduation from Erasmus University in Rotterdam and Nyenrode Business University. In his first role, he ran OZ Import and later, OZ Export, a floral wholesale company with substantial exposure to the US market, which at the time headed for rocky waters due to an economic downturn.

More than 34 years later, he says that reshaping a business, bolstering its market, is what he  still enjoys most. He says, “Building  a company is building a community by following a step-by-step approach. First comes the vision, second the strategy. The third challenge is to find the right people to execute it with precision.”

Van Zijverden is sure to leave the company in good hands. Not only has his successor soaked up a great deal of mentoring from his ‘old boss’, but he also brings to DFG an excellent track record in retail, the market segment in which the Dutch Flower Group generates two-thirds of its business. Van Zijverden continues, “Jan’s experience in retail and online sales and his international work experience (Boston, Prague) makes him the obvious choice for the job. And yes, he is a nice chap. Interesting that you ask me because to lead successfully in the modern business setting, your social capital – your likeability factor – is also at stake. My father always told me you can be extremely intelligent but if you run a company you must ensure that people are willing to work with and for you. Much of leadership is about facilitation, showing interest in your people’s jobs and career, and about knowing how to draw ideas out of others.”

Creating a colourful, ever-changing world

Van Zijverden looks at his job as a source of meaningfulness; he adapts what he calls a ‘politically correct language’. “I am completely honest with you when saying that when I started in this business, I appreciated the beauty of flowers and plants. But that was it. It was all about the worldwide business, profitability, competition and the global trading networks which are behind them. However, during the last 10 years I have grown prouder of our products. Not only do they keep the world smiling, flowers and plants are also good for our physical and social well-being. What once started as pure business has become something much more, something that is creating  a more colourful world and even better world.”

In terms of corporate activity, in a world which is also fast-paced and ever-changing. Van Zijverden points to the game-changing merger of equals in 1999. “Van Duijn Group and OZ Group, two financially strong family companies joining forces to become Dutch Flower Group was an absolute first for the industry in that it showed that knowledge sharing can be the main motive on which to build a company. Another significant change over the last ten years is the digitalisation of our industry, and the changing role of the auction clock. In the 1980s, we bought 95 per cent of our products through the clock. Today, the companies serving wholesale continue to do so while nearly all mass market flowers are directly sourced from growers across the globe. Which automatically brings me to the rise of the mass market floral industry and how it is transforming the way our industry operates.”

The need for new blood to progress

Family businesses typically form the backbone of global ornamental horticulture, and DFG is no different. Van Zijverden’s departure marks the first time that the company is reaching outside for a CEO. And that is, Van Zijverden is quick to ensure, without leaving nor the Van Duijns nor the Van Zijverdens struggling with a well-known paradox; maintaining family values and respecting the legacy of the previous generation whilst also seeing the need for new blood to progress. “Frankly, we are proud to be a family run business with deeply engrained values such as transparency, responsibility and sustainability. But we are always in search for the right balance between talents from within the floral industry and beyond. Bringing in outsiders is important, and it is what we have been doing over the last couple of years. Our Chief Information Officer (CIO) has previously held different management positions at KLM and Transavia, Harry Brockhoff comes from the tobacco industry, and my successor worked for Ahold.”

At DFG the management takes shares in the company. “To date we have more than 100 shareholders. If the managing directors and their teams are performing well, they are automatically part of the financial success. This results in a strong, family-like commitment,  which really helps us to grow.”

‘We were losing 80 per cent of our turnover’

In an ironic twist of corona-fate, people are spending much more time at home and taking a considerable interest in decoration, gardening, and home styling.

After barely two months following Van Zijverden’s announcement to withdraw, the first wave of coronavirus cases was engulfing Europe with widespread disruption in the logistics chain, closure of borders and markets, an auction clock in a free fall and tonnes of unwanted flowers ending up in the compost heap. Trade show after trade show cancelled or postponed. And even if Van Zijverden stays on as part of DFG’s advisory board, his farewell party has been rescheduled at least five times.

Giving a timeline of events he recalls, “None of us had experienced such a thing before. It felt surreal and as something beyond your control. When I came home in the evenings of mid-March the reality kicked in that we were losing 80 per cent of our turnover. The biggest challenge was to keep the team motivated while the reality forced us to cut costs right away by laying off all temp workers.”

DFG made use of a wage subsidy scheme and only a handful of its divisions made claims under the government’s €600 million aid package. Van Zijverden notes, “It is easy to blame the government for your problems but looking back I think the whole thing was well organised. The needed money was there into your account within three weeks. More than 85 per cent has been paid back as losses turned out less severe. As for the national stimulus package, ultimately less than half has been used by growers and traders. Given the situation in which our peers abroad are, we should not complain.”

In the run-up to Easter business started to pick up and countries were easing their restrictions. “Fortunately, Boris Johnson announced the country’s lockdown two days ahead of Mothering Sunday, allowing us to supply just in time for all our British retail customers. If he had done so one week earlier, the drama would have been even bigger for us.”

Top selling living plants

In an ironic twist of corona-fate, people are spending much more time at home and taking a considerable interest in decoration, gardening, and home styling. “Living plants have emerged as the top selling product amid the pandemic. In cut flowers, our companies selling to supermarkets are performing reasonably well. But Covid-19 restrictions differ from country to country. Following France’s second wave of coronavirus cases, the government ordered supermarkets to close their non-essential departments. In my opinion this is proof of political short-sightedness as the measure will be counterproductive. It will encourage shoppers to take to Amazon, which already is the country’s most popular online store.” (Note from the editor: apart from a handful of fruitless partnerships between Monceau Fleurs and Amazon France, the online retailing giant plays no role of importance in online flower delivery. More successful are platforms such as Aquarelle, Bebloom and to a lesser extent Monsieur Marguerite)

Van Zijverden candidly admits that DFG’s cut flower business, selling to wholesale such as OZ Export, Hamifleurs, Holex and Florca are battered more heavily as the road to recovery for the events industry is long. “In a country such as Italy weddings and flowers are big business when it comes to cool new varieties. Turnover in these segments dropped between 20 and 30 per cent. It may be too early to predict a flurry of marriage celebrations in 2021, but we are ready for it.”

Keeping it simple and straightforward

Countless webinars have tried to identify the route to recovery under the new normal and post-Covid. Van Zijverden does not believe in painstakingly crafted strategies. “Keep it simple and straightforward. Cut overhead costs and ensure that customer satisfaction remains intact. Again, you need the right people in the right role. Sometimes you can also use the pandemic in a positive way. Hamifleurs, OZ Export and Van Dam Bloemen for example have combined their activities, logistics operations and back office support functions. Bloom, Green Partners, and Greenex, all three specialised in supplying mass market floral departments across Europe, they now have a joint leadership team.”

He recalls the exceptional coming-together online of all the 33 members of the DFG family. “Lengthy discussions on why there was a need to join forces lifted, the spirit of togetherness was stronger than never before.”

Ongoing growth strategy

In this spirit of bonhomie, Airflo and Waterdrinker are examples of DFG’s ongoing growth strategy, although comparing both, is difficult. Van Zijverden points out. “The acquisition of Airflo, a specialised forwarder of flowers and fresh produce in which we already had a 25 per cent minority share, was about taking back control. Consider it a pure business opportunity allowing us to create a more efficient cold chain between grower and retailer. One major asset is the company’s cutting-edge tracking system to be set up with the flower farms in Kenya. The merger of OZ Planten and Hamiplant (both DFG plant-focused companies) with Waterdrinker involved broader decisions for the long-term.”

In terms of international growth, it is no secret that DFG aims at expanding its business in the USA, building on their existing market presence through The USA Bouquet Co. and Holex USA through dedicated partnerships. “But we need to speed up things as competitors such as Sunshine Bouquet are at our heels and there is a quickening pace of consolidation .”

Contrary to what Dutch newspapers reported, Van Zijverden insists DFG will not embark on flower production themselves, but will further intensify its long-term agreements and exclusive deals with flower farmers. Plus, in an era of easy money, with interest rates at European banks at a record low, the Group will ramp up the co-financing of flower farms in Kenya and Ethiopia and tulip farms at home.

When asked about a shift in international trade patterns, he notes, “Increasingly what you will see happening is that China produces for Asian countries. In turn, Africa and South America will continue to cater for the European and North American market, respectively. So no real big changes anticipated there, apart from a few niche ventures. DFG, for example, ships weekly around 10 to 20 containers from Colombia to the UK, while also sourcing some products from China.”

The Dutch Plant Group

More recently, news broke of the new powerhouse of plants: the Dutch Plant Group. Three major plant suppliers, including DFG members OZ Planten and Hamiplant, and Waterdrinker joined forces tapping the potential of ever-popular indoor and garden plants. All three companies will continue to trade under their names. The brand title will merely serve to indicate its market power. By partnering, all three companies can now offer their associated breeders and growers a much larger and exclusive sales territory. It will help plant innovators to obtain an even better return on investment.

Van Zijverden foresees a growing interest in plants, especially among the younger shoppers. “Waterdrinker has brought in its flagship Green Trade Centre (GTC), a 25,000m2 ultramodern cash and carry store. Before merging some of our cut flower focused companies – doing plants only on the side – used to order from GTC, an outlet which is extremely useful when you only need a few trays of plants.”

DFG’s digital readiness helped to tackle the coronavirus crisis. In a demonstration of frugal entrepreneurship Van Zijverden says, “Granted, the total cost of software ownership comes at a cost. But we were lucky to have the latest update of Office 365 implemented within all our companies, allowing them to connect using Teams. Already in 2019, we decided for a multi-million overhaul of the webshops of our wholesale companies . Also, we will complete the roll out of Enterprise Resource Planning (ERP) system. This solution plays an important role in centralising information that eventually will boost productivity and sales between DFG and its supermarket customers.”

Don’t get Van Zijverden wrong. He has nothing against private equity, but DFG’s is not a short-term focus. “A good example is our letterbox flowers company BloomPost and its e-commerce fulfilment and delivery service e-Flora. This part of our business is still not huge, but rapidly expanding. At the time, we felt the need to invest because we foresee more future growth.”

In Blue Roots, data protection is a top priority

Another digital venture is digital platform Blue Roots. Initiated by DFG in 2018, Blue Roots is now a 50/50 business partnership between a group of 25 trading companies including DFG and FM Group, and Royal FloraHolland.

Blue Roots is an integral part of the auction’s Floriday platform. Van Zijverden explains, “While Floriday is the grower’s powerplug, Blue Roots is meant to be the portal for buyers. So, all growers enter their products via Floriday and in the end the flowers shall go out via Blue Roots.”

For all the EU’s GDPR efforts, the question arises whether it is a good idea to put full trust in a sales platform by handing over data online. How to keep control over how this precious data is collected and used? Van Zijverden explains, “Data protection is our absolute top-priority. Royal FloraHolland’s CIO André van Linden previously worked at Rabobank and has in-depth knowledge of data governance and protection. Conversely, FM Group, Royal Lemkes and DFG have teamed up in the Blue Roots expert team to develop protocols and the first results look good. It may be worth stressing that if auction reps breach data protection laws they can be fired and fined. To date, that is not the case because the auction still works with an open access system dating back from one hundred years ago.”

Blue Roots position was to counterbalance the auction’s strategy with the cooperative, for example purchasing and reselling flowers in China. “A year ago, we decided to open up this innovation beyond our walls as we realised that we need external parties to expand. Now that a wind of change is blowing and the auction is back to its core business, there is confidence we can increase the Blue Roots’s potential together.”

The Blue Roots partnership highlights the stark contrast between DFG and Royal FloraHolland being frequently on a collision course halfway the 2010s. Van Zijverden iterates, “There is no conflict between auction and trade. We would like to stress that we support the auction, but we will always continue to challenge them.”

Today for tomorrow

As an outgoing CEO Van Zijverden has one great wish left; to make the auction system of that what is regularly called the ‘Ministry of Flowers’ more efficient. “The outlook is good. The auction will deploy nation-wide auctioning, and further digitalise its business. All this will mean that soon we will stop auctioning at 6 am but at a more generally accepted hour during the day. This ‘today for tomorrow’ approach will allow wholesalers to directly source their products from the grower or through the auction’s fine-meshed and frequent distribution network. It will lead to huge efficiency within our companies because you will not have to wait any longer for your flowers and plants. When it comes to efficiency it is good to see that the auction stopped the crazy numbers of interim managers. Sometimes you need them, but they can also be a good way of wasting money.”

Now that the relationship between DFG and auction has normalised is Van Zijverden ready to put his money on the auction? After giving the issue a long thought, he says, “As long as they accept our feedback on their strategy, I am ready to do so. But it is all very much depending on the type of leadership. In my 34-year career I have seen at least six auction CEO’s come and go, all of them bringing in new strategies. And we all know that from RFH’s earlier ‘2020 strategy’ this resulted in pretty much nothing.”

Wrapping up an eventful year

The Covid-19 restrictions, and their impact on the international horticulture sector, has made 2020 an eventful year. “But it was fantastic to witness the unity of the sector as we tackled the crisis together.”

Van Zijverden references the Dutch sector’s Let Hope Bloom campaign that, he says, “re-invigorated the importance of flowers and plants in consumer’s minds”. He also expressed how happy he was to see that the coronavirus outbreak forged new bonds of togetherness and altruism. Instead of throwing unsold flowers away, the industry sent the blooms to the elderly, nursing homes, and hospitals.

Dutch Flower Group generates two-thirds of its business in the multiple retail segment (Photo credit: Melinda-Lou van der Linden).

In 2020, DFG posted a €1.6bn turnover, a seven per cent decrease in comparison to 2019. DFG will still be profitable -expenses were kept below budget- but at a lower level. This calculation is partly due to the economic impact of the coronavirus pandemic, but also the imminent loss of Tesco’s business at the end of 2020. This situation forced DFG to restructure Intergreen.

Few of us can imagine what it means if one of your largest clients that brings in €140m leaves to somewhere else. For Van Zijverden it is the cold harsh truth. DFG lost the tender, Flamingo Horticulture Ltd and MM Flowers won. “The brand name Intergreen will continue to exist while we liquidated the company ourselves and arranged for a social plan.”

He vividly remembers the moment he had to share the news with the Intergreen folks “It brought tears to my eyes. The client left due to no fault of our own and despite all our hard work.”

If the price is the primary reason why a customer is leaving, the hardship is even harder to digest, Van Zijverden says. “Especially when considering the huge amount of work spent on shopper experience, floral composition, quality and marketing research. In a tendering process the risk is that you are only evaluated on price, while all other values easily get lost. Fortunately, we will continue to serve Tesco Ireland and mainland EU.”

Van Zijverden comments upon the increased level of outstanding debts across the horticultural value chain due to a tumultuous 2020. “In March, we were deeply concerned about our wholesale customers in Italy and Spain fearing huge outstanding debts. However, I have to say that the year ended on a much more positive note than expected.”

Drumming his finger prominently on the table, he adds, “But you can never increase your margins to make up for the debts among your clients.”

The year 2020 also marked the year in the Floriculture Sustainability Initiative (FSI) diary that was to fulfil its promise of having 90 per cent of its flowers and plants responsibly grown and traded. Is DFG, one of FSI’s most prominent advocates, on track? Van Zijverden comments, “In retail yes, in wholesale no. However, recently the clock displays FSI compliance of the grower which makes it easier for our clock buyers to identify sustainably grown products.”

He has a particular sustainability call to growers. “If they do not ensure that they are FSI compliant at DFG we cannot buy from them any longer.”

Finally, the end of 2020 will make it into the history books as the final part of the UK’s divorce from the EU. “The good thing is that Ecuador and Colombia are now at zero tariff. Within our company our CFO Harry Brockhoff, touted as Mr Brexit, is liaising with governments through sector bodies and lobbyists, discussing custom duties. So, yes we are prepared because if plants need inspection in the UK you need a location, VAT numbers, and knowledge of kinds of different systems. We are prepared for the worst, that is an eight per cent tariff on fresh cut flowers.”

Sighing deeply, “Yes, it is crazy. It will hurt the overall business resulting in less turnover, and more expensive flowers for the consumer. But we are all realistically in the same boat and this applies to all businesses active in multiple retail.”

Passport

Name: Marco van Zijverden

Born: 29 April 1962

Place of birth: Aalsmeer

Joined DFG in 1985

Served as OZ Group’s CEO between 1986-1999

Served as DFG’s CEO from 1999 to 2020

Will stay on as Chairman of DFG’s Advisory Board

Quick facts Dutch Flower Group

€1.6 billion turnover (2020)

33 companies in six primary market segments: multiple retail, e-fulfilment service, floral wholesale, plant wholesale and retail, sourcing and freight forwarding.

3,050 employees

174 temporary staff

offices in 13 countries

sourcing from 30 countries

exports to 106 countries

10 million bouquets/week to consumers via mass retailers

75 million stems of cut flower traded every week to the floral wholesale

10 million plants are  traded every week

aiming to reach 90 per cent sustainable sourcing by 2020