Valentine’s Day is a day of love. But for those who sell roses, it’s probably a day full of something else.
“Probably a lot of stress, right? This is the chance to make money for everybody that’s concerned, right? This is the opportunity where you can clean up for the year,” says Martin Lariviere, a professor of operations at Kellogg.
In this episode of The Insightful Leader, we put on our rose-colored glasses to appreciate the flower’s long journey to our bouquets.
Podcast Transcript
Laura PAVIN: Hey everybody! Valentine’s Day is upon us, and so are the roses. Roses that we’ll either give, receive, or simply see … everywhere. So we thought it prudent to resurface a podcast we did about how all of those roses get here to the U. S. of A. Because it’s an impressive logistical feat!
You’ll hear about that today.
Couple of quick notes: this episode is from 2019, so tariffs weren’t in the picture yet, but, by and large, the mechanics of the system and how it moves and behaves haven’t really changed. So know that.
Second, and finally: Jess Love, former editor in chief of Kellogg Insight, hosted this episode, so you’ll be hearing from her today. Okay? I’ll let her take it from here!
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Jess LOVE: As you might guess, every February 14, there is a sudden massive spike in demand for flowers, and not just any flowers.
Martin LARIVIERE: You might settle for sending whatever bouquet of flowers looks nice to your mom for Mother’s Day, but for Valentine’s Day, you go with roses. No one sends carnations on Valentine’s Day.
LOVE: That’s Martin Lariviere. He’s a professor of operations at Kellogg. Most of us think of Valentine’s Day as the day of love or the day of romance, but for people in charge of getting those roses out of the field and into the hands of consumers, from the growers who cultivate the roses to the companies that ship them to the retailers who sell them, this holiday has a very different meaning.
Jake SMITH: What might they say Valentine’s Day is the day of?
LARIVIERE: Probably a lot of stress, right? This is the chance to make money for everybody that’s concerned, right? This is the opportunity where you can clean up for the year.
LOVE: But in order for this lucrative love story to have a happy ending, everything has to go just right.
Welcome to the Kellogg Insight Podcast. I’m your host, Jessica Love—no relation to the holiday. Today on the podcast, what does Valentine’s Day look like from the other side of the flower-shop counter? As Martin Lariviere tells us, the humble rose can teach us quite a bit about what goes into a working supply chain and the many ways it can go awry.
The most-thorny problem for those in the rose industry is how to line up supply with demand. You see, it takes at least two years for rose bushes to produce roses that are mature enough to be cut and sold. That means that years ago, the growers had to make a bet about how many roses people will buy this year.
And if that guess is wrong, there’s nothing anyone can do. It’s way too late to produce more roses or to cut back production if they produce too many.
LARIVIERE: You see this in other markets. You see this, for example, with Christmas-tree farms. You might predict that next year is going to be a great year to be selling Christmas trees, and having that information one year out doesn’t do you any good. You can’t act on that, because you can’t get the product ready soon enough. Roses are similar. And throw on top of that the general uncertainty you have of what the weather conditions and things like that are going to be.
LOVE: Things are also hard to predict on the demand side. For one, consumer appetites for roses can actually change a lot from year to year. For example, when Valentine’s Day falls on a weekend, people tend to buy fewer roses than when it’s on a weekday.
LARIVIERE: Flowers tend to be a last-minute purchase. You may decide on January first that you’re going to spring for flowers for Valentine’s Day, but you don’t order them six weeks out. You order them much closer to the holiday or stop in. And so you end up having greater unpredictability of exactly what sales are going to be.
LOVE: Both growers and retailers do whatever they can to project how many roses they’re likely to sell. For instance, if they know Valentine’s Day is coming on a Thursday, they might look at how many they’ve sold in past years when it fell on a Thursday, as well as general market trends and what competitors are doing.
But at the end of the day, it’s never a perfect science.
LARIVIERE: It’s not the case that you can guarantee having enough supply or, on the flip side, enough demand.
LOVE: Another big challenge: the flowers have to get to the flower shop looking and smelling fresh. That’s tricky given that most of the flowers we buy in the U.S. are actually grown in Ecuador, in Colombia, and roses are plants, meaning they need to be transported like plants.
LARIVIERE: The same technologies that make it possible to buy asparagus in February are what let you get flowers in February as well.
LOVE: Namely, the technology of cold storage. At every step of the supply chain, the roses have to be kept just above freezing so they stay fresh. That means they have to be about 34 degrees when they’re packed at the farm, when they’re flown overseas, when they’re inspected by customs, and in the truck on the way to the flower shop.
If the roses get too warm or too cold at any point in that chain, they could wilt, rendering them unsellable. And of course, all that refrigeration costs a lot of money. So you might wonder, wouldn’t it be cheaper to just grow roses locally? Lariviere says, probably not.
LARIVIERE: If you think about what demand for flowers is going to be in Cook County, how many greenhouses do you need to be able to keep Cook County happy with roses? And do you want to pay to heat greenhouses in February in Chicago? It’s not going to come cheap.
LOVE: So South America it is. And there’s really only one place for roses from overseas to enter the United States.
NEWSCASTER: More flowers and people are touching down at Miami International Airport.
LOVE: It turns out nearly 90 percent of all flowers entering the U.S. go through the Miami airport. But why Miami? After all, there are a lot of American airports just as close to South America. The reason actually comes down to people.
As Lariviere explains, flowers are typically transported on the same planes as passengers.
LARIVIERE: Airlines that have regular scheduled flights between Latin America and the U.S. sell the extra space for cargo, and that’s where most of the flowers go during the year. Miami historically has been a hub for travel to Latin America. So if you have a lot of flights coming in from Ecuador or Colombia, there are going to be a lot of flowers coming through there.
LOVE: So as a result, Miami has gotten really good at handling flowers and other produce. They have a refrigerated storage facility the size of five basketball courts and plenty of customs agents trained to handle agricultural products. But that specialty can be a double-edged sword.
LARIVIERE: If one particular port of entry carries an inordinate part of one industry, there is risk there of some kind of shutdown. If Valentine’s Day fell in September and there was a chance of a hurricane shutting down Miami for a week, that’s a risk of not having your supply.
You could serve through more ports than just one, but if you have to plan for a peak, if you have to plan for being able to serve Valentine’s Day or Mother’s Day, it’s a lot tougher to replicate that kind of capacity across the whole country. There’s a reason for only doing it once, and it just happens to be in Miami.
LOVE: Eventually, of course, the roses end up with retailers who stuff them in lovely bouquets and get them ready for customers. And you might think by this point the retailer’s profits are all but guaranteed. But that’s not the case.
In order to unlock the full money-making potential of Valentine’s Day, there’s still one more critical question the retailers have to answer: How much should they charge for a rose?
This is a tough one because on Valentine’s Day, the price of roses at the wholesale level nearly doubles in a lot of markets. So how much of that expense should retailers pass on to consumers? Lariviere says it depends on the retailer.
LARIVIERE: If you are Costco or a supermarket, flowers are something of a sideshow, so you don’t raise prices much. On the other hand, if you are a standalone floral shop, this is the family business. Charging high prices for roses on Valentine’s Day is one way to pay the rent.
LOVE: But like everything in this delicate supply-chain dance, pricing, too, requires a careful balance. Even though the rose may be the undisputed symbol of love.
LARIVIERE: There’s some price point at which you would not buy roses for your significant other. You just face the hell of going home empty-handed.
[CREDITS]
LOVE: This program was produced by Kevin Bailey, Jessica Love, Rich Maltz, Jake Smith, Michael Spikes, and Emily Stone. It was written by Jake Smith and edited by Michael Spikes. Special thanks to Martin Lariviere.