Auction boss apologies for too hasty decision-making

AALSMEER, Netherlands: Following a backlash from members, Royal FloraHolland has decided to reframe its digitalisation ambitions and mandatory eco-certification policy. Its CEO Steven van Schilfgaarde freely admits that the board has ‘acted excessively quickly’ while stressing that the discontent is not as widespread as it may look from the outside. The auction boss also looks back on the roller coaster year of 2020 with the ups of a quickly recovering market and the downs with tonnes of composted flowers at the onset of the pandemic. A universal crisis forced the auction to successfully break through rigid bureaucracies and act instantly, bringing back much-needed calm and confidence in the auction rooms.

Last year, Royal FloraHolland, the world’s largest global auction in cut flowers and potted plants, announced four strategic priorities to make the cooperative future-proof, accelerate growth and create long-term member and customer value. Their implementation did not pass unnoticed.

Making the headlines

The announcements came in threes. Firstly, its ‘100 per cent digital target’ goal forcing all member growers to process their entire supply for direct trade through the auction’s digital sales platform Floriday by the end of 2020.

More or less simultaneously the auction’s board ordered digital reporting of environmental performance and mandatory certification for all growers by December 2021 – meaning all members and non-members supplying flowers and plants to the marketplace.

Thirdly came the news of Royal FloraHolland’s initiative to modernise its financial services. The goal is to extend the reach of instant cross border payments across the global market by enabling Floriday customers to pay in US dollars. The auction partnered with Citibank for this purpose (an international bank with an extensive network in Africa and the Middle East) to jointly simplify dollar currency balances and flows and reduce associated costs. A November 2020 trial demonstrated the auction’s ability to facilitate orders, with payment in dollars through Floriday, between a Kenyan grower and a buyer from Saudi Arabia.

That same month, the cooperative made headlines by acquiring three leading transportation companies: De Winter Logistics, Wematrans and Van Zaal Transport. This ‘deal-in-the-making’ , also known as Floriway, is set to create ‘smart logistics services to serve as a solid backbone of nationwide  auctioning.

Too much too soon

While the introduction of all these Flori-initiatives – Floriday, Floriway, and ‘flori-certification’, came from a good place, their reception was ‘too much, too soon’, causing much emotional turmoil. That is, for approximately 400 members (representing five per cent of the auction’s votes) who signed a FloriNEE petition urging the auction to reconsider its sustainability strategy and improve the useability and speed of its Floriday platform.

The FloriNEE movement also requested suspension of the mandatory eco-registration and certification for growers.

Meanwhile, the Netherlands Authority for Consumers and Markets (ACM) is currently examining the Floriway initiative and checking to see if its deals contravene anti-trust laws.

‘Not all members are worried  about the same thing’

In hindsight, auction boss Mr Van Schilfgaarde is ready to acknowledge mistakes and learn from them. “We have acted excessively quickly and have not always been clear about why we are doing -or not doing – things. We have disappointed some and for that, we are genuinely sorry.”

He also quickly adds that there are nuances in conversations that are often lost. “Whether it is sustainability or Floriday: different issues affect growers differently. It is certainly not true that all members are worried about the same thing.”

To date, it is difficult to say if the boards pacifying words are capable of putting the genie back in the bottle or -conversely- have increased the members’ taste for more rebellion, with increasingly stronger voices to bring power back to the members.

In 2018, at a Royal FloraHolland General Members’ Meeting (GGM) it was agreed to alter the organisational structure for the cooperative with a new Members Council replacing the GGM. Three years later, there is a  re-emerging nostalgia for the GGM pulling the emergency brake when there’s disagreement on all-encompassing industry issues. Not every member is convinced that this decision has led to what was back then touted as ‘a more structured influence for members.’

What helped was that the supply was not cut off entirely with the products continuing to be available when the first wave of coronavirus was over

Digital transformations are hard

It is a well-known fact that various issues surface when a company is in transition. The job number one focus is to embrace a data-driven future and cater for a well-oiled digital infrastructure. Transformations are complex, and it may be that in more traditional industries such as ornamental horticulture, digital transformations are even more complicated.

Implementing a digital system is a time-intensive process in reality. One could argue that following a five-year roll out and the time, money, and energy invested in the new technology, should all work smoothly for Floriday. The caveat is that new technology becomes quickly obsolete, and there is always something better around the corner.

Floriday, in essence, is a well-thought-out platform with a massive potential to expand the breadth and depth of the auction’s digital relationships with current and future members and customers. Its success not only depends on good communication and leadership. It is also about constantly adjusting and upgrading tools. And that can be a daunting task, notes Van Schilfgaarde.

“We have underestimated the need for more tailor-made solutions for growers and exporters which are more complex than we had imagined. Luckily, there was very positive feedback. But Floriday users also indicate the system needs additional functionalities.”

Togetherness and transparency

Van Schilfgaarde underlines that the industry is complex, with many different products, specifications, and working methods which were not all reflected during Floriday’s development stage. “Following extensive deliberation with the Members Council, handling agents, growers, buyers and software suppliers, we are now ready to bring in new functionalities so that that the platform becomes more user-friendly, and less time-consuming. Together with all parties involved we are now looking at a feasible end date for 100% digital,” he announces.

According to Van Schilfgaarde, there is currently a good dose of ‘togetherness’, ‘transparency’ and ‘interaction’ in the digital platform. The auction runs Q&A sessions on YouTube, with each episode giving a grower or trader space to address one of the many pressing functionality issues.

Building on a strong foundation

Speaking of pressure, how does Van Schilfgaarde handle the extreme pressure that the rollout of Floriday brings? “Was it nice? No of course not. I would have preferred a smooth implementation of this key strategic initiative. Taking a more holistic approach, one realises not only the huge size of this programme but also its meaning for our entire industry. With currently 30 per cent of direct trade realised through Floriday we are now building on a solid foundation, but we are not there yet. However, I am fully confident that by the end of this year, together we can look back on significant achievements. Hopefully saying to each other that despite the tough journey our efforts have been worth it.“

Whether Floriday has kept Van Schilfgaarde awake at night or not, being a CEO is a dynamic, exciting career that certainly gets him up in the morning. He says, “Frankly speaking a CEO’s primary task is to run the daily operations while preparing our marketplace for the future. Digitalisation, but also wholesale distributor consolidation and direct sourcing from flower farm to retail store; we must move faster with new services to address the more rapidly changing preferences and needs of our member growers and customers.”

Royal FloraHolland’s CEO believes that the company has taken a significant step towards digital readiness over the past three years, efforts for which it is not always easy to deserve credits, especially among industry peers. “In turn, it is remarkable that people from outside the industry show great appreciation. For not taking our leading position as the global hub for flower trade for granted. For our sense of reality and pro-active approach in digitising our business for the sake of the entire industry at home and abroad,” notes Van Schilfgaarde. He firmly believes in the power of an ‘interconnected ecosystem’ with Floriday being the grower’s powerplug and Blueroots, the portal for buyers.

Crisis management

For all the eco-certification sensitivity, tensions in transportation, digital distrust, Royal FloraHolland does deserve credit for the pro-active handling of its Members interests during the unprecedented global health crisis. The pandemic shook the market from the onset, with auction clocks in free fall and tonnes of products composting when they would usually be selling in the peak season of March and early April.

The auction’s rebound was lightning fast for product categories such as indoor plants, garden plants, trees, shrubs and young plants. Meanwhile, the pressure continues for the cut flower segment as couples rethink their wedding arrangements and other celebration events continue to be cancelled and postponed.

In week 9, the auction recorded its highest ever week’s turnover: €162 million. For the first time in its 110-year history, the Dutch cooperative reached the one billion mark in turnover in week nine. This milestone, under normal circumstances, is customarily celebrated in week 11 or 12.

“In terms of managing the coronavirus crisis, I reckon that the industry did an excellent job, realising the importance of bonding together. The way out of the crisis was quicker than anticipated. What helped was that the supply was not cut off entirely, with products continuing to be available when the first wave of coronavirus was over. Simultaneously, we managed to create more airfreight capacity.

“At home, Royal FloraHolland teamed up with the government and industry stakeholders resulting in a €600 million stimulus package, which brought back calm into the industry. Growers regained trust and started to plant new crops. Currently, flower and plant exports remain strong, price levels are good. Which does not mean the Covid-19 impact on the industry is over, as several companies continue to struggle.

Van Schilfgaarde asserts, “It is important to mention that the auction did not use any of the money from the stimulus package so we survived without any state aid.”

Covid-19 long-lasting impact

Asked whether the pandemic will have a lasting impact on the flower industry, Van Schilfgaarde notes, “Covid-19 will change the world as we know it for good. We have all grown more accustomed to working digitally and the pandemic has accelerated e-commerce growth. Some of the more traditional ways of working will return but overall the digital world is here to stay.”

Today, the industry may well find itself in a seller’s market. But where will the growers and traders be in a year from now when mass vaccination will start to have a profound effect. By then, people will be done with their sofa and garden, ready to go out and about. Is there a future flower crisis in the making?

“No one has a crystal ball, everyone is guessing. In our pre-Covid world, we were already seeing a growing demand for flowers, and, in particular, indoor plants. Prices are high, while we are also seeing an increase in production. So I am very optimistic. But the degree to which a business adapts to the new business landscape is likely to substantially impact a company’s performance.”

What will be the future of Royal FloraHolland’s auction hub in Naaldwijk?

Embracing sustainability

Van Schilfgaarde thinks that when positioning a company for long-term success, horticultural entrepreneurs must embrace sustainability because the industry is highly vulnerable to negative connotations towards poor flower farming practices. “Consumers expect transparency. They want to know where the plants and flowers come from, how they are grown to subsequently assess which of them have the lowest environmental impacts. This not only applies to our industry for all mass market retailers,” says Van Schilfgaarde. He adds that of the auction’s annual turnover of €4.65 billion, currently 81 per cent can be attributed to flowers and plants grown in an environmentally friendly way.

According to Van Schilfgaarde, sustainability, competitiveness, and reputation go hand in hand. He says, “In a highly competitive gift market, you need a firm sustainability strategy to stay top of mind with your customers. With eco-certification, we are responding to all sustainability requests. However, the question is whether you need to make digital environmental registration and eco-certification mandatory? From the emotional debates, this consideration results in varying costs and considerable paperwork. “Therefore, it has been decided to look into how we can accommodate the various requirements jointly. We are therefore postponing the enforcement of the obligation for growers. We are not enforcing and applying sanctions until further notice, and so we will not be imposing any penalties.”

One-size-fits-all is not the way forward

Our final question to the auction boss, who is at the helm of the auction since 1 January 2018. Suppose discussions on the regulatory burden, paperwork, and digital preparedness show an increasingly significant gap between large growers serving the mass floral market and the small-to-medium-sized grower doing traditional wholesale. How urgent is it to move away from a one-size-fits-all business model? Van Schilfgaarde recalls how this discussion started one year ago and is ongoing.

He candidly admits that a one-size-fits-all strategy is not the way forward. On the other hand, he also says that an organisational restructuring to set up different cooperatives, each responding to the diverse needs of growers, is ‘the worst thing you could do’.

“For running a strong cooperative you need economies of scale to deliver low cost services. Second, you need both smaller and larger growers. The smaller ones for growing specialty products which our exporters need to cater for the events market. The wider your product range, the more attractive you are for the consumer in the end. The best thing you can do? Is to exactly follow the path we are currently embarking on, that is using one digital eco system which everyone connects. Based on this digital environment every grower and trader can use the service they need, with no obligation to pay for unnecessary services. And this will lead to the best competitive position for the industry as a whole.”