Prices in our Industry – a crisis we can overcome

Prices in our Industry – a crisis we can overcome

The other side of the coin:

When trying to review the economical situation of our industry we usually refer to its crisis, to an industry that is enduring difficulties, an industry that is suffering, an industry that does not have adequate capital and all the resources of the producers in the entire chain of supply focus usually on one type of solution, which is cutting down on costs, saving, and cutting down on investments and resources.

We are in the midst of a rather tough competition in the market that is totally exploited by the retailers who put pressure on the prices and always offer the lowest price in the market. But we must stop and ask ourselves whether this is really how it should be? Is this the only way?

Since every coin has two sides, is it not high time to deal with the other factors? Must we only talk about reducing prices? Talk only on cut downs? Only on cheaper offers just so to survive? And why not talk about higher rates? Why not talk about a completely different level of prices? Why do we collaborate with the prices of $1.99 to $3.99 of the finished product for the consumer at the retailer level? Have we asked ourselves whether the price of our product should be the same or generally even lower than the price of a cup of Starbucks coffee? Why shouldn’t we talk about $6.99 or $9.99 instead of the current prices, is this really asking for too much?

We cannot escape the question why we, the industry, are based on cents? Throughout the entire supply chain, beginning from the breeding point and throughout the production of cuttings, plants, the finished flowering pot and ending with the final sale to the consumer – throughout the entire process we are talking about a few cents – our royalties are around 3-5 cents, the value of our plants are around 8-15 cents and so on…what is the real answer to this question? Is the consumer really not prepared to pay for our product and double the amount than what the retailers are offering? Or perhaps dare a little more and sell thrice its price than what we usually sell?

Well, I would look for the answer first and foremost within us! How do we see ourselves, what is the image we have of ourselves? Do we see ourselves as farmers who labor their soil, our environment being land, water, mediums-mud, plants, a labor that its roots are in agriculture and farming, and from time immemorial ‘farming’ was considered the lowest in the price scale, the wage scale, and lowest in self-image of all those working in this industry.

To demonstrate our low attitude I would like to give you the following example: Certain companies brought an amazing idea - ‘triplets’ in all sorts of forms – three cuttings in a plug or three plugs planned in a pot, three varieties of one sort of product or three different products in one pot. In any case, the idea was beautiful and the companies worked on it and did research, checked, explored and chose the most suitable combinations, the concept would save work, save research for the growers and eventually would give them an advantage and a better product. But then these companies made a decision – to charge for the triplet a lower price!!! Why not a higher rate and charge for the idea? Do you think Microsoft would charge a lower price for a new concept they came up with? The market is not expecting a lower price, but on the contrary the market is prepared to accept the high rate for a new idea, and it is only in our industry a company that comes up with something new, takes less money for it!!! Is this not a result of the low image we have of ourselves in our industry? Is it not time to say with our heads high: ‘We are prepared to tell the retailers to convey our message to the consumers – ‘No more – we are high-tech! We are an industry that has high esteemed work and we are not prepared to sell our merchandise at a price less than a cup of ‘Grande Vanilla Latte’ at Starbucks (my favorite).

We have nothing to fear of because if we don’t value ourselves as an industry with high esteem neither will the consumer. We have to learn from Starbucks and see ourselves at the top so the consumer will also refer to us in the same manner. In order to reach this goal we need to join forces with the retailers because we have common interests, meaning selling the product at a higher price will absolutely benefit their interests and the interests of entire industry.

To state emphatically, we are not inferior to the coffee industry or the pharmaceutical industry or to any high-tech industry in existence today. Our scientists as in the various high-tech industries spend years in breeding a variety our biologists and entomologies invest tremendous resources in supervising against pests and diseases so to bring to the market a clean product. Our growers work for many months in bringing a high quality and amazing beautiful product to the market at its right time so that it flowers exactly in the specific week, and the retailers also demand from us a durable product that would survive also in the store without any particular supervision and care, a product that demands less water and maintenance, and all this so to sell the consumer a product that its value is less than a cup of coffee…

The plant material price is always an issue to debate over and argue about between the breeder, producer of cuttings and between the growers. On what do they argue? A cent more or a cent less? Is our industry actually built on that one single cent on which the argument is all about?

Going back to my favorite store, Starbucks – the client asks for an additional flavor to be added to his cup of coffee – it could either be vanilla or hazelnut or caramel syrup, and with two-three squeezes of the pump the customer is charged another 35-40 cents! Does the consumer debate much about this before agreeing to this extra charge? And if tomorrow Starbucks decide to raise their prices at coffee shops and charge 45 cents instead of 35 cents for the extra flavor – will the customer cancel his order because of this? I believe the answer is evident, the consumer will pay because he thinks that the coffee he is buying is worthwhile its price. But, I think that first and foremost, it is Starbucks who believes that it is worthwhile its price!!

I take the liberty of also saying aloud that if the owners of Starbucks think that there is no problem in charging another 40 cents for three squeezes of sweet syrup despite the very low cost value, also the consumer shall have no problem paying for it. What differs us from Starbucks? There they are selling a brand name, differentiation, and atmosphere…but does all this together make it a more valuable item than what we are selling? How many new products did Starbucks introduce over the past few years? How many research scientists are actively breeding and introducing new coffee varieties or creating better consumer products? None? Or, practically none!

Note – three squeezes of the pump equals ten times more than the royalty we charge for New Guinea Impatiens, Geranium or Petunia and I am not talking about the price of the product itself, but only the royalty vs. the extra syrup.

The price of a cup of coffee with syrup would cost about $4.50 to $5.00 depending on the size of the cup – about twice the retail price of the 4-inch flowering pot sold at the chain store. A flowering pot could bring joy and pleasure to the consumer for a month or two and sometimes even more. How long does getting pleasure from a cup of coffee last? Ten minutes? Twenty minutes? Thirty minutes if taking into account the atmosphere, the tranquility and the quality time spent at the store. It seems that our client pays half the price for the product that can be used hundreds of time longer than a cup of coffee. Where’s the logic? Or alternatively, for three squeezes of sweet syrup the customer pays ten times more that the royalty paid for the average product in our industry.

Right, there is no logic. But, first of all and before anything else, we need to decide that we are high-tech, and are acting in a high tech environment and not an agriculture one whose raw materials are not only land and water, but scientists who are MD graduates and some also with higher titles, experts in fertilizers, pests and growth regulators, genetic experts, product designers, experts for clean water, international researchers known in all the above mentioned fields, marketing inclusive, and being so we have to first and foremost refer to ourselves as a high-tech industry and not be afraid of the consumer’s reaction because the world cannot do without plants…

During the springtime the consumer may invests several dollars on plants. He might buy 2-5 plants and pay about $5.00 -$20.00 for each acquisition. That same customer on his way out from the shop can sit over a cup of coffee for the same amount without thinking about it for even one second. And he can also do this again and again several times a day.

We have to reposition ourselves; at first in our own conscience and later in our customers’ conscience, as an industry that is on the top and not on the bottom of the scale, not an inferior agriculture industry but a high-tech because this is what we are actually. We need to stop arguing over one cent, because an industry based on the cent is doomed to vanish…Our industry is duly entitled to double and triple the prices current in the market today. We need to encourage the retailers to raise the prices and the consumers will accept it too, But we must believe in it deep down and be convinced about this, and if we truly believe, we will be able to convey the message to others.

Summarizing, an industry built on a "one penny mentality" will continue to suffer unprecedented foreclosures, intense economic pressures from all sides and struggle just for subsistence survival. Hence, we need to focus on the other side of the coin, which is the price level, and for this we need to see and treat ourselves as a high-tech industry, and together with the retailers convey this message to the market.

Author : Chanochi Zaks

July 2010