The Floral Insight Newsletter—August 28th, 2024
Greetings from the Wizard
August Recap & Upcoming Events
August was fantastic! We had the pleasure of hosting Thomas Prince of Prince & Prince on The Bloom Show, where he shared valuable industry insights on past trends and how they may shape consumer buying habits in the future. (link)
We were also thrilled to welcome Jackie Lacey, the winner of the Sylvia Cup, who shared his experience, offered some tips, and provided insights on how others can participate in this world-renowned competition hosted by the Society of American Florists. (link)
As mentioned earlier, our host Sahid has been invited to Chrysanthemum Week by Deliflor to cover the DeliShow. We can’t wait to share all the amazing content with you in next month’s newsletter!
Looking ahead, The Bloom Show is excited to announce our invitation to Fun N Sun! It’s going to be a special event, starting with us being live at the Cocktail Party on 4th September, 2024, from 7PM to 8.30PM PST | 10PM to 11:30PM EST
We’ll also be going live from the That Flower Feeling panel on 6th September, 2024, from 9.15AM to 10.15 AM PST | 12.15PM to 1.15PM EST , and for the first time ever, we’ll be hosting The Bloom Show Road Show! Join Sahid Nahim and co-host Willie Armellini as they speak with farms showcasing their top products—this is going to be lots of fun.
We also have exciting opportunities for our community to support the floral industry and showcase their brands to our audience. The third annual Floral Events Calendar, highlighting all the floral industry events globally for B2B, is offering sponsorship opportunities. This calendar reaches over 30,000 floral industry professionals! (link)
Additionally, we’ve just launched pre-registration for the floral industry’s only independent, community-driven collaborative event, the 5th annual Bloom Together Event. With over 60 collaborating companies from around the world and 400+ guests in attendance, this event is designed to showcase the industry’s support, and highlight the importance of collaboration, networking, and community building across all sectors. We’re now opening free pre-registration and accepting applications for sponsors and contributors. All contributions go towards making this event possible, with any remaining funds donated to floral industry non-profits. For more information, use this link or email Mymy at [email protected]. Attendee Registration | Sponsor Registration
Upcoming Events:
Fun N Sun (4th – 6th September, 2024)
Expoflor (8th – 10th October, 2024)
We would love to connect! Feel free to reach out to [email protected] if you’d like to schedule a meeting with Sahid to learn more about our company and discover how you can support the floral industry while growing your brand and business at the same time. (link)
Thoughts from the Wizard
And now for some thoughts from the Wizard on some of the current economic, logistic problems, and global issues that may impact you and your business.
The economy is slowing but still growing.
The six-month annual growth rate is no longer pointing to a recession ahead. Many experts are more optimistic about an economic soft landing. Hopefully, they are right.
Most experts feel that the upcoming interest rate reduction will stimulate the economy further. We will still have economic growth, even if it slows a little. The economy remains on solid footing.
Americans stepped up their spending at retailers last month by the most in a year and a half, easing concerns that the economy might be weakening under the pressure of higher prices and elevated interest rates.
The Commerce Department reported that retail sales jumped 1% from June to July, the biggest such increase since January 2023, after having declined slightly the previous month.
July and August back-to-school shopping and special promotions by some retailers in many different sectors have helped fuel the economy.
Consumer confidence in July rose, even though high prices continue to be a major concern.
Heavy-duty competition and margin compression are facing many distributors and retailers as demand declines. We are seeing price cuts and fierce competition in certain sectors. Margin recovery is expected in late 2024 as the market stabilizes.
Homebuilding seems to be increasing and looks to continue as interest rates are expected to drop. Also, some material prices are coming down or increasing less as inflation levels decrease. Demand for housing is strong.
Even food companies are facing a lot of consumer push back. Consumers are tired of continuous price increases and have reached their limit on many items. More deals and new products are being offered. Some food manufacturers are offering smaller, less expensive packs. There is even political pressure addressing growing corporate profits.
Many companies have shifted manufacturing away from China. Tariffs from China have been working to diversify supply chains away from China. Biden has added tariffs on Chinese goods, and this policy looks likely to continue under both candidates. Many companies are reducing their dependence on Chinese suppliers.
Inflation
Inflation has continued to slow down. US producer prices rose in July by less than the forecast. This reflects an ongoing moderation in inflationary pressures.
US consumers are more optimistic than a month ago for many reasons. Some is due to the change in the candidates in the upcoming presidential election. Consumer sentiment is on the rise. With inflation slowing down there is a very good chance of the Federal Reserve reducing rates in September.
Even though inflation is slowing, many Americans are still seeing inflation’s ugly head for certain necessary goods,insurances, and services. Consumers are tightening their spending habits. We all hope these price increases ease up soon. The pace of price increases is slowing as US companies find it increasingly difficult to pass on higher costs.
Jobs and Wages
The U.S. labor market is finally cooling. July was the second-lowest monthly increase of 2024. In addition, the unemployment rate went up to 4.3%. July added fewer jobs than expected. We have a slowing but still growing labor market.
Supply and demand conditions have come into better balance for the current labor market.
Wage growth is also slowing, especially hourly wages. Many companies are slowing down hiring and even laying off workers, which appears to be leading to other companies finding it easier to recruit and retain staff. Some industries, like health care and construction, continue to add jobs, while challenges remain in sectors like trucking.
US companies are slightly scaling back plans for pay raises in 2025 as the nation’s hiring begins to shrink and the percentage of annual pay increases is dropping.
According to WFH Research remote work has stabilized at significant levels, with around 25%-30% of workdays remaining remote. The trend benefits both workers and employers–workers value the flexibility while employers save on real estate and training costs. The rate of remote workers currently is lower than its pandemic peak.
The Fed
At Jackson Hole Powell said “time has come’ to soon begin reducing interest rates”
Federal Reserve officials held interest rates steady at their most recent meeting, but minutes suggest that a rate cut could be coming in September. Most officials indicated that “if the data continued to come in about as expected, it would likely be appropriate to ease policy,” according to the minutes. Powell emphasized the need to adjust policy to protect the job market and maintain economic stability. While he did not specify the size of the rate cut, he indicated that the Fed is prepared to act quickly if the labor market shows further signs of weakening.
The Fed will most likely begin trimming rates starting in September. This should take some pressure off consumer and business lending as well as reduce investor anxiety that the Fed is somehow behind the curve. This was the feeling after early August’s stock market drop.
With easing inflation pressures likely to continue through year-end, the Federal Reserve now has room to reduce its rate, which could help economic growth remain positive through the rest of this year.
The market is currently pricing in a 0.25% to 0.50% cut at the September meeting. The Fed’s statement noted that risks of inflation vs. unemployment are more balanced now, suggesting that easier monetary policy may be coming soon.
Other worldwide Central banks have started cutting rates. The Bank of Canada and the Bank of England cut rates in 2024. Most other major central banks have kept rates unchanged this year. On the other hand, the Bank of Japan raised its rate from 0.10% to 0.25% in a surprise move in late July. It also announced a slowing of its bond buying program. The forecast of increasing inflation in Japan may indicate that further rate increases are likely. This caused the Japanese Yen to strengthen, which hurt the Japanese stock market in early August.
The Stock Market
August began with a roller-coaster week of stock trading, with the S&P 500 Index at one point declining by 10% from it’s all-time high set in July 2024!
Global market sentiment quickly shifted to one of caution. Some Investors and businesses felt the Fed was holding interest rates too high, too long.
Earlier this August we saw a global market selloff. Disappointing July jobs data spurred this global market selloff owed to investor concerns that the slowing labor market may deteriorate further and harm consumer spending, which has been the main reason for economic growth.
It won’t be surprising if we see continued Stock Market volatility through September. According to FactSet, August and September are among the two worst-performing months of the year, following July as the best-performing month
A July report showed slower hiring in the US as the unemployment rate rose, and some experts say that contributed to the stock market’s sudden drop in early August. However, some economists say the market was overreacting to the job news, as other indicators of the economy remain solid as inflation declines.
Investors have more recently grown anxious that the Fed’s policy was too slow recently. We saw this concern on stock prices in early August. Fortunately good news from Powell came at Jackson Hole
Logistics and Strike Threats
Canada’s largest railroads, Canadian National and Canadian Pacific Kansas City, both said they had formally locked out union rail in an unprecedented shutdown of the country’s two largest railroads. CN said the lockout came after the union did not respond to its final contract offer in an attempt to avoid a labor disruption. Canada’s labor minister put an end to CN and CPKC work stoppage. Railroads must resume operations and enter binding arbitration with Teamsters Canada. If this Strike proceeds it will cause for Canada and large financial losses and disruption for Canada as well as some for the States and Mexico. The great news is that Canadian National and Canadian Pacific Kansas City trains are now rolling days after the work stoppage thanks to Trudeau’s support of the railroads.
The threat of a strike by long shore workers at American ports could increase import container volume to near-record levels especially as shippers look to get holiday goods ashore earlier than usual to beat any work stoppages.
Fresh off June’s early peak season for end-of-year holiday merchandise, the latest Global Port Tracker indicates container traffic approaching record monthly levels as retailers bring in merchandise ahead of a potential job action at East Coast and Gulf Coast ports this fall, according to the report by the National Retail Federation and Hackett Associates.
The Port of Long Beach set a monthly record in July as retailers got a substantial head start shipping inventory ahead of the peak shipping season.
Air Cargo was extremely strong the first half of the year and expected to be even stronger the second half of the year. especially the last quarter. when international shipping normally peaks to meet holiday demand. This usually leads to less available capacity and higher rates.
E-commerce volumes out of Asia continue to be a strong factor in growth, but there are other factors that are also positively influencing air shipping. Although many U.S. and European businesses pre-ordered inventory to avoid being impacted by supply chain constraints, such as vessel rerouting around the Red Sea conflict zone, it appears that strong demand will result in more transport activity. The big question is will consumer demand hold and how much product was front loaded. Stay tuned to find out. Hopefully we will be able to determine the answers
Transportation and logistics are seeing increased merger and acquisition activity due to ongoing supply chain disruptions and prolonged inflation that are increasing opportunities for transportation and logistics companies.
Another good thing for logistics and inflation is that the price of diesel has had seven consecutive weeks of declining prices. Even with Israel and Iran at odds, prices have not spiked.
Negatives(we hate these but must mention them)
1) There is a slowdown worldwide( (some regions worse than others)
2) Wall Street Journal, “Japan’s Nikkei Suffers Worst Day Since 1987, Hit by U.S. Concerns”, August 5, 2024
3) Heat waves across Europe and North America have disrupted manufacturing and agriculture. Factories have been forced to shut down or reduce output to protect workers, while crop yields have greatly declined, leading to food shortages and price hikes. The economic impact of the European heat wave alone is estimated to exceed $10 billion.
4) Floods in China and India have crippled transportation infrastructure, factories, and warehouses. The series of hurricanes in the Atlantic has disrupted shipping and port operations. The total cost of these events on supply chains is still being assessed, but early estimates suggest it could reach tens of billions of dollars.
5) Wildfires in California and Australia have caused damage to infrastructure but also led to widespread air pollution and respiratory problems, impacting worker productivity and logistics operations. The economic cost of wildfires in California alone is projected to reach $50 billion.
6) For the latter half of 2024 we expect more El Nino that threatens to exacerbate weather-related events. This pattern usually brings intensified weather to different parts of the world, including droughts in some regions and heavy rainfall and flooding in others.
El Nino droughts could impact agricultural production in regions like Australia and South America, leading to shortages and price volatility on products like wheat, coffee, sugar and maybe even flowers. Heavy rainfall and flooding could disrupt transportation networks, leading to delays and increased shipping costs. This could impact the movement of goods across various industries, from manufacturing to retail.
The cumulative impact of these weather events has been as extreme as the weather. Supply chain disruptions in 2024 are estimated to have cost companies globally upwards of $100 billion. This includes costs associated with production delays, transportation disruptions, inventory losses and increased procurement expenses.
7) 2024 has proved challenging for global supply chains, with extreme weather conditions wreaking havoc on transportation, factory production, and agriculture. These problems are being felt by many industries and causing delays, shortages and rising prices. Unfortunately we have no control over the weather.
Conclusions
Due to the many reasons above as well as the usual summer cycle here is an article from Floral Daily about the Dutch trade this summer. (link)
According to Zola, a wedding planning site, says that weddings in 2024 will cost an average of over $30,000. Brides and florists are having sticker shock at the inflated prices of floral arrangements for weddings. Inflation has led newlyweds to cut costs in ways they may never have expected, and that includes trimming the rising cost of flowers for their weddings. Zola, a wedding planning site, says the 2024 average price tag for a wedding is over $30,000. Inflation driving a thorn into wedding plans, with budding newlyweds trimming flowers from their budgets
Charlie Hall is Ellison Chair of International Floriculture at Texas A&M University: Charlie says refine your value propositions and maintain a focus on the health and well-being benefits of flowers, a key area where consumers are likely to continue spending. Here is Charlies great article on Floral Daily “Growers need to distribute benefits of flowers to consumers”.(link)
As interest rates drop there will probably be more mergers and acquisitions in the Flower Industry sooner than later.
I know there is a lot to digest in this blog. The Flower Business had to avoid the quagmire of the restaurant business. Many restaurants have become so expensive that only the very well off can afford to frequent them. That high end segment is doing well but limited. The middle and low priced restaurants are where they are seeing large drop off in sales. McDonalds, KFC, and many more have brought back the $5 meal. Even Subway is bringing back a special price for the foot long.
What concerns the Wizard is that staples like beautiful wedding flowers will over price themselves and become less utilized. Even white roses and white spray roses have been less scarce this wedding season(although we do expect that to change a little in September.) We need to restore this usage as well as increasing the use of everyday flowers and plants in your home year round. Scratch your head and become aggressive in your selling. As I buy groceries I have seen many mass markets bringing back the 3 for. (Most are a little higher than the old $10 but still very competitive!)
Warm regards and thanks for reading my rants and tidbits that may or may not mean anything to you, Let the Wizard know if you have any comments!
The Flower Wizard- David Kaplan
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