"NL: "We no longer deliver below the cost price"

It looked good for the first months of 2017. Lily nursery Qualily started the year well and continued the growth of recent years. Then the summer came. In one month time turnover fell by 15% and the margin by 2%. The greenhouse horticulture company took two measures. Entrepreneur Ruud van der Hoeven: “We purchase less enthusiastically and we have introduced a minimum price on the clock. These measures ensure that 2017 will still be a good year for us.”

For a number of years Qualily has been following the strategy to deliver lilies more directly. More at the request of the customer and progressively less by the clock. This strategic choice ensures more stable sales and improved continuity. Ruud van der Hoeven, one of the two entrepreneurs behind lily nursery Qualily, indicates that this steady shift has in recent years been accompanied by various acquisitions and investments. “Since last year we have a box at FloraHolland, the lion’s den. There we prepare the orders for our customers every day. The advantage of a box at the auction is that we can deliver and follow-up very quickly. Even after closing of the clock. Furthermore, we now control everything ourselves: from production to transport to our branch at the auction to delivery in the box at the customer. This allows us to better honor our name as a supplier of quality lilies. This also was the case in the first months of 2017.”

Also on the basis of the income and liquidity in the first five months of the year, 2017 promised once again to become a top year for Qualily. A month later it suddenly looked very different. According to Van der Hoeven, the reason for this is not found at the cost side, because the costs are well controlled year after year: 

The costs, income and liquidity were in line with those of 2016. Van der Hoeven: 'If you have the figures clearly available at any given time and you also keep a close eye on the market, such as geopolitical developments in Europe, then you can switch quickly when something is happening. "And in June Van der Hoeven all of a sudden saw the prognosis go completely askew. “We are lagging 15% behind in terms of turnover and because of this, the margin dropped by about 2%.”

Summer was early this year. “Consumers then do not stay inside, but rather go into the garden. They do not buy flowers, but bedding plants. Our sales stagnated. At the same time our supply went up. As a result of the nice weather we had to harvest the cultivated lilies after nine instead of eleven weeks. We had a double quantity, of which we did have the costs, but not the revenues. That immediately showed in our figures.”

Van der Hoeven mentions two measures he took to tackle disappointing results: less enthusiastic purchasing and deliver slightly more below cost price.

The bulb purchase price depends on the effect of supply and demand and is therefore subject to fluctuations. If in one year fewer bulbs are purchased, bulbs suppliers are left with a quantity of bulbs, chances are that the following year it will be cheaper to purchase bulbs. “We usually purchase one year ahead of delivery. We have already completed about 90% of our purchases for 2018. For next year we cannot really influence the purchase price anymore. But for 2019 we can anticipate and purchase less enthusiastically. However, that will not benefit the price of bulbs, because everyone will put the brakes on it. But for our purchasing price and ultimately the result, that does offer a solution”, according to Van der Hoeven.

The most important measure that Qualily implemented in 2017 is the introduction of a minimum price on the clock, the so-called withdrawal price. Van der Hoeven: “Previously our withdrawal price was on the standard of 6 cents. Following a few other growers, we now also have raised the withdrawal price. If the lilies are not sold above the withdrawal price, they are run through, in other words: withdrawn from the market and destroyed.”

"There is a risk that our customer has ‘no demand‘ at that price and the lilies are therefore run through earlier. This means that we have no revenue. In fact: running through costs us money, because we pay the discharge costs. But we have built up such a strong reputation in the sector as a supplier of quality lilies in recognizable packaging, that we have dared to make a strategic choice: we will no longer deliver below cost price. If we are not ‘able’ to earn anything, our customers will not have our product either. With this measure we engage in price setting and we motivate the customers to buy our lilies for a non-loss-making price.”