CONTENTS

Evaluating PromoFlor: Has Promotion Had an Impact?

Manager's Viewpoint

The Rest of the PromoFlor Story...

Editor's Notes

Director’s Corner

Next Meeting

NEC-63 2002 Next Meeting Date xx-yy, 2002 Albuquerque, New Mexico Title

The Rest of the PromoFlor Story...

by Marvin N. Miller

Flowers. The term means different things to different people. Except for the occasional hay-fever sufferer, most people love flowers. Consumers just need the occasional reminder to buy them. A commodity? If you believe a rose is a rose is a rose, perhaps, so. But to most, the thoughts of “flowers” are quite varied, but the term itself is usually all-inclusive. Most consumers use the term to include cut flowers, potted plants, and even garden flowers. So what was there to debate about industry promotion? Plenty.

When it was announced that the PromoFlor referendum had failed, there was shock. PromoFlor was very focused in its approach, unlike the industry’s previous effort to organize, Floraboard. Floraboard included potted flowering and foliage plants, as well as the cut flowers and greens that were PromoFlor’s sole focus. More cut flower producers had voted in favor of the Floraboard referendum than growers in other industry segments, so the narrower focus seemed appropriate. Floraboard was to assess thousands of growers rather than the mere hundreds of handlers, as defined by PromoFlor, making collections more manageable--another plus for PromoFlor. PromoFlor spoke specifically to so-called “handlers,” those selling at least $750,000 in cut flowers and greens to retailers. And while some growers qualified as handlers (those vertically integrated into wholesaling or those bypassing wholesalers and selling directly to retailers), most handlers were either wholesale florists or importers, making the PromoFlor focus that much sharper.

Indeed, a referendum vote in favor of industry promotion had been anticipated this time. Before the industry even went to Congress for enabling legislation, an Ernst and Young survey found 78 percent of respondents were in favor of the idea. Industry organizers had also done their homework, speaking at every opportunity to answer questions, address concerns, and poll participants. The delayed referendum allowed advertising to begin and allowed for research showing ads made a difference. If there was any fault, Monday-morning-quarterbacks might suggest that the referendum, which was held earlier than required, was rushed before industry periodicals had a chance to editorialize suggesting a “pro” vote. But the anticipation was such that most observers felt PromoFlor would easily pass. Hence, the early-referendum timing and the subsequent shock.

Of course, I was forced to rationalize the defeat. As an AgEconomist working in the industry, I knew the industry was under-marketed for several reasons. First, the industry has always been fragmented, and the fragmentation has always been best observed among cut flower growers. Unlike growers of potted plants or bedding/garden plants, where production diversity is the norm, cut flower producers have often focused on one species, e.g., roses vs. carnations vs. chrysanthemums. Product line offerings usually don’t appear homogenous until the product moves through the market channel and gets combined with other species and services at the wholesale and retail levels.

Secondly, many growers have historically believed that as long as they grew “quality,” they could sell all they could produce. While certainly more true in the days of the Floraboard referendum (1983-84), many, especially those in the cut flower sector, have come to realize that global competition on the supply side has repeatedly challenged that belief. Domestic cut flower producers have always resented imports and have repeatedly brought suit before the U.S. International Trade Administration alleging unfair dumping; the suits have often resulted in duties being imposed. By 1980, over half of the U.S. carnation and pompon chrysanthemum supplies were already coming from offshore. By the time PromoFlor was being conceived, more than half of the U.S. rose supply was also being imported. To many producers, fighting imports was preferred to tackling demand issues.

Third, industry fragmentation is inherently part of today’s “disjointed market channel.” Domestic floriculture producers have really changed their focus in the last 15 - 20 years away from cut flowers to potted flowering or foliage plants, and/or bedding/garden plants. Most of the domestic floricultural production goes one way, to mass merchandisers or garden centers, while the perishable focus of both wholesale and retail florists is almost exclusively geared to cut flowers and greens, products now coming primarily from offshore producers.

The market channel issue is further complicated by imports. While both the importer and the wholesale florist qualified as handlers in the program when selling to retailers, there could be an inherent inequity in the assessment amount paid per flower as the latter could have taken another markup on imported product prior to its sale to a retailer. Supermarkets, the one mass marketer typically selling cut flowers, often bypass the traditional wholesale florist, buying much of their product directly from importers, thereby benefitting from this inequity for much of what they purchase. During the program’s conception, both the import equity issue and whether those cut flowers sold to supermarkets were even to be assessed by the promotion order were heavily debated.

The consumer’s role in the market channel must also be recognized. There is evidence that the consumer sometimes favors other industry products at times previously considered prime cut flower occasions, e.g., Mother’s day. This issue, combined with the general market environment created, in part, by the influx of new mass marketers and the resulting pressures on margins they bring to the industry as a whole, may have also led to PromoFlor’s defeat. Some have suggested that handlers just voted their pocketbooks, perhaps, admitting that the industry was benefiting but noting that, individually, their businesses weren’t. The one-firm-one-vote referendum could have been a factor here, as some have questioned whether sales increased as much at the many smaller firms as at the few larger firms that handle the bulk of any industry’s sales.

Subsequently, the PromoFlor organizers have maintained that the cause was right and that most of the industry really does want and need promotion. One organization is already examining issues to see where the industry goes from here. Some have cited Floraboard, suggesting that other product segments should have been included in PromoFlor because the term “flowers” is more comprehensive than cut product alone for most consumers. Others have noted that the entire industry benefits from promotion, and that the entire industry market channel should contribute, not just larger cut flower handlers. Time will tell what happens, but the industry is already talking.

Dr. Marvin N. Miller is Market Research Manager for Ball Horticultural Company, West Chicago, IL, a breeder, producer, and distributor of seeds and young plants for the commercial floriculture production industry.