AU: The complex logistics of selling flowers at the supermarket

Mourners grabbing a bunch of roses at the supermarket en route to great aunt Dora’s funeral would be oblivious to the complex logistics that enable a bunch of fresh blooms to be available beside the wonky trolleys every day.

Flowers pose an added challenge for supermarkets because they are ultra-perishable. They also need to look extra nice on display and often can’t be grown locally. “Flowers are a unique product category that are highly perishable and have a short vase life, resulting in complex and time sensitive supply chain and high barriers to entry,’’ Lynch Group Holdings (ASX: LGL) chief executive officer Hugh Toll explains.

Pandemic 
The company has emerged from a pandemic that saw consumers rushing the shelves for toilet paper – but not delphiniums. “Flowers were the last thing on anyone’s mind,” Mr. Toll said. “It certainly made us change some things in the business we never thought we would change, and simplify our range and production methods to make things move faster.”

While the banning of decent-sized funerals and social events didn’t help, the convenience trade is oriented more to consumers self-purchasing flowers to liven up the home. The convenience blooms typically sell for around $10 for a straight bunch and high teens for a bouquet. Not surprisingly, a Valentine’s Day arrangement can sell for $60 or more.

Global flower market
Industry stats suggest Australia’s flower market was worth $1.32 billion in 2015 and $1.37 billion in 2019 – a compound annual growth of 0.8%. With their wide variety of shapes and colours, roses account for at least about one-third of sales. The sector is expected to expand to $1.46 billion by 2024, or 1.3% growth.

In contrast, the Chinese market is worth much more – $19 billion – but largely has been flat. While these growth dynamics are nothing to get excited about, Lynch’s dominant position in the convenience sector might be. According to Mr. Toll, the supermarket/convenience channels accounts for only 19% of flower sales here, compared with 55% in the UK. The company expects the convenience share of the market to grow to 24% by 2024, at the expense of sub-scale operators.

To read the complete article, go to www.smallcaps.com.au.


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