News of more grower consolidation rocked the industry this week with the acquisition of indoor foliage producer Delray Plants by Costa Farms. The acquisition has occurred rapidly all within the past few weeks, and the agreement has been signed and will be final by the end of this week, says Costa Farms CEO Jose (Joche) Smith. Delray Plants has been considered to be one of Costa Farms’ biggest and best competitors over the past 50 years, he says.
“We’ve had a good friendly relationship and we’ve helped each other out over the years when either nursery needed product,” Smith says. “When the opportunity came up to purchase Delray Plants – and it came up just recently, over the last couple of weeks – we were going to do everything we could to make it happen. We thought it was important, rolling into spring, that we execute as quickly as possible for the team and for our customers.”
Production and Integration of Delray Plants with Costa Farms
When it comes to acquisitions, Costa Farms considers purchases based on strategy or value. Buying Delray Plants was a strategy acquisition, Smith says. While Delray and Costa served the same customers, Delray covered some markets that Costa didn’t.
“We have a pretty large footprint on the indoor plant side of the business, but in many places, the areas that we don’t have, Delray did have,” he says. “This offers the opportunity to increase our footprint with our customers, and also to add a few of the products that we offer into their offering, to expand the offering for that customer in that particular market. And that will work the other way, too – where we can now offer some things that Delray was doing and we weren’t.”
The integration of the two operations won’t happen overnight, as the production laid out for this year is already done, Smith says. Any changes to production will be for 2018 and beyond. It’s too early to tell what changes will be made thus far, so the plan is to get through spring and make sure customers are comfortable, before the integration steps begin.
“We want our customers to understand that it’s going to be business as usual, and then we’ll knock off all the integration steps one at time,” he says. “The first thing we’re doing is just getting everybody on board to our payroll system, and then the last thing we do will be to integrate the brands and get them into our production systems and so forth. That will all happen over the next several weeks.”
Delray Plants, well-versed in integrated pest management (IPM) and the use of biocontrols, is Veriflora certified, and also began the process of becoming certified through MPS over the past year. Costa Farms has also been innovative with biocontrols and IPM, Smith says. When an acquisition occurs, best practices from the combined organizations are always shared and integrated, he says.
“We just go back and forth, and figure out what’s the best way, and always there is information and best practices developed that flow back and forth,” Smith says. “We don’t want to assume at all that we’ve got all the answers, or that the other guys have all the answers. Hopefully we end up becoming a little stronger and a little smarter once we get together and merge the teams.”
Delray’s E-Commerce Activities an Asset to Costa Farms
One thing that Delray Plants had “a leg up on” Costa Farms was in its e-commerce platform, and the business it had already built through online sales, Smith says. Over the past five years, Delray Plants has shipped plants direct to consumers through online sales with its current retail customers, and in the past year since it has been working with Amazon.com. It also sells plants through FTD.com.
“It’s something that we’re excited to learn from them in that space, and to turbo charge our initiative in the dotcom space,” Smith says. “We had just kicked off our e-commerce initiative and hired an e-commerce general manager about three months ago. So this is going to fast-track our efforts, as we integrate that with our current platform. We’ll jump into an existing program as opposed to building one from scratch.”
There’s a big push to start with online sales on the foliage side of the business, Smith says, and that will likely include foliage plants, orchids, cacti, succulents, and other specialty items. Annuals and perennials may follow eventually, he says.
Delray Plants CEO Randy Gilde says the online sales numbers have doubled and even tripled in some cases over the past four years since the operation has been marketing plants via e-commerce.
“The numbers are small by our standards, but they’re growing – like everything online,” Gilde says. “And as we continue to improve the packaging, and the online content, it continues to grow.”
Content is king in selling plants online, and with the ability for consumers to upload photos and see plants in their own space, the sales will continue to grow, Gilde says.
“When you look at online sites, in particular Amazon, the lifestyle settings have helped improve growth,” he says. “We have embraced online sales for the past four years, and we actually hired FlowVision at one location to come in and help us lean-flow the packaging, because they numbers kept going up. That has helped a lot.”
The learning curve and the challenge in online sales comes from figuring out how to process one plant at a time, and do it efficiently, Gilde says. But he adds that the effort is worth it when you look at the reach of online sites, especially Amazon.
“I think Amazon sales are going to increase at a faster rate than other online suppliers,” Gilde says. “Amazon will grow faster than other online sites, particularly because of the reach they have, almost 100 million people. It’s going to be big. The simple stuff, like bamboo or bonsai or smaller plants – that’s easy stuff to sell. Some of the bigger items will get figured out. We’re selling more and more of our 10-inch house plants, and palms.”
The Delray Plants banner on Amazon will remain business as usual, but sometime within the next 30 to 60 days, it will likely make the transition over to Costa Farms, Smith says. Online sales is the next progression to Costa Farms’ already rich consumer-facing content generation.
“We’re going to leverage the content that we already have and our plant library, to help the consumer succeed.”
Succession Planning Played a Role for Delray Plants’ Sale
According to Gilde, the story is the same for Delray Plants as it is for many other growers in the industry who, due to a challenge with succession planning and no immediate family members ready to take over the operation, have looked to extend their operations’ legacy in another way. Gilde, who is 57 and has three children, and Vice President Ed Koornneef, age 50 and with four children, both realized their families would not be in a position to take over the business, Gilde says.
“Succession planning has been in the forefront for the last few years, as Ed, my brother-in-law, and I get older,” Gilde says. “It’s the same story. One guy’s business has continuation long term, and the other guy doesn’t see it. We’re in that same boat, so when the opportunity presented itself, we got together as a family and talked about it and prayed about it, and even though it was earlier than expected and it was a tough decision, it was the right one for our family and our employees.”
Selling the operation to Costa Farms is good for Delray Plants’ employees, because the operation has similar values in how it treats its people, Gilde says.
“They’re going to a great company, and Costa Farms takes care their employees like we take care of our employees, which for people who know me, that’s one of the most important things,” he says.
Smith says his team is happy to integrate Delray Plants team into the Costa Farms organization
“We think they have a very good team,” he says. “There’s actually a few people there who used to work here, and we’re excited about the opportunity, too, to put the team back together in some cases.”
Gilde says he will stay on through the end of the year, helping with the transition and then getting involved with operations, and then he’ll re-evaluate after that. And he’ll be around at industry events, he says.
“In the end, Joche and I both agree,” Gilde says. “We’re trying to always do what’s best for the industry, what’s best for the customer, and what’s best for the consumer.”