A message from Laurie Nesbitt, Florists Supply President
The floral industry has had relatively stable pricing in cut flowers and supplies since the start of the pandemic in 2020. The industry itself, after struggling the first few months, has been one of the fortunate industries and demand for our products has been strong.
In 2021 there are forces in play that are putting pressure on price increases in the industry:
- Almost all supply vendors have come forth in the first half of 2021 with price increases. We are seeing price increases ranging from 4.5% to over 10%. Over my last 25 years in the industry, it has been rare to see double digit price increases.
- Ocean freight rates to move product have increased significantly. Carriers are charging premium surcharges during peak periods, ignoring contract rates, and new contract rates are being negotiated at double or more the previous rates.
- While pricing from cut flower vendors has been relatively stable with only minor product increases, transportation costs from airlines and trucking have seen rate and fuel surcharge increases.
What is causing all the increases? Reasons cited by hard good vendors for product increases include higher raw material costs, higher labor costs due to COVID-19 disruptions, incenting employees to come back to work, and to meet significant demand increases caused by increased industry sales. The same vendors often increase fuel surcharges on invoices due to higher transportation costs. Retail diesel price in Edmonton for example in March 2020 was 1.024 per litre. At the end of April 2021, the price was $1.22 per litre, an increase of 19%.
When it comes to ocean freight, increased demand for space allows carriers to charge higher rates. The transportation time for containers to travel overseas is being extended (adding costs) due to port congestion. It is not unusual for ships now to wait 5 to 10 days offshore to get a berthing spot in the port to unload the containers. The ports themselves are taking longer to clear the containers.
Freight carriers in the flower industry always have premium surcharges during floral holidays. It is a little early to know where the new normal might be coming off Mother’s Day, but the expectation is there will be some increases in transportation costs due to rising fuel and labour costs.
Is there a silver lining in all this? The bright spot has been the strengthening of our Canadian dollar. In March 2020, the dollar traded around 1.43 versus the US dollar. It is currently trading around 1.24. That is approximately a 13% increase in purchasing power. This is helping to mitigate price increases on products we purchase in US dollars.
The strengthening Canadian dollar has helped maintain some stability on our wholesale prices despite vendor and transportation increases. In looking back at our 2019 cut flower Mother’s Day prices, the variance to 2021 prices was minor.
However, when faced with a double-digit US dollar vendor increase and double-digit transportation increase, the stronger dollar will lessen the price increase necessary but not eliminate it.
We are planning some Supply product increases on June 1 to keep pace with the increase costs being passed on to us. You may want to restock on key supply items post Mother’s Day this month. Always check www.floristssupply.com for your current (and sale) pricing and ensure your retail pricing calculations reflect your latest costs. We attempt to hold our Catalogue prices where possible but do reserve the right to change the published prices. Cut flowers pricing is market driven and are published weekly.
When you start seeing price increases at the wholesale level, in my opinion, it is foreshadowing of inflation to follow. With higher inflation we may finally see interest rates go up. I will let the Bank of Canada manage the interest rate as I am no economist, but it may be time to lock in borrowings on longer terms.