Am­s­ter­dam’s Flower Auc­tions

Reader's Digest Asia Pacific - - Front Page - BY SHEL­LIE KARABELL

We take a look in­side the world’s largest flower mar­ket, where the stakes are as high as the stems are plen­ti­ful

Think of the Nether­lands and the en­dur­ing im­ages that come to mind are wind­mills, wooden clogs and… tulips. But tulips are not indige­nous to the tiny na­tion. They come from – de­pend­ing on whom you talk to – some­where in Cen­tral Asia, Kaza­khstan or Afghanistan. Tulip bulbs were given to vis­it­ing dig­ni­taries by the sul­tan of the Ot­toman Em­pire, with the plants first cul­ti­vated in the Nether­lands in 1593. The name ‘tulip’ de­rives from ‘tulibend’, the name of the tur­ban worn in the area (now modern Tur­key) be­cause of the sup­posed re­sem­blance of the flower to a tur­ban.

Tulips have long been a force in the Dutch econ­omy, and were even the source of the world’s first ‘in­vest­ment bub­ble’. Back in the early-17th cen­tury, the tulip’s value es­ca­lated so pre­cip­i­tously that one bulb could cost as much as a house. Then, in 1637, thou­sands of peo­ple lost ev­ery­thing when a plant virus brought the whole value sys­tem crash­ing down. Car­toons de­pict­ing this folly can be found in Dutch gal­leries as, in the years fol­low­ing, artists added tulips to their paint­ings as an aside com­men­tary mean­ing ‘fool­ish’.

To­day the tulip cont i nues as a main­stay of the coun­try’s eco­nomic life, and it plays an im­por­tant role as the cor­ner­stone on which the Nether­land’s lead­er­ship as the largest pur­veyor of plants and seeds in the world is built. It all takes place at Royal Flo­raHol­land, the world’s largest flower auc­tion com­pany, where to­day more than half of the world’s flow­ers move from grower to dis­trib­u­tor and then on to the re­tail cus­tomer. It is in­deed the Nether­land’s ‘Wall Street for Flow­ers’.

Beauty Meets Busi­ness

Royal Flo­raHol­land is a show­case for Dutch ex­per­tise in lo­gis­tics. More than 12 bil­lion plants and flow­ers – in­clud­ing more than 90 per cent of the Nether­land’s own out­put – change hands each year at Royal Flo­raHol­land’s four mar­ket places through­out the coun­try. The con­tri­bu­tion to the Nether­land’s econ­omy is pro­found: more than

250,000 jobs are the prod­uct di­rectly and in­di­rectly of the flower mar­kets.

Royal Flo­raHol­land is a co­op­er­a­tive with 4500 mem­bers, 9000 sup­pli­ers, 2500 cus­tomers and 3000 em­ploy­ees. The largest of the mar­kets is at Aalsmeer, just be­low Schipol Air­port, south of the cen­tre of Am­s­ter­dam. Here, in a huge con­crete build­ing, hun­dreds of mini-trucks haul­ing wag­ons full of plants and flow­ers whizz around other work­ers on smaller ve­hi­cles in an area the size of 200 soc­cer fields – ap­prox­i­mately 990,000 square me­tres.

The flow­ers ar­rive daily, usu­ally overnight, for the auc­tion five days a week, which starts at 6am and ends around 10am. Else­where in the build­ing, Royal Flo­raHol­land cus­tomers – flower sell­ers rang­ing from small fam­ily- owned out­lets to mega chains, such as Tesco in the UK, are bid­ding against the clock on the mil­lions of flow­ers sold each day.

Race Against the Clock

The auc­tion works in re­verse: rather than bid­ding up the price, Royal Flora­Hol­land’s auc­tion bids down. The bid­ding sys­tem is based on a clock that runs back­wards: buy­ers stop the clock at the price they want to pay and then ad­vise how many plants they want. Then the clock resets. The process moves at light­ning speed. In the time it takes you to read this para­graph, Royal Flo­raHol­land would have sold per­haps ten lots of flow­ers. To the ob­server, it all seems quaint in an ef­fi­cient sort of way: the bid­ding is done on com­put­ers, with more than half of the auc­tion par­tic­i­pants do­ing their bid­ding off the premises. Yet here are the ac­tual flow­ers, right un­der your nose. Within hours they could be in a bou­quet on your din­ing room table. And flow­ers are such an all-pur­pose com­mod­ity – wed­dings, fu­ner­als, birthdays, Valen­tine’s Day – they prac­ti­cally sell them­selves.

Dis­rup­tive Forces Abound

But there’s an­other sur­prise: the flower busi­ness and the Nether­land’s lead­er­ship po­si­tion in it have been ‘dis­rupted’ by the in­ter­net, the eco­nomic cri­sis, com­pe­ti­tion from new low-cost grow­ers and chang­ing con­sumer tastes. Shortly af­ter 2009, Royal Flo­raHol­land’s con­sis­tent growth tra­jec­tory – on the up

since the co­op­er­a­tive was founded in 1911 – ground to a halt.

A 2015 re­port on the mar­ket con­ducted by Rabobank showed con­sumer spend­ing on flow­ers for the pre­vi­ous five years had been ab­so­lutely flat while cus­tomers were drift­ing to­wards cheaper cut flow­ers from su­per­mar­kets rather than spe­cial­ist florists, due in large part to con­straints on dis­pos­able in­come in the wake of the eco­nomic cri­sis.

Then there’s in­creas­ing com­pe­ti­tion from low-cost flower-pro­duc­ing coun­tries near the equa­tor – Colom­bia, Ecuador, Ethiopia, Kenya and Malaysia – all of which have lower pro­duc­tion costs. Bet­ter and cheaper trans­port – im­prove­ments in sea con­tain­ers, for ex­am­ple – meant these low-cost pro­duc­ers could also ex­port glob­ally.

It’s an ef­fec­tive com­bi­na­tion and it is erod­ing the flower mar­ket: in 2003, Ja­pan – one of the world’s top three flower im­porters along with Western Europe and the US – im­ported ten per cent of its flow­ers from Colom­bia; in 2013, that num­ber had in­creased to 26%, ac­cord­ing to the Rabobank study. By com­par­i­son, Ja­pan’s im­port of flow­ers from the Nether­lands had dropped from 8% in 2003 to just 2% in 2013. The Dutch share of the global flower mar­ket had dropped from 58% in 2003 to 52% in 2013, with ex­ports go­ing mainly to Ger­many, France and the UK – still dom­i­nant, but shrink­ing. And with grow­ers able to deal

di­rectly with re­tail cus­tomers via the in­ter­net, the en­tire Royal Flo­raHol­land co­op­er­a­tive auc­tion busi­ness model was be­com­ing less rel­e­vant.

Over­haul­ing the Bou­quet

In Jan­uary 2014, Royal Flo­raHol­land ap­pointed a new CEO, Lu­cas Vos, who lost no time in re­view­ing the co­op­er­a­tive’s op­er­a­tions. His changes and the re­turn of shop­pers buy­ing in florists saw solid im­prove­ments. In 2016, the con­sump­tion of flow­ers and house­plants in Europe rose by 1% to €35.9 bil­lion. Emerg­ing mar­kets such as Brazil, Mex­ico, China and In­dia are help­ing to drive growth – de­spite ­be­com­ing flower pro­duc­ers them­selves. The Nether­land’s his­tory- con­scious florists have cho­sen to move with the times. Open­ing Royal Flo­raHol­land’s auc­tion floor to tourists has also helped in­crease in­ter­est in the 125-year-old pro­ce­dure. To­day, vis­i­tors f rom around the world can wit­ness the f lower auct ion f i rst­hand, and through an in­for­mat ion- packed dig­i­tal tour get to fully un­der­stand what goes on be­hind the scenes of this gen­uinely Dutch in­sti­tu­tion.

Per­ish­able plants and blooms need to travel quickly through the cool sup­ply chain

Royal Flo­raHol­land moves more than 12 bil­lion plants and flow­ers an­nu­ally

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