The $288 million orchid industry remains strong with ample room for growth as more stores expand their programs and new retailers carry the popular Phalaenopsis orchid. But Phalaenopsis’ impending plunge over the mass-commodity cliff means shrinking profit margins for growers, and the path to continued profitability in this arena may not be as obvious as producing them cheaper.
“Growers have moved more toward peak supply, which has improved prices, but year-over-year growth at store levels on regular, commodity orchid items (like the 5-inch) is getting harder to achieve,” says Ben Van Wingerden, owner of Color Orchids in Stevensburg, VA.
The predictability of Phalaenopsis orchid production lends itself well to automation, which has led to the reduction in cost to produce orchids and thus, the ability to reduce prices and make these once price-prohibitive plants more affordable for all consumers.
The shift from using loose-filled open trays for propagation to plugs has helped because it cuts weeks off production time. However, Van Wingerden says he thinks growers will use the extra time to grow the plants longer and shoot for more double spikes rather than cutting costs.
But just because growers can produce orchids inexpensively en masse, doesn’t mean they should always do it, according to Van Wingerden.
“Retailers don’t grow year-over-year by lowering their retails dramatically on orchids. Orchids are a high-end product, and that needs to resonate with every orchid grower,” he says. “Growers need to be innovative instead of focusing on low-cost production at high quantities.”
Some of that innovation has already hit the market, reflected in the new colors and shapes of Phalaenopsis available, but customers want more. In a recent FloraDaily article, Aline Andreas, Marketing Manager at Hassinger Orchideen in the Netherlands, was quoted as saying that people have learned the general growing features of Phalaenopsis orchids, and now they want to see new and special varieties.
Exotics Have Potential, But Reliability Is An Issue
This is opening the way for orchid growers to expand to other orchid items and exotics, like Dendrobium and Cybidium, but while the interest is there, the production and financial constraints are prohibitive.
“Phalaenopsis have long production turns, but a predictable outcome with a state-of-the-art environment and talented growers,” says Max Sherer, Director of Sales and Marketing for Indoor Products at Green Circle Growers in Oberlin, OH. “You can trust that plants finished on the other side will turn out great. Until other varieties can do the same, it will be hard for growers to take the risk to produce them.”
For Matsui Nursery in California’s Salinas Valley and New Jersey, offering a large variety of top-quality orchids is a value proposition, a way to differentiate.
“We grow some intergenerics and exotics like Oncidiums that can’t be as tightly controlled as the Phalaenopsis,” says Teresa Matsui, President of Matsui Nursery “They have to be hand-grown, which requires more labor and time than some growers can commit to, but it’s worth it to us to be able to offer something unique.”
Growers Need To Offer Value-Added Products In Existing Channels
Future advances in exotic genetics may open up the orchid market even more, as breeders find ways to give consumers what they want. But for now, orchid growers without the means to produce exotics on a large scale must look for other ways to compete. What makes sense for some growers is varieties that are easy and not too expensive to produce, according to Van Wingerden, who says growers need to look more at value-added than special varieties.
The search for differentiation also drives, to some extent, a move toward segmentation in the orchid industry.
“The biggest development I see in the orchid industry is that everyone is diversifying in pot sizes, flower size and shapes,” says Ron van Geest, who directs general and commercially operations at Netherlands-based Floricultura, which also owns Floricultura Pacific, in Salinas, CA. “Growers are also specializ ing in high-end products or concentrating on the retail size where the flowers are not as important.”
Floricultura Pacific recently teamed up with Flamingo Holland to provide customers with high-quality Phalaenopsis orchids and reliable delivery, with Floricultura producing pre-cooled, spiked orchids and liners in Salinas, CA, for the North American market and Canada. Floricultura’s Holland division will provide tissue cultured Phalaenopsis in flasks.
A Personal Touch Brings Repeat Customers
One way Green Circle Growers in Oberlin, OH, is distinguishing itself is by making the experience of receiving an orchid more personal. More than half of the company’s customers buy orchids for gifts, particularly for birthdays. When the recipients have a good experience with the product, they’re more apt to gift an orchid to someone else.
Education, to overcome customers’ fears of growing something as exotic as an orchid, is a big part of making the experience of owning an orchid a positive one.
Green Circle’s motto is that growing an orchid is hard — owning an orchid is easy. With 55% of the company’s customers on Facebook and 49% on Pinterest, social media engagement is an important part of getting the word out. Sherer says the company has created tons of care-related content online, which engages massive communities of people to share in the knowledge that owning (and giving) an orchid is easy.
Green Circle’s Just Add Ice brand simplifies the watering process for its customers, assuring them that watering an orchid is as straightforward as adding three ice cubes once a week. Color Orchids has patented another method that helps demystify orchid care. Each orchid it sells comes with a Simpleshot glass so the consumer never has to worry about overwatering. The company now offers the shot glass concept to other growers through Multi Packaging Solutions.
Color Orchids also offers education through its website, including a “Select Your Orchid Problem” section, which educates consumers on what to do about problems like stem breakage and droopy blooms. All of these efforts contribute to customers having good experiences with their orchids — a plus for the industry that can lead to repeat sales and potential new customers.