The flower business is wilting
Zackary Crockett: What's going on everyone? It's Wednesday, May 4th and you are listening to The Hustle Daily Show. I'm Zackary Crockett and I'm here with Rob Litterst.
Rob Litterst: What's going on, Zack?
Zackary Crockett: Rob, what are we talking about today, man?
Rob Litterst: Zack, we are talking about flowers.
Zackary Crockett: Flowers?
Rob Litterst: That's right. One of the biggest days of the year for flowers is coming up but the flower business isn't looking too hot right now. They've got all kinds of problems, both on the supply side and the demand side and we're going to dig into all of them.
Zackary Crockett: All right, we're going to get into that in a second. But first let's do some news. Apple CEO Tim Cook has been named chairman at Tsinghua University School of Economics. You may have never heard of that college before but it's widely considered to be the Harvard of China and Cook is not the only US big tech exec to sit on its board. Mark Zuckerberg, Satya Nadella and Elon Musk are all among its other advisors. Now Apple pulls in about 17% of its global revenue from China so Cook's move is likely an effort to further bolster ties there but that decision has come under some heat. The company was recently scrutinized after it pulled a real time mapping app used by pro- democracy protesters in Hong Kong from its app store. Facebook is winding down its audio efforts. The company will stop allowing users to upload podcasts to its podcast hub and it's also shutting down Soundbites, which was a feature meant to be kind of like the TikTok for audio. The company went all in on audio last April in a bid to capitalize on the podcast craze but it looks like Spotify and apple were too big of a competitive hill to climb. And since we're on kind of a FAANG update spree here, Amazon announced that it would pay employees up to 4K in travel costs for non- life threatening medical procedures, which include abortions. The flip side of that, Amazon will also stop offering paid time off for US employees diagnosed with COVID- 19. And lastly, per Axios, Quartz, the global business news site founded a decade ago as part of the Atlantic Media Company sold last week to GO Media. The deal was reportedly an all cash deal, at less than$ 10 million. And just for reference, Quartz did 11 million in revenue in 2021 and that makes the price of this deal a 1X multiple on its revenue. All right Rob, what's going on with flowers here? Are moms all over America just going to be let down this year or what?
Rob Litterst: Zack, unfortunately that might be the case. As everybody knows, Mother's Day is right around the corner, which along with Valentine's Day is one of the most popular occasions of the year to buy flowers. Here's some stats for you. US consumers spent a record$ 2. 66 billion on flowers for Mother's Day last year alone. Another one, there are 85 million moms in the US and an incredible 69% of all Mother's Day gifts are flowers. Breaking that down a little bit, that means out of the average$ 61.56 cents spent per American adult on Mother's Day gifts this year$ 42. 48 cents is going to the flower industry. That's a big cut.
Zackary Crockett: That's a whopper.
Rob Litterst: But this year, florist are having a bouquet of problems, if I do say so.
Zackary Crockett: All right. These problems are both on the supply and the demand side. Let's start with the supply side issues here. There's obviously a lot of talk about how the US has become dependent on imports, whether it's cars or microchips or oil but flowers are probably one of the most extreme examples of this. 82% of all cut flowers sold in the US are imports and of those, about 80% come from Columbia and even with the cost of packing, preserving and shipping, it's still cheaper to import them from a country like Columbia than to grow them in the United States, just due to lower labor costs.
Rob Litterst: Yeah, it's really unbelievable. And labor is something that we'll get to here in a second because that definitely plays into this whole equation as well. But if you want to get to the root of the problem, if you will, when the pandemic hit in 2020 many farmers got rid of their flower crops and didn't really know what demand would hold in the future so they didn't plant as many flowers as they normally would, which has kind of caused an overall shortage of flowers over the last few years. Add that to some of the other issues that the supply chain is having, we mentioned labor. When these farmers stopped planting flowers and got rid of their flower crops, they also let go of some of the workers that are kind of on the front lines with helping them plant flowers. And along with that, floral designers are becoming harder and harder to come by in general. Add to that weather issues have not made it easy on growing flowers. Weather has played a big role in this as well. And lastly, shipping has been a huge problem. As you mentioned before, we import a ton of flowers and we've had less international flights than ever over the last couple of years, which has made it really hard to get flowers into the country and add to that the massive shortage of truck drivers that we've been experiencing here in the US and you've got a hot bed of challenges for a florists.
Zackary Crockett: All right. What I'm hearing here as a consumer is higher prices.
Rob Litterst: Exactly.
Zackary Crockett: And obviously, consumers don't like higher prices. What kind of effect is this going to have on demand?
Rob Litterst: A 100%. I think you just hit the nail on the head. Demand is down. One of the kind of biggest pieces of evidence that we have for that, 1- 800- Flowers, which I think most people probably know. I know I've ordered from 1- 800- Flowers before. It's a flowering gift behemoth. They own 1- 800- Flowers obviously, but then they also own Harry& David and Shari's Berries. They reported lower demand for everyday gifting in their fiscal third quarter, just last week. And so when you think about kind of everyday gifting, that's just coming home and bringing your wife or significant other a bouquet of flowers. It's not necessarily Valentine's Day or Mother's Day. Apparently 1- 800- Flowers had a solid Valentine's Day. They're expecting a decent Mother's Day. But it's this kind of everyday gifting that is getting driven down by these higher prices and a big part of that, I think some of these supply issues we've talked about but also inflation.
Zackary Crockett: Sure. And then this might be a separate thing, but at the same time you have a much, much higher demand for weddings too. A lot of weddings were obviously canceled in 2020. They were rescheduled for 2021. It's estimated that they're going to be almost two and a half million weddings in 2022.
Rob Litterst: Geez.
Zackary Crockett: That's compared to 1. 3 in 2020. Does this play any role in flower demand?
Rob Litterst: Yeah. That felt like my summer 2021 wedding schedule. About two million weddings. No, but you're a 100% right. It's been crazy. If you are of the age where people tend to get married, like you and I are, over the last couple of years, so many of my friends have had to push their wedding and these florists are having a really hard time stocking demand outside of weddings because the wedding flower market is definitely different than the kind of gifting flower market. It's very different types of arrangements that you're looking for but ultimately a lot of the time they are kind of tracing back to the same place. A lot of these supply issues are going to impact both of them. If you want tulips for an arrangement at your wedding and you also want tulips for a bouquet that you're going to give your mom for Mother's Day, those are ultimately a lot of the time going to come from the same place. And so both sides of this are getting hit really hard. And to your point, this absolute boom in weddings in 2022 is likely to really contribute to this. And I think a lot of the sources that I was reading earlier today were talking about how the supply for Mother's Day is already dwindling and if you're looking to get some flowers for your mom, you should probably log on to your computer right now and make it happen because they might not be there anymore at the end of the week.
Zackary Crockett: Geez. Well I guess another silver lining here is if you look back historically, flowers are actually a surprisingly recession proof industry. FTD, which is one of the largest flower wholesalers in the United States, they only reported about a 5% dip in sales during the recession back in 2008. Even though we are facing inflation and a bevy of supply and demand issues, it does bode well for them looking back on this historical context.
Rob Litterst: Yeah. That is pretty crazy when you talk about it. I think squaring that with where we're at today, it'll be really interesting to see what happens with some of these bigger companies, like you mentioned FTD, 1- 800- Flowers. 1- 800- Flowers' stock dropped, I think 15% last Friday.
Zackary Crockett: geez.
Rob Litterst: After its earnings call on Thursday to a new 52 week low.
Zackary Crockett: Wow.
Rob Litterst: And I think like one thing that they did is they lowered their guidance for the rest of the year. They're basically saying," Valentine's Day was solid. Everyday gifting was definitely down." And they're looking at some of these macroeconomic factors, I think and they're really worried about getting back to kind of whatever normal is for the flower industry. I read some reports that are saying that these companies don't think they're going to get back to their normal levels of inventory until at least 2023. And so it seems like it could be an issue kind of over the next few years. Zack, with all of this being said and all the issues that we're seeing in the flower market, what are you going to do for Mother's Day? Are you going to buy Mama Crockett some flowers?
Zackary Crockett: Ah, man. Well, I wasn't stressed about it until we did this pod, Rob. I live away from my mom now so I was planning on maybe getting one delivered or something. But now that I know the demand's high, I have to figure out something else. Do you have any suggestions?
Rob Litterst: I do. And knowing your workload, I know you have a lot on your plate. If you don't get around to it, I do have a backup plan for you. I don't know if you know Tim Hortons but it's basically the Dunkin' Donuts of Canada. They just dropped a bouquet of donuts. If you end up falling short on flowers, you can always buy Mama Crockett a bouquet of donuts and there you go. There's your backup option.
Zackary Crockett: Oh, wow. All right thanks, Rob. Appreciate that. All right, that's going to do it for us today. Go out and get your Mom a bouquet of donuts. Thanks for tuning into The Hustle Daily Show. We're a part of the HubSpot Podcast Network. Our editor is Robert Hartwig and our executive producer is Darren Clarke. If you liked what you heard today, we've got a lot more tech and business coverage over at thehustle. co. We'll catch you all tomorrow.
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One of the flower industry’s biggest days of the year is approaching - but they have a bouquet of problems. Plus: Tim Cook named chairman of Tsinghua, Facebook shuts down their podcast hub, Amazon offers employees $4k in medical travel costs, and more!
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