FloraCulture International sat down with Jan van Dam, who became Dutch Flower Group (DFG)’s CEO in January 2021. We wanted to learn more about how this supermarket insider finds his place within the close-knit cut flower and plant family of companies.
When we meet Jan van Dam at DFG’s office in De Kwakel, it has been six days since Russia began a full-scale invasion of Ukraine. Van Dam, who is starting his third year at DFG – often referred to as the world’s largest floral wholesaler – is visibly uncomfortable with our first question of how the Ukraine-Russia war would impact company business. His reply is measured: “With all due respect, the human tragedy which is unfolding is way more important than the floral trade to Russia. It simply feels awkward to talk shop when so many suffer, including the Russians. We don’t know exactly what is going on. When speaking to Russian customers, it appears that Putin does not have the support of the entire population. So, the story is not just black and white.”
Van Dam prefers to see things from a broader perspective. DFG’s cut flower business OZ-Hami has customers in Russia and Ukraine. Its plant-exporting companies service garden centres, supermarkets, and traditional wholesale in Russia. “But that’s a minor part of our business. The Dutch trade of flowers and plants with Ukraine has come to a standstill, and in essence, with Russia too. For now, we wait and assess the situation day by day. Needless to say, that we keep an eagle eye on payments following the Western allies’ decision to block selected Russian banks from the SWIFT payment system.”
The war in Ukraine is another blow to a troubled world still reeling from the global health crisis’s economic and social impact.
Van Dam elaborates he could write a book about what the Dutch Flower Group has been through since he first joined the company on 1 January 2020 – as Chief Commercial Officer and then a year later as CEO. “You can craft the best business strategies and generate clever ideas and solutions, yet the pandemic still took us and the rest of the world by surprise. Following a collapse as customers, countries and borders closed, and tonnes of flowers were dumped, demand for flowers and plants rebounded rapidly.”
Lockdowns and stay at home policies caused people to take a greater interest in nature, plants, and flowers. According to Van Dam, 2021 has been a good year for DFG, which posted a turnover of €2bn in 2021, a significant growth over the previous (corona) year when the Group generated a €1.7 billion in 2020.
And yet, 2021 will equally make it into the history books as a tough year. Many lives continue to be rocked – as we speak, the death toll from Covid-19 passes the grim milestone of 6 million – and business-wise, uncertainty persists. He adds, “Confusing everything at one point was the flimsy interpretation of essential and non-essential shops, closing and reopening of markets. Then, by the end of the year, our growers started to be hit by soaring energy prices.”
So, as the cost of energy, fertilisers, packaging, wages, and transportation goes upward, it is the perfect catalyst for widespread inflation. More recently, the International Monetary Fund (IMF) cut the world economic growth forecast to 4.4 per cent, citing weaker prospects for the USA and China and persistent inflation. It anticipates the annual inflation rate to average 3.9 per cent in advanced economies in 2022, up from a prior 2.3 per cent estimate and 5.9 per cent in emerging and developing nations. All factors are combined, and it seems to predict a perfect storm.
Van Dam acknowledges, “I am curious to see how this will translate in retail prices. And how this will change pricing and demand in floral, and what consumer behaviour will be.”
Cost increases prompted the company to increase its prices last year. Van Dams says this process should be carried out fairly and transparently. “We do this in close collaboration with our customers. I feel that customers understand that prices have to increase, but you need to communicate why correctly to them. Our retail customers are open to the debate. We are all in the same boat; it’s a level playing field, so we all need to adapt.”
The pandemic, Van Dam thinks, has helped DFG build a stronger business. Several companies within DFG combined their activities or virtually merged. “Our biggest strength is the entrepreneurial spirit of our people, fighting for their individual businesses, staying on top of the market while never forgetting the greater good. At the end of the day, your company is only as strong as its team.”
Van Dam references that DFG is a highly diversified company. He notes, “We do cut flowers, bouquets, houseplants, and garden plants. We sell to supermarkets, traditional wholesale, and e-tailers. And we are active in Europe, the USA, and Asia. That helps a lot. Right now, the Russian and Ukrainian markets are down, but we can easily compensate thanks to our presence in so many other markets.”
The international aspect of DFG’s business, an already strong relationship with DFG board members, and a keen interest in the global fresh produce and floral supply chain are the three factors Van Dam says attracted him before working here. He notes, “I already served on DFG’s supervisory board. So, in that role, I met many DFG workers with whom I continue to have a strong connection. Then there was the aspect of international agribusiness. It’s about farming, just-in-time delivery, being down to earth and dynamically flexible. And, my goodness, I can assure you: this sector is very dynamic.”
DFG generates approximately half of its turnover through supermarket sales. With a 23-year stint as manager at Dutch retail organisation AHOLD, Van Dam brought to the company an excellent track record in retail.
It is essential to know where the floral mass market is today to move the trade forward. Van Dam freely admits, “It is a struggle, in that flowers and plants are an important category with much growth potential. Still, many supermarkets find it difficult to grasp the opportunities.”
The DFG boss draws a parallel with the supermarket bakery category. “In the 1980s, every supermarket wanted to develop its in-store bakery into a destination stop. But it took 30 years before supermarkets understood how to do bakery well. I reckon the floral category is still in its maturing stage with only a few, such as Dutch supermarket chain Deen, truly standing out.”
The UK, Van Dam says, is unique. Its mass-market retail floral departments have significantly contributed to the store’s performance for many years. “Is it because of Britain’s love affair with gardens, flowers and plants? I can’t nail it down, but it has probably to do with careful consideration of the category given by managers who believed in it. The same thing happened with the sea-food category in France and bakery in the Netherlands. The fact is that supermarkets, with an estimated 70 per cent market share, remain the largest outlet for cut flowers and plants in the UK and are dominating florist shops. I don’t know any other country where such a situation occurs.”
In an ironic twist of fate, it was in the UK where DFG had to give up Tesco’s business at the end of 2020. The company lost the tender to Flamingo Horticulture Ltd and MM Flowers; the pair are vertically integrated floral wholesalers, active in every stage of the supply chain. From growing the flowers to processing, marketing and distributing them.
“They are vertically integrated, but only when it comes to roses,” Van Dam is keen to be precise on this point. “They do not cover tulips, chrysanthemums, and other floral products.”
So, is vertically integrated the future path to embark on for DFG? “It is a strategy, but we believe in partnerships and long-term agreements with growers and co-financing together. We are finding ourselves at a crossroads. Only five years ago, we were, in essence, a trading company buying from a myriad of products from 100 different growers. To date, there is a limited number of supplying growers with whom we do collaborative innovation, supply chain improvement and sustainability programmes. Most definitely, we are more than a trading company alone, evolving towards a full-service provider to unburden our retail and wholesale customers.”
The UK’s and USA’s mass-market floral industries have strong, robust information sources to help them build their tactics with specific data. Van Dam notes, “In the rest of world, these data sucks, so the industry relies on a good deal of what we call ‘intelligent guessing work’.”
But it is not all about speculation, hypothesis, and theory. DFG uses benchmarking and business information tools to decipher what end consumers think and what the company can do to help them out. Van Dam’s biggest takeaway is how shopper segmentation research identified a new younger face of home decoration, styling, and gardening with many new green-fingered fans between the ages of 20 and 30. “Apart from the influx of young novice gardeners, conscious consumerism is happening big time. The conscious consumer typically asks many questions about plant care, the health benefits of plants and considers where the plant they buy comes from.”
Another key conclusion is that Covid-19 – when in a sweet show of gratitude, tens of thousands of flowers and plants were given to frontline healthcare workers – bolstered the floral product’s image as a gift.
“This renewed interest in flowers and plants for gifting occasions has not revolutionised our industry, but the gift of giving hope was a big thing then,” says Van Dam.
He states that DFG companies Waterdrinker, OZ Plant and Hamiplant teamed up in the plant segment to inspire the next generation of plant purchasers. “The role of plants in fighting climate change and emotional stress becomes more widely known. It’s a challenge to develop new products and marketing concepts that benefit the environment and people’s health.”
DFG has been one of the frontrunners within the Floriculture Sustainability Initiative (FSI). In 2013, FSI members revealed their ambitions to have 90 per cent of their internationally traded production sustainable by 2020. What progress has DFG made?
“We found that 81 per cent of our traded cut flowers and plants are sustainably certified. So, we are not there yet. It takes more time than we thought to have all growers on board.
“Overall, we may have been a bit too positive in the beginning because it will be a tough job to achieve the remaining 15 per cent. But we as DFG will continue to do our utmost. I feel that a few growers are still waiting for more details on future legislation before they decide to certify.”
Van Dam is convinced that sustainability is here to stay.“We must build a sustainable supply chain; otherwise, we will be in trouble when, for example, emission stickers will become mandatory in the era of climate change and footprint measurements.
“None of us wants to end up in a situation with flowers receiving a red sticker for the most polluting product. Within four to five years, my kids will not tolerate a product that hasn’t got the energy transition right.”
Out there is a world to win, enthuses Van Dam. “In my previous job at AHOLD, industry peers frequently told me how complex floral products are in a supermarket environment. Perhaps the issue needs revisiting. Flowers and plants can spice up any store entrance; they are cheerful and help you make the difference. Transitioning to a full-service department and renting space out is only one way to professionalise the business. I believe that some supermarkets will sooner or later find better ways to sell.”
Regarding sales tactics, Van Dam underlines that innovation in products and services is the only way to improve the business while focusing on consumers’ growing demands for convenience and freshness. And please don’t tell him that competition between supermarkets is too fierce to make reasonable profit margins with supermarket flowers. “That’s the same old story we heard 30 years ago. That ‘fierce competition’ also applies to beer or chocolate, which teaches our industry we need to sell an experience instead of a product. The beer industry, for example, moved from selling crates to micro beers and speciality beers.”
Van Dam cites the marketing concepts Urban Jungle/Greenify Your Space as examples of innovative marketing ideas within the sector. The trend provides consumers with valuable tips on how to turn their homes into a lush green oasis.
The flowers for Pink Ribbon charity can also count on Van Dam’s support. The Pink Ribbon Foundation receives a portion of purpose-created Pink Ribbon Bouquets in this campaign. It provides support to people suffering from or who have been affected by breast cancer.
Van Dam also has a soft spot for online concepts such as letterbox flowers sold by Bloompost, and bloomon, a Dutch company founded in 2014 and known for its famous tagline ‘Geen Bloemen, Maar bloomon’ (‘No Blooms, But bloomon’). The company differentiates itself by its signature look. For that, floral designers use a creative eye to compose arrangements that capture both the look of a fresh field bouquet and the elegant beauty of cool new flower varieties. A style that has since been copied multiple times.
But despite a handful of clever market concepts, including the one highlighting the air quality benefits of houseplants, “the industry is not yet there”, warns Van Dam. “Be smart, innovative, data-driven. It’s crucial for us as a sector to take the floral category within supermarkets to the next level. Innovation comes with many trials and errors, but we should never stop trying new stuff. Just think of how soya milk became the white gold in the dairy category.”
Back to the supermarket stats: on average, supermarket flowers in Europe generate between 0.5 to 2 per cent of total store sales. It depends on the store’s location, available range, and how knowledgeable and dedicated category managers are. Naturally, the percentage is lower at discounters than at full-service stores. In the USA, the footprint of a supermarket’s floral department may be 100m2, while in the Netherlands, it can vary from a few racks and one or two m2 to a full-service florist shop.
In the long run, Van Dam sees a modest one per cent increase in the supermarket flowers’ market share to the detriment of retail florists in Europe. The future success of flowers on the retail shelf intrinsically links with floral shrink, which in Europe is currently between seven to 14 per cent on average. Van Dam: “The best way to prevent shrink is to sell more. But then the question is what the per store target is and if there’s a competing florist next door. The overall conclusion is that only essential shops such as supermarkets continued to stay open during the pandemic, almost to the extent of having monopoly power. But there was also growth for florists, particularly those with a digital strategy and curbside pick-up. But Covid-19 blurs the picture. So, let’s see and wait until the dust has settled.”
There are frequent stories about growers hitting out at the monopoly power of supermarkets and their supplying wholesalers for ‘squeezing them’. Critics argue that supermarkets take none of the risks of ornamentals production and profit from small growers. A situation which Covid-19 aggravated. In the spring of 2020, Royal FloraHolland’s Order and Risk Service (ORA) department effectively intervened as the mediator between growers and exporters as Covid-19 triggered a wave of cancelled retail orders.
Van Dam says he is unaware of the picture of growers, exporters, and retailers engaging in trench warfare against each other. “DFG and its retail partners are extremely transparent in pricing. We all strive to sell more flowers and plants; we aim at quality, sustainably grown products. I can clearly see our growers and retailers work on the agenda, running projects together. The story you mentioned also goes the other way round when growers receiving record prices at the auction clock are suddenly unable to supply the agreed number of tulips for retail contracts. At the same time, some retailers rely on tendering, which is always tough.”
The tulip is a prime example of a product category that Royal Floraholland desperately tries to keep within its four walls. Not an easy job because tulips typically represent direct trade between growers and retailers, modelling on long-term supply contracts to deliver tailor-made retail orders. Both auction and DFG are fishing in the same pool of growers who are expanding to benefit from the economies of scale. Both production and trade seek collaboration – growers want the security of orders and exporters because they want to oversee the supply chain. The auction may no longer be a valuable market platform in such market dynamics. The other way round, the auction offers wholesalers and florists at home and abroad the possibility to buy ornamentals via their remote buying system (KOA), eating away a portion of the wholesaler’s business. But when Van Dam speaks of Royal FloraHolland, he does not refer to them as ‘competitors’.
He concludes, “We are good partners. Naturally, we hardly work together in the retail business, while we do good business in traditional wholesale. I have never considered them a big competitor. The auction is, above all, a service supplier, and it is up to us to use their services or not. I get along well with the auction’s boss, Stefan van Schilfgaarde. We have had some good discussions on labour and sustainability themes.
We still buy a sizeable number of flower stems for our wholesale customers through the auction, while trade flows are increasingly going direct. That’s the reality Royal FloraHolland must cope with.”
Jan van Dam Passport
Place of birth: Linschoten, The Netherlands.
Career: After completing his studies in Business administration, Jan van Dam embarked on his career at AHOLD. Here he fulfilled several different commercial roles within supermarket store Albert Heijn. He then held various CEO and executive positions in the Netherlands, Central Europe (Prague) and the United States (Boston). In his last position as a member of the Albert Heijn board, he was responsible for speciality stores and new markets.