lower market update

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Flower Market Update How downtown flower markets are changing with the times. By Bruce Wright Editor, Flowers& Magazine

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BOSTON ✿

LOS ANGELES ✿

NEW YORK ✿

PORTLAND ✿

SAN DIEGO ✿

SAN FRANCISCO

✿ HOLLAND

✿ CANADA

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lower market update

How often do you get to see flowers up close before you buy them? Check out new varieties and special seasonal flowers that you might not otherwise know about? Compare the quality and selection of different suppliers? Purchase your hard goods

and fresh flowers all in one place? Meet your suppliers face to face, so you can ask them about their practices, hear their recommendations, and talk with them about your own needs and preferences—the best way to develop, over time, a relationship of trust and understanding?

Most floral professionals would probably have to answer, “Not often” or “Never.” This is why it is imperative to schedule trips into your budget for trade shows and conferences, such as the International Floriculture Expo in Chicago when new products are showcased to the world for the first time. In between shows, one can visit a traditional downtown flower market. All of the practical benefits are apart from the sheer feast for the senses and the camaraderie that comes from visiting a downtown market, and trends seen at trade shows will filter down. Your local wholesaler may give you great quality and service. But nowadays few are really set up to accommodate in-person buyers; the priority is on phone sales and delivery, which is why these face-to-face meetings are so meaningful.

Of the great North American downtown flower markets, most if not all got their start in the early 20th century, serving as central locations where local growers could sell both cut flowers and plants. Eventually, wholesalers took on a more prominent role in the markets—but of those that survive today, a number are helped by their vicinity to flower-growing regions on the West Coast.

By Bruce Wright Editor, Flowers& Magazine www.flowersandmagazine.com

CURB APPEAL In warm weather, vendors in New York City’s flower district along 28th Street display their wares along the sidewalk—but these days the merchandise looks sparse in comparison to prior years. Flower sellers are getting crowded out by rising real estate values and residential development.

How downtown flower markets are changing

with the times.

lower market update

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lower market update

Wherever they are, the downtown markets face a rising challenge from the growth of online selling, faster and better delivery service, and—not least—rising property values in urban areas. What follows is a look at just a sampling of the downtown flower markets, large and small, that are finding new ways to compete—or not—in an age of urban renewal and sweeping changes in the ways flowers are bought and sold.

BOSTON In the vanguard of change is the Boston Flower Exchange, which recently relocated to a 65,000-square-foot facility in Chelsea, northeast and across the Mystic River from Boston proper, and was re-christened the New England Flower Exchange. The move was not entirely voluntary: the l5.6-acre property (nearly 244,000 square feet) that formerly housed the exchange, in Boston’s ethnically diverse South End, was purchased by new owners for development as a tech office campus. Vendor leases ran out at the end of last year, but occupants were given until after Valentine’s Day to move.

Of the dozen vendors in the Boston Flower Exchange, 10 are moving to Chelsea. One is retiring, and another will move next door to Jacobson Floral Supply, a strong, stable, and highly regarded wholesale operation that remains in the area of the former exchange.

The long-term impact of the move remains to be seen, since the New England Flower Exchange opened in Chelsea only on March 1, 2017. The mood at the opening, however, was upbeat, with vendors and buyers praising the natural light that pours through skylights at the new location. It will be more convenient for some, less so for others (buyers south

of the city will have farther to go to visit the market). It is smaller—but still touted as “the largest wholesale flower market on the East Coast.” The vendors are certainly to be

applauded for their commitment to keeping the tradition alive. As the website for the New England Flower Exchange states, “when one door closes, another will open”—if you grab the handle and give it a push.

www.newenglandflowerexchange.com

LOS ANGELES If Boston has the largest wholesale market on the East Coast, Los Angeles has the largest in the country. It is actually two markets, housed in buildings on either side of Wall Street in downtown LA, each with 40 or 50 vendors. Back when the LA flower

district was getting started, in the 1920s, one was “the Japanese market,” today known as the Southern California Flower Market, west of Wall Street. The other, on the

east side, is called the Los Angeles Flower Market—formerly known as “the American market” in a parlance and division that reflects the anti-Japanese prejudice prevalent

before and during World War II.

The International Floriculture Expo hosts key decision makers in the floral industry where the state of the industry is discussed and new products are revealed that will make their way into downtown flower markets and retailers throughout the country.

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lower market update

Both markets began as a way for growers to consolidate shipments to points east and north. “Local florists got what was left over,” says Jim Mellano, chief financial officer of Mellano & Company, one of the few (and the largest) of the remaining flower-district vendors who are also growers. Today, the flower district still benefits from proximity to growers in central and southern California—but flowers sold in the district also come from around the world, via Miami and the Los Angeles airport. “It’s the most competitive market in the world, with very low prices,” says Jim.

Before 8:00 a.m. weekdays, only flower-industry professionals are allowed into the two main markets. After that, the public is allowed in, but visitors must purchase a badge or pay a $2 entrance fee and pay tax on their purchases. In recent years, the flower district has sprawled beyond its original boundaries, as flower vendors moved into spaces vacated by former garment factories and a produce market. These vendors tend to cater to non-florists; retailers mostly shop inside the two main markets.

In many ways, the LA market is doing well. There is a high volume of business. But like other markets, it is threatened by rising real estate values and an aging infrastructure. On the west side of Wall Street, the owners of the Southern California Flower Market—many of them descendants of the founders—have proposed a redevelopment of the space to include a 15-story residential tower and an upgraded market building, with a smaller space for flower vendors on the ground floor, parking and office space above that. The project would require rezoning. Plans have been submitted to the city for approval. Backers hope construction can start in two years. The current political climate in Los Angeles could well favor such a development, but the impact on those who buy and sell flowers in the market remains unpredictable.

www.laflowerdistrict.com

THE BIG ORANGE Mayesh Wholesale Florist anchors one half of the sprawling downtown Los Angeles flower market, the largest in the country with more than 80 vendors.

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lower market update

NEW YORK In contrast to Boston and LA, the New York flower district isn’t housed in just one or two main buildings but comprises a group of vendors in shoulder-to-shoulder storefronts along West 28th Street in Manhattan, between 6th and 7th Avenues, where they have been consolidated since the 1890s. The arrangement lends the district considerable charm in spring and summer, when their wares spill onto the sidewalks in pots, buckets and benches bursting with exotic plants and cut flowers. It may contribute, however, to the failure of the district’s trade group, the Flower Market Association, to find an alternative location or another way to push back against the same forces that are pressing on other downtown markets.

As long ago as the late 1970s, some of the larger wholesalers began to move to the suburbs. Once home to more than 60 flower wholesalers, the district now has less than half that number. In 1995, local zoning was changed to allow for housing. “A few of the buildings in the district have been completely torn down” and replaced with hotels and high-rise residential towers, says Hewley Helstone of Jamali Floral & Garden Supplies, which still occupies a space in the district. “Some flower sellers are still on 28th Street, but on upper floors. Before, the whole sidewalk would be full of flowers and plants. Now that’s kind of disappeared.”

Efforts to find a new location have been made, but with no success. The difficulty in finding a solution, of course, is the same as the problem: real estate in Manhattan, and even in the outer boroughs, is not to be had at any reasonable price. For those who do business and have customers there, the midtown flower district is home—a home that seems to be slowly vanishing, piece by piece.

PORTLAND In Portland, the local flower market is in the enviable position of having already met the challenges of a downtown location by moving to a nearby industrial area—29 years ago.

WORKING TOGETHER The Portland, Oregon flower market is sitting pretty with its own building and a cozy, mutually supportive floral community. In season, local growers sell directly to market customers along with seven wholesale suppliers.

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lower market update

“We began downtown,” says Scott Isensee, general manager of Frank Adams Wholesale Florist and current president of the Portland Flower Market. “But the current location is much better. Portland Flower Market Associates owns the building, which was built specifically for the market.” Not least among the benefits is ample parking.

Like other flower markets, Portland’s got started as an initiative of local growers, represented by the Oregon Flower Growers Association. Today it houses the OFGA office along with seven wholesalers. The growers “still have a nice foothold here,” says Scott. “Individual growers rent booths in the market and sell directly to retail customers. In the summertime, it’s like a farmers’ market here”—except that sales are wholesale only. “Everybody goes there to shop first, then to the wholesalers, which is fine—we love supporting our local growers; we don’t want to lose them. We know the value we have there.”

The same cooperative spirit reigns among the wholesalers. “We’re competitors, but friendly competitors,” says Scott. “Being in one building gives us a chance to work together” on projects like design programs, where everyone in the market shares responsibility for the program’s success.

“We’re a different bunch here in Portland,” says Scott. “We’re optimistic for the future”—with good reason.

www.pdxflowermarket.com

SAN DIEGO (CARLSBAD) Famous for Ecke poinsettias and the Flower Fields at Carlsbad Ranch—50 acres of blooming ranunculus, farmed by Mellano & Company—San Diego’s North County is one of those coastal areas that provide a prime environment for growing flowers. In the 1980s, growers in this area got together to build a floral trade center in Carlsbad (about 35 miles north of San Diego), on a site donated by the Ecke family. When it opened, in late 1989, the San Diego International Floral Trade Center included a Dutch-style auction along with wholesale vendors of fresh flowers and floral supplies.

For the auction, the timing wasn’t great. It offered an efficient way to get flowers from local growers onto the market—but this was about the time when imported flowers were taking an ever-larger share of the American market. The auction faltered, then, after just a few years. It had been the trade center’s largest tenant. Other vendors in the trade center prospered—but as the city of Carlsbad developed around it, the owners of the property realized they could get much higher rents from a different kind of tenant, says Gene Willis of San Diego Florist Supplies, which became the largest tenant after the

auction folded.

In 2014, the first trade center building was converted to office space. Vendors relocated to one of two new venues, both in Carlsbad: the Carlsbad International

Floral Trade Center and the Sunroad International Floral Market. Each of these is anchored by well-known suppliers and does substantial business. But the market, of

course, was now split. And property values in Carlsbad keep rising. “The center we’re in now will be used for apartments or condos within the next five years,” says Gene. “Everybody’s biding their time.”

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lower market update

They have good reason for doing so. A plan is in the works for a new, mixed-use center, being developed by the Carltas Company—the same company that developed the original San Diego International Floral Trade Center. To be called the North 40 Urban Farm, the new center will be built on the edge of the Flower Fields. It is conceived as a destination replete with retail attractions that share an agricultural theme: “They’ll have a restaurant, a wedding center, a winery, microbreweries,” says Gene; “they’ll press olives and make cheese.” A separate building will house a new floral trade center—still open to the trade only, but profiting from a convenient location (just off the I-5 freeway) and the cachet of its neighbors, appealing to event professionals among others. Projected to come online in 2018, the North 40 sounds like just the kind of creative approach that could be a big success by catering to multiple constituencies with a shared interest: growers, wholesalers, florists, and consumers.

SAN FRANCISCO San Francisco’s Flower Mart, the second-largest in the country, is a beloved city landmark. Grower-owned and over a century old, the mart has long occupied a spacious building at 6th and Brannan Streets in the SoMa (South of Market) district. Its more than 50 vendors offer a lavish and diverse cut-flower inventory enriched with all the bounty of the Pacific Northwest.

But no city has experienced a dizzying rise in property values like San Francisco. With the influx of tech companies, the pressure is on to rezone areas once filled with warehouses and light industry for office, residential and retail use.

Flower Mart tenants were understandably nervous when they first heard about plans to tear down the mart building and rebuild it to accommodate tech offices and “a vibrant public plaza” with retail businesses, along with a renovated facility for the Flower Mart. The

PAST, PRESENT, FUTURE San Francisco’s legendary flower market, founded over a century ago, bursts with the bounty of flower farms both nearby and farther afield. An architectural rendering shows how the mart might look in five years if developers succeed in moving tenants out, then back into a spiffy new multi-use building.

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lower market update

timeline for the project is still uncertain, depending on city approval of a new plan for the entire SoMa area.

Representatives of the developer, however (real estate giant Kilroy Realty Corp.), including chairman and CEO John Kilroy, have sought to reassure flower mart stakeholders. If all goes according to plan, they will be moved to a temporary site

in late 2018, when construction of the new building begins, and will be welcomed back in mid to late 2021, with long-term leases at affordable rates. The terms were negotiated with help from city politicians and in the aftermath of public protests by fans of the flower mart. It’s a big gamble—but one that could pay big dividends. The biggest? Preserving the rich and beautiful tradition of a downtown flower mart.

In 1911—around the same time that growers near major urban centers in North America were getting together to create downtown flower markets—Dutch flower growers

formed a cooperative and founded an institution that has had enormous impact over the past century on how flowers are bought and sold worldwide: the Dutch flower auction. Today the auction at Aalsmeer and other locations in the Netherlands is known as Royal FloraHolland. It has spawned imitators across the globe—some created by Dutch growers who brought their passion and expertise to other lands, like the auction in Burnaby (near Vancouver), owned by United Flower Growers, a cooperative of over 80 growers in British Columbia. Today members of the Royal FloraHolland cooperative are still mostly Dutch, but the number also includes flower growers from Africa, Israel and other places.

The auction did what downtown flower markets did on a larger scale: it created an efficient marketplace where buyers

could purchase from a variety of growers, and growers could have access to many buyers at a central distribution point. In addition, FloraHolland also guarantees and facilitates payments—which are often very slow, outside the auction system—and plays a role in defining and regulating quality standards. The auction “clock”—not a timepiece, but a dial with a fast-moving hand that experienced buyers can use to make bids—provides a deft mechanism for determining a

Going, Going, Here to Stay Innovation at the flower auction.

IN TRANSITION The flower auction at Aalsmeer in the Netherlands is a vast facility with impressive logistics for handling huge volumes of cut flowers (below right) that arrive at the auction from growers and are sold and redistributed around the world. In the age of global communications via the internet, more and more flowers are traveling directly from grower to customer, bypassing the auction, which has had to re-evaluate its role in the marketplace. Similar strategic considerations apply to the smaller but still very substantial auction in Burnaby, British Columbia (below left), which was founded on the Dutch model.

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lower market update

market-set price. The auction does not buy and sell but only facilitates the sale.

The auction system in Holland experienced great export-oriented growth for about 30 years starting in the late 1960s. It was vital to the success of Dutch growers and traders, making the Netherlands the strongest flower exporter in the world.

In a way, FloraHolland today is a victim of that success. As the cut-flower market has globalized and grown, it makes less and less sense for flowers to travel to the auction for sale before they are shipped elsewhere. High-volume buyers and sellers want to make direct sales at fixed prices. Such sales can also go through the auction—indeed, today more than half of the products sold through the auction are by direct sales; sales “on the clock” are diminishing. The problem for the auction system is how to remain solvent and relevant when many of its past functions can be duplicated by competitors on the internet.

The task is harder because of the many constituencies served by the auction: small to medium-size Dutch growers, flower farms in Kenya and Ethiopia, big and medium-size buyers. Under new leadership, FloraHolland has pursued a policy of innovation in a digital and international direction while cutting costs. It reported overall growth in 2016, with revenues up 5% for the first time in many years, and big changes ahead, with the addition of a 24/7 online transaction platform.

Auction innovation, Canadian style

In British Columbia, the United Flower Growers auction is facing some similar challenges, and coming up with innovative solutions. Started in 1963, the Canadian auction grew rapidly during the 60s, 70s, and 80s, moving twice and expanding in the current location. Growth began to slow during the 90s

and peaked in 2001, according to Bob Pringle, CEO of United Floral Holdings Inc. What happened?

“When a lot of larger customers entered the picture—the Krogers, Home Depots, Walmarts, Costcos—they wanted assured pricing and to purchase directly from growers,” Bob explains. “In the early stages, many of those transactions were done through the auction, but as the florist trade has declined and larger retailers have taken a bigger slice, the auction has become smaller—though it still does a healthy business.

“How we responded was to reorganize ourselves.” In 2015, the auction purchased Kirby Floral, also known as Kirby Signature, a premier wholesale supplier that was in some ways a competitor to the auction.

“We have now essentially two entities, and two ways of purchasing, that complement each other,” Bob continues. The wholesale florist side caters to independent retailers of all kinds, who need specialty items in smaller quantities. On the auction side, buyers can purchase in person, online, or through commissioned buyers, making a direct connection to growers that might not be otherwise practical or possible—just like at downtown markets in the early days, and here and there still today.

One of today’s overarching trends in the floral marketplace is that even as it grows to encompass more kinds of buyers and sellers, those buyers and sellers are continually coming closer together, with shared information and resources in a globalized, digital world. It’s not easy to be all things to all clients and stakeholders—but for any business that’s all about making connections, it might not be a bad thing to try.

www.royalfloraholland.com, www.ufgca.com

Going, Going, Here to Stay continued

The International Floriculture Expoexists to bring together vendors from around the

country and globe in one location. For those who can’t travel to all of the

downtown flower markets, attending IFE is an attractive yearly option to connect face-to-face and be able to see products under one roof.

North America’s largest B2B trade show for floral buyers.

June 13-15, 2017 | McCormick Place | Chicago

FLORAL INNOVATIONSTARTS HERE

Join us for three days of trends, education, design demos, unparalleled networking with industry leaders and more than 150,000 square feet of floral, produce, and cold chain exhibits!

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