Navigating in a changing world: Gerben Splinter

The world is changing rapidly. With developments happening so quickly, it seems that nothing can be taken for granted. As this poses major challenges to growers worldwide, we dedicate a series of articles to zoom in on the topic in collaboration with businesses and entrepreneurs, researchers, and other stakeholders. Innovation and development are two of ICL’s core values, so we feel a responsibility to help our community of growers. In these inspirational industry stories we aim to give growers new ideas and perspectives to help them navigate in a changing world, now and in the future.

In recent decades, and particularly in the last ten years, significant shifts have occurred in the supply chain of ornamental horticultural products. More direct sales and a diminished role for auctions have been the main trends. According to WUR researcher Gerben Splinter, the relationship between growers and large-scale retailers is still imbalanced, with the power predominantly lying with the retailers. “Given this situation, it is crucial for growers – especially in times of rising costs – to broadly consider customer needs in order to maintain their position.”

Over the past decades, there has been a drastic transformation in the supply chain of ornamental horticultural products. The auction, particularly the clock auction, played a key role in sales for a long time. That has completely changed today. “Growers, especially in potted plants, have been doing direct business with buyers (including traders and retailers) for years. This development started in the 1980s, especially in Germany, where supermarkets wanted to run large campaigns featuring specific potted plants or plant mixes. The quantities required for these campaigns were not available through the clock auction. Therefore, trading companies started contracting one or more growers directly. While this trend began in the 1980s, it gained further popularity in the last ten years,” says Gerben Splinter, a researcher at Wageningen Economic Research with a focus on entrepreneurship.

Splinter mentions that nowadays many potted plant companies have their own sales representatives who maintain direct lines of communication with buyers. Labeling, wrapping, and similar tasks are also carried out at the companies themselves. “Additionally, companies strive to offer the widest possible range of products to provide one-stop shopping. They achieve this by growing more varieties themselves, often in smaller batches, or by collaborating with colleagues. In this way, entrepreneurs aim to meet the demands of the retail sector as much as possible and remain relevant to retailers.”

No seismic shifts ahead

Offering a broader assortment is often beneficial, Splinter notes. Large growers typically address this by purchasing from colleagues, and growers’ associations and collectives also play a crucial role in this regard. Additionally, according to the researcher, inventory management has gradually shifted from retailers to producers and traders. This does not mean that the auction has become obsolete, he emphasizes. “Although the auction has increasingly become a digital marketplace where products are not always physically present, the auction organization still plays a central role in the settlement and handling of transactions. This provides a kind of guarantee for growers to receive their payments on time.”

Splinter expects that direct sales will further gain ground in the coming years but does not foresee major upheavals in the supply chain. “The biggest ‘seismic shift’ has already taken place,” he indicates. “However, it remains a fact that producers or growers remain relatively small players in the ornamental horticulture chain; the ‘power’ still lies mainly with retailers. In other words, the relationships in the chain between growers and large-scale retail are still imbalanced and influential. Entrepreneurs have to deal with this reality.”

Choosing a clear direction

Splinter acknowledges that these developments present certain challenges, especially considering the significant cost increases that growers have faced in the past year, such as in energy and material purchase. “To maintain profitability and preserve their market position as growers, it is essential to make targeted choices and set a clear direction. This may involve cultivating a niche product or prioritizing maximum efficiency and a low cost price. In other words, know your strengths and maximize them as much as possible.”

Nevertheless, according to the researcher, it is difficult to pass on the cost increases to the supply chain. “Retailers generally prioritize the lowest price. If one grower cannot provide a product at a certain price, they will turn to another grower or import the product from abroad. This way, retailers usually come out on top.”

Exploring new opportunities

Despite this, there are certainly opportunities for additional value creation for potted plant growers, emphasizes Splinter. Cooperation with colleagues, for instance, holds potential. “For example, in sales; together, you have more weight when dealing with retailers. Additionally, you can choose to jointly purchase raw materials and necessary supplies. This can make a considerable difference in terms of cost price.”

He emphasizes the importance of broadening one’s horizons and looking beyond traditional methods to find new businessmodels. “In these times, growers can generate revenue in areas other than just growing a product. Consider exploring new applications for waste or byproducts from your company and finding ways to monetize them. Or supplying excess energy to residential areas or other entities could be an option. An excellent example is the supply of (excess) energy from greenhouse vegetable companies in Agriport A7 to Microsoft’s data center. But potted plant growers could also potentially play a role in water storage, considering water is becoming increasingly scarce. In short, there are opportunities for new business models and added value creation within horticulture.”

No one-size-fits-all solution

According to Splinter, the opportunities for additional value creation strongly depend on the type of company, the location of the grower, and the type of entrepreneur they are. “However, my advice to growers is always to diversify their business operations and explore possibilities for additional value creation to improve profitability and strengthen their business operations and market position. The ultimate path will depend on each specific case. There is no ‘one-size-fits-all’ solution.”

Profile

Name: Gerben Splinter

Position: Entrepreneurship Researcher

Institution: Wageningen Economic Research