• TABLE OF CONTENTS
HIDE
 Title Page
 Copyright
 Dedication
 Acknowledgement
 Table of Contents
 List of Tables
 List of Figures
 Abstract
 Introduction
 Review of literature
 Cut flowers : general commodity...
 U.S. cut flowers supply : domestic...
 Consumption of derived products,...
 Subsector organization
 Past and present behavior and performance...
 Expected future characteristics...
 Present or potential problems in...
 Summary and conclusions
 Appendices
 Reference
 Biographical sketch






Group Title: commodity subsector analysis of the U.S. cut flower industry /
Title: A Commodity subsector analysis of the U.S. cut flower industry /
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STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00099224/00001
 Material Information
Title: A Commodity subsector analysis of the U.S. cut flower industry /
Physical Description: 2 v. (xxiii, 790 leaves) : ill. ; 28 cm.
Language: English
Creator: Miller, Marvin Neal, 1953-
Publication Date: 1983
Copyright Date: 1983
 Subjects
Subject: Cut flower industry -- United States   ( lcsh )
Floriculture -- Economic aspects -- United States   ( lcsh )
Food and Resource Economics thesis Ph. D
Dissertations, Academic -- Food and Resource Economics -- UF
Genre: bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Thesis: Thesis (Ph. D.)--University of Florida, 1983.
Bibliography: Bibliography: leaves 776-789.
General Note: Typescript.
General Note: Vita.
Statement of Responsibility: by Marvin Neal Miller.
 Record Information
Bibliographic ID: UF00099224
Volume ID: VID00001
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: alephbibnum - 000366124
oclc - 10040623
notis - ACA4960

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Table of Contents
    Title Page
        Page i
    Copyright
        Page ii
    Dedication
        Page iii
    Acknowledgement
        Page iv
    Table of Contents
        Page v
        Page vi
        Page vii
        Page viii
        Page ix
        Page x
        Page xi
        Page xii
    List of Tables
        Page xiii
        Page xiv
        Page xv
        Page xvi
        Page xvii
    List of Figures
        Page xviii
        Page xix
        Page xx
        Page xxi
    Abstract
        Page xxii
        Page xxiii
    Introduction
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
    Review of literature
        Page 6
        Page 7
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    Cut flowers : general commodity characteristics
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    U.S. cut flowers supply : domestic production, imports, and the effects of world markets
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    Consumption of derived products, elasticities of deman and commodity price patterns
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    Subsector organization
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    Past and present behavior and performance in the subsector
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    Expected future characteristics of the subsector
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    Present or potential problems in the subsector -- opportunities for improving performance
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    Summary and conclusions
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    Appendices
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    Reference
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    Biographical sketch
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Full Text











A COMMODITY SUBSECTOR ANALYSIS
OF THE
U.S. CUT FLOWER INDUSTRY















BY

MARVIN NEAL MILLER


A DISSERTATION PRESENTED TO THE GRADUATE COUNCIL OF
THE UNIVERSITY OF FLORIDA
IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE
DEGREE OF DOCTOR OF PHILOSOPHY



UNIVERSITY OF FLORIDA































Copyright 1983

by

Marvin Neal Miller
































This dissertation is dedicated
to the author's parents for their
support and encouragement in
completing this project.














ACKNOWLEDGEMENTS


The author wishes to express sincere appreciation to the following

persons for their contributions as members of his graduate committee:

Dr. Cecil N. Smith, chairman; Dr. Ronald W. Ward; Dr. Karl W. Kepner;

and Dr. William J. Carpenter. Special thanks are extended to Drs. Smith

and Ward for their patience and guidance during the difficult stages of

this research.

Gratitude is noted for the grant received from SAFE Endowment which

afforded the author the opportunity to travel to major floricultural

producing areas and market centers to observe the industry firsthand.

Appreciation is expressed to the many industry members who granted the

author interviews and who showed other courtesies.

The help of Mr. M. Truman Fossum, President of Marketing Facts for

Floriculture, Ltd., and the staff of Florists' Transworld Delivery

Association is acknowledged for their assistance with data and other

support. Thanks are extended to Yoder Brothers, Inc., for the use of

pictures of chrysanthemums showing types and forms of the flowers.

Finally, the author wishes to express his thanks to the many

secretaries of the Food and Resource Economics Department who aided in

the typing of various parts of the initial draft; Mrs. Ada Ohlson

deserves special mention in this regard. Sincere appreciation is

expressed to Mrs. Janet Eldred for the many sacrifices and the

conscientious efforts involved in preparing the final manuscript.















TABLE OF CONTENTS


ACKNOWLEDGEMENTS ..............................................

LIST OF TABLES ................................................

LIST OF FIGURES ...................................... ........

ABSTRACT .... ...................................................

CHAPTERS

I INTRODUCTION ................................ .............

Problem Statement .......................................
Methodology ............................................
Dissertation Organization .................................

II REVIEW OF LITERATURE ......................................

III CUT FLOWERS: GENERAL COMMODITY CHARACTERISTICS ...........

Product Description .......................................

A Product with Meaning ...............................
Various Cut Flower Species and Other Inputs ..........

Carnations (DiantlhuL caaryophylluS&
CatyophyUi cacce ) ...............................
Chrysanthemums (CIyhtsantheinan motifoiLwn
Comipositae ...................................
Gladioli (Glaciotu gcandijoftus -Itdaceae) .....
Roses (Rosa iuybLida-Rosaceae] ...................
Other cut flower crops .........................
Other inputs ....................................

Quality Specifications ...............................
Other Product Differentiation ........................

Summary .................................................


Page

iv

xiii

xviii

xxii



1

1
2
4

6

33

33

36
38


39

42
53
59
66
70

72
77

79










Page


IV U.S. CUT FLOWER SUPPLY: DOMESTIC PRODUCTION,
IMPORTS AND THE EFFECTS OF WORLD MARKETS .................. 80

U.S. Cut Flower Supply: Domestic Crop Production
and Import Competition .................................. 80

Domestic Production ................................. 80
International Contributions to Domestic Supply ....... 92

Cut Flower Industry: Geographic Changes .................. 106

A Trend Toward Centralization ........................ 106
Regional Centralization of Production ................ 108
International Production Patterns: Suppliers
to the United States' Markets ...................... 130
Shifts in Production: Cut Flower Production
Alternatives ...................................... 138

Status of International Trade and World Markets ........... 140

Trends ............................................ 140
International Development of the Cut Flower
Industry ......................................... 145
Summary ........................................... 151

V CONSUMPTION OF DERIVED PRODUCTS, ELASTICITIES OF
DEMAND AND COMMODITY PRICE PATTERNS ....................... 152

Consumption of Derived Products ........................... 152

The Products ......................................... 152
Market Outlets ...................................... 153
Consumption: Alternative Uses of Derived
Products and Rates of Growth ....................... 156
Substitutes ......................................... 181

Elasticities and Flexibilities of Demand .................. 188

Theory and Discussion ................................ 188
A Hedonistic Aside ................................... 196
Cut Flower Demand: A Two-Tiered Approach ............ 198

Data sources and limitations .................... 200
Retail cut flower arrangement demand ............ 203
Wholesale cut flower demand--introduction ....... 208
Wholesale standard carnation demand ............. 214
Wholesale miniature/spray carnation demand ...... 219
Wholesale standard chrysanthemum demand ......... 221
Wholesale pompon chrysanthemum demand ........... 222
Wholesale gladiolus demand ...................... 227
Wholesale hybrid tea rose demand ................ 229









Page

Wholesale sweetheart/miniature rose demand ...... 231
Summary of wholesale cut flower demand .......... 233
Conclusions of elasticity and flexibility
investigation ................................ 237

Commodity Price Patterns ................................. 240

Introduction ......................................... 240
Seasonal Price Patterns of Cut Flower Species ........ 242

Methodology .................................... 242
Standard carnation prices ....................... 243
Miniature/spray carnation prices ................ 244
Standard chrysanthemum prices ................... 251
Pompon chrysanthemum prices ..................... 253
Gladiolus prices ................................ 270
Hybrid tea rose prices .......................... 277
Sweetheart/miniature rose prices ................ 279
Price movement summary .......................... 279

Wholesale Marketing Margins .......................... 283
Retail Prices ....................................... 289
Charges of Associated Services ....................... 297
Summary .................................... ... .... 300

VI SUBSECTOR ORGANIZATION ................................... 302

Production and Marketing Channels ......................... 303

An Overview ........................................ 303

The start ....................................... 303
The grower ..................................... 304
Entering the distribution channels .............. 308
Movement to wholesalers and retailers ........... 312
The wholesaler ................................. 320
Distribution centers of multi-unit
retailers ..................................... 326
The retailer .................................... 328
Vertically integrated firms ..................... 336
The market channel picture completed ............ 338
The consumer ................................... 339
The role of the wire services ................... 341

Timing of Product Flow ............................... 343
Contractual Arrangements ............................. 345
Communication and Change in the Market Channel ....... 347










Page

Structure and Characteristics of Buying and Selling
Industries at Each Level in the Subsector ............... 349

Identification of Relevant Markets and Business
Concentrations ..................................... 349
Entry and Exit Conditions ............................ 358

Retail level ................................... 358
Wholesale level ................................. 361
Grower level .................................... 364

Technology Characteristics and Changes in the
Various Segments of the Marketing Chain ............ 366

Retail level .................................... 367
Wholesale level ................................. 369
Grower level .................................... 371

Characteristics of Cost Functions and Average
Sales Level ........................................ 374

Retail level .................................... 374
Wholesale level ................................. 378
Grower level .................................... 381

Financing and Credit Characteristics ................. 383
Specialization and Diversification of Firms
in the Industry .................................... 386

Degree of species specialization and
diversification ............................... 386
Integration ..................................... 389
Form of business ownership ...................... 393

Coordination within the Subsector ......................... 393

The Complexity of the Coordination Task .............. 395

Variability of subsector organization ........... 395
Uncontrolled factors affecting
coordination .................................. 397
Firm decisions affecting coordination ........... 398
Conflicting goals: Conflicting issues
and conflicting members ....................... 400

Relative Importance of Coordination .................. 410
Coordinating Mechanisms .............................. 413









Page

Exchange arrangements ........................... 414
Information systems ............................. 415
Collective organization ......................... 418

Coordinating Elements ................................ 421

Prices ........................................ 422
Information ..................................... 424
Predictions of future market conditions ......... 427
Attitudes of industry decision makers ........... 428

Summary ....................................... ...... 428

VII PAST AND PRESENT BEHAVIOR AND PERFORMANCE IN THE
SUBSECTOR ............................................ .. 430

Inventory and Risk Management Practices ................... 430

Costs in Retail and Wholesale Businesses ........... 431
Growers' Costs ...................................... 443
Risk Management Practices ............................ 446

Pricing ............................... ........... ....... 450

Price Variations in the Short Run .................... 450
Historical Differences Between Wholesale
Markets ............................. ............ 458
Historical Changes in Pricing Over Time .............. 461
Price Variability Within and Between Markets
at Retail ......................................... 462
Price-Cost Relationships ............................. 472

Value Added and Profits at Different Stages ............... 473

The Value Added by the Entire Subsector .............. 476
Value Added by Each Level of the Subsector ........... 480

Traditional retail trade--total ................. 480
Traditional retail trade--perishable cut
flowers only .................................. 481
Wholesale trade--total .......................... 481
Wholesale trade--perishables only............... 482
Value added at each level--summary .............. 483

Value Added Per Employee and Per $1,000 Assets ....... 484

Retail ........................................ 485
Wholesale ...................................... 486
Grower level ................................... 488
Value added per employee and per $1,000
assets--summary ............................... 490









Page

Profits as a Percent of Sales, Assets and
Net Worth .......................................... 491

Retail ......................................... 491
Wholesale ...................................... 493
Grower ....................................... 494
Summary ........................................ 495

Losses in the Subsector .................................. 496

Product Shrink and Deterioration ..................... 497
Intentional Non-Marketing and Delayed Marketing
of Products ....................................... 499
Resource Underutilization ............................ 501

Transaction Costs at Different Stages and With
Different Coordinating Mechanisms ....................... 504
Progressiveness at Each Stage ............................. 507

Product: Cut Flowers as Inputs ...................... 507
Production Process Through the Market Channel ........ 509
Innovations in the Organization and Coordina-
tion of Portions of the Subsector .................. 514

Extent to Which Supply Offerings of Sellers Match
the Demand Preferences of Buyers ........................ 517

Accuracy With Which Demand Preferences Are
Perceived at Different Stages ...................... 519
Ability of Participants to Influence Supply
or Demand ......................................... 523
Flexibility of Resource Use .......................... 527
Incentives Involved for Matching Supply and
Demand ........................................... 531

Equity With Which Risks, Rights, Responsibilities
and Returns Are Distributed Within the Subsector ........ 538
Competitive Environment in the Subsector .................. 539

Balance of Market Power .............................. 540
Widening or Narrowing of Markets ..................... 542
Access to and/or Foreclosure of Markets .............. 544
Equality of Market Information ....................... 548
Fairness of Competitive Behavior ..................... 550
Numbers of Entries and Exits at Different
Stages ......................................... . 557









Page

Causes of and Degree of Conflict Within the
Subsector ............. ...................... ............ 561

Forces Causing Change in the Organization and
Performance of the Subsector ....................... 567
The Wire Services ................................... 567
The Society of American Florists and Other
Organizations ...................................... 569
Floraboard ................................... ...... 570
Imports ........................................... 572
Mass Marketing ...................................... 574
Energy Shortages .................................... 577
Transportation and Freight Handling .................. 579
Post-Harvest Physiology .............................. 581
Changing Market Channels ............................. 583
Other Factors ....................................... 585

Summary ............................................... 587

VIII EXPECTED FUTURE CHARACTERISTICS OF THE SUBSECTOR .......... 589

Spatial Production Patterns and the Roles of
Imports, Improvements in Transportation and
Handling, and Product Demand ............................ 589
Varietal Selections Offered ............................... 594
Computerization .................................... ..... 596
Size and Numbers of Operators ............................. 599

Size and Number of Producers ......................... 599
Size and Number of Middlemen ......................... 607
Size and Number of Retailers ......................... 611

The Mass Market ........................................... 613
The Traditional Florist and Floral Services ............... 616
Use of Flowers ........................................... 620
The Future as It Relates to Behavior and
Performance .......................................... .. 625
Summary ............................................... 626

IX PRESENT OR POTENTIAL PROBLEMS IN THE SUBSECTOR--
OPPORTUNITIES FOR IMPROVING PERFORMANCE ................... 628

Grades and Standards ..................................... 629
Post-Harvest Physiology .................................. 637
Industry Statistics ...................................... 643
Educating the Industry and the Consumer ................... 649
Influence of Alternative Laws, Policies and Institu-
tions on the Organization, Control and Performance
of the Subsector ........................................ 652
Summary .................................................. 657









Page

X SUMMARY AND CONCLUSION ................................... 659

Working Concept of Commodity Subsector Analysis ........... 659
General Characteristics of the Product .................... 659
Supply .............................................. 660
Characteristics of Consumption ............................ 662
Subsector Organization ................................... 666
Subsector Behavior and Performance ........................ 670
The Future ........................................ .... 675
Industry Problems ........................................ 676
Final Thoughts ....................................... .... 677

APPENDICES

A SUMMARY OF IMPRESSIONS FROM VISITS TO LEADING
OPERATORS, MARKETS AND INSTITUTIONS OF THE U.S.
CUT FLOWER INDUSTRY ....................................... 681

B PERSONS AND FIRMS CONTACTED DURING THE AUTHOR'S 1981
TRAVELS ............................................. 753

C SUPPLEMENTARY DATA USED FOR ECONOMETRIC AND PRICE
ANALYSES ........................................ .... .. 762

D USDA PRODUCTION DATA ON CUT FLOWERS, 1956-1981 ............ 771

REFERENCES ................................................... 776

BIOGRAPHICAL SKETCH ............................................ 790
















LIST OF TABLES


Table Page

3-1 Percentage of FTD Holiday Orders Attributed to Various
Holidays, U.S. & Canada, for Selected Years .............. 37

4-1 U.S. Domestic Production of Major Cut Flower Species:
Number of Blooms, 1956-1980 .............................. 81

4-2 U.S. Domestic Production of Major Cut Flower Species:
Wholesale Value of Crops, 1956-1980 ...................... 83

4-3 U.S. Domestic Production of Major Cut Flower Species:
Deflated Wholesale Value of Crops (1972 = 100),
1972-1980 .............................................. 84

4-4 Nominal and Deflated (1967 Dollars) Per Flower
Average Wholesale Value of Major Cut Flower Species,
1956-1980 .............................................. 85

4-5 U.S. Domestic Production of Major Cut Flower Species:
Number of Producers, 1956-1980 ........................... 86

4-5 U.S. Domestic Production of Major Cut Flower Species:
Number of Flowers Produced Per Producer, 1971-1980 ....... 88

4-7 U.S. Domestic Production of Major Cut Flower Species:
Production Area, 1,000 Square Feet (Gladioli in
Acres), 1975-1980 ....................................... 89

4-8 U.S. Domestic Production of Major Cut Flower Species:
Number of Cut Flowers Produced Per 100 Square Feet ....... 91

4-9 U.S. Imports of Selected Cut Flowers (rounded to
nearest 1,000), 1971-1980 ................................ 94

4-10 U.S. Market Share of Domestic and Imported Carna-
tions and Per Capita Consumption, 1971-1980 .............. 95

4-11 U.S. Market Share of Domestic and Imported Standard
Chrysanthemums and Per Capita Consumption, 1971-
1980 .................................................. 96









Table Page

4-12 U.S. Market Share of Domestic and Imported Pompon
Chrysanthemums and Per Capita Consumption, 1971-
1980 .................................................. 97

4-13 U.S. Market Share of Domestic and Imported Roses
and Per Capita Consumption, 1971-1980 .................... 98

4-14 U.S. Imports of Ornamentals--Comparison of First
Six Months' Figures for 1981 and 1980 .................... 100

4-15 Top Five Producing States of Standard and Miniature/
Spray Carnations for Selected Years ...................... 110

4-16 Top Five Producing States of Standard Chrysanthemums
for Selected Years ...................................... 115

4-17 Top Five Producing States of Pompon Chrysanthemums
for Selected Years ...................................... 117

4-18 Top Five Producing States of Hybrid Tea and
Miniature/Sweetheart Roses for Selected Years ............ 120

4-19 Top Five Producing States of Gladioli for
Selected Years ......................................... 123

4-20 Comparison of Area of Production and Spikes Sold
for Gladioli, 1970-1980 ................................. 126

4-21 Top Five Producing States of Snapdragons for
Selected Years ......................................... 127

4-22 Leading States in Wholesale Sales of Cut Flowers,
1959, 1970 and 1978 ..................................... 129

4-23 Total U.S. Cut Flower Imports and Major Countries
of Their Origin, 1977-1980 ............................... 135

4-24 Total U.S. Cut Flower Imports and Major Countries
of Their Origin for the First Six Months of 1981
as Compared with the Same Period of 1980 ................. 137

5-1 Estimated Percentage Breakdown by Occasions of Total
Retail Florists' Operations for 1964-65, 1970, 1975,
1979 and 1980 ........................................ .. 163

5-2 Number and Sales of Florist Shops in the 50 States
and the District of Columbia for Selected Years .......... 166

5-3 Sales, Per Capita Sales and Adjusted (to 1980
Dollars) Sales and Per Capita Sales of U.S.
Florist Shops for Selected Years ......................... 168









Table Page

5-4 Resident Populations, Florist Shops Per 10,000 People
and Florists' Sales Per Capita for the 50 States and
the District of Columbia, for Selected Years ............. 169

5-5 Regional Comparisons of Resident Populations,
Florist Shops Per 10,000 People and Florists' Sales
Per Capita, for Selected Years ........................... 172

5-6 U.S. Births Per 1,000 Population, 1960-1979 .............. 176

5-7 U.S. Marriages Per 1,000 Population and Marriages Per
1,000 Unmarried Women Age 15 and Above, 1960-1979 ........ 177

5-8 U.S. Hospital Admissions, 1960-1977 ...................... 178

5-9 U.S. Deaths Per 1,000 Population, 1960-1979 .............. 179

5-10 Summary of Price Flexibility Coefficients, as
Calculated at the Mean, Maximum and Minimum Volumes
of the Observed Data Sets, for Major Cut Flower
Species ............................................... 234

5-11 Summary of High and Low Shipping Point Average
Prices, the Months Occurring, and Average Shipping
Point Prices, for Selected Cut Flower Species, in
1978-1980 Harket Price Survey ............................ 281

5-12 Summary of High and Low Wholesale Market Average
Prices, the Months Occurring, and Wholesale Market
Price Averages, for Selected Cut Flower Species, in
the 1978-1980 Market Price Survey ........................ 282

5-13 The Range of Wholesale Marketing Margins, the Months
Occurring, and the Average Wholesale Marketing
Margins, for Selected Cut Flower Species in the
1978-1980 Market Price Survey ............................ 284

5-14 Summary of Wholesale Marketing Margins for the
Months of High and Low Average Wholesale Prices,
for Selected Cut Flower Species, in the 1978-1980
Market Price Survey ..................................... 287

5-15 Summary of Average Shipping Point and Wholesale
Market Prices, Average Wholesale Marketing Margins
and the Percentage of the Average Wholesale Market
Price That Equals the Average Wholesale Marketing
Margin, for Selected Cut Flower Species, in the
1978-1980 Market Price Survey ............................ 288









Table Page

5-16 Average Value of Florists' Transworld Delivery
Association (FTD) Outgoing Orders, 1929-1978, as
Compared with the Consumer Price Index ................... 290

6-1 Breakdown of Cut Flower Growing Establishments by
Sales Levels, 1979 ...................................... 307

6-2 Breakdown of Merchant Wholesalers Operating Entire
Year by Sales Level, 1977 ................................ 324

6-3 Employment, by Principal Activity, of 1977 Flower
and Florists' Supplies Wholesale Trade Employees ......... 325

6-4 Sales Size of Retail Florist Establishments, 1977 ........ 332

6-5 Number of Retail Grocery Stores in the U.S. by
Sales Level, 1979 ....................................... 333

7-1 Depiction of Price Variability for Product from
Different Sources Using Weekly California
Shipping Point Prices (per bloom) for the First
13 Weeks (January to March) of 1978 to 1980, for
Fancy Grade Carnations .................................. 452

7-2 Depiction of Price Variability for Product from
Different Sources Using Weekly Philadelphia
Wholesale Market Prices (per bloom) for the First
13 Weeks (January to March) of 1978 to 1980, for
Fancy Grade Carnations .................................. 453

7-3 Depiction of Price Variability for Product in
Different Markets Using Weekly Boston, Chicago
and Philadelphia Wholesale Market Prices (per
bloom) for the First 13 Weeks (January to March)
of 1978 for California and/or Colombia Grown
Fancy Grade Carnations .................................. 454

7-4 Comparison of the Leading Producing States of Cut
Flowers and Florist Greens with the 10 Leading
States in Florist Sales ................................. 459

7-5 Summary of Results by Species and Year of Study of
Price Variances Within and Between Retail Markets ........ 467

7-6 Summary of Results by Year, Species and City of
Study of Price Variances Within and Between
Markets ............................................. 469

7-7 Adjusted (1980 Dollars) Sales Per U.S. Florist
Shop for Selected Years ................................. 551










Table Page

8-1 Summary of Past and Predicted Future Numbers of
Producers in the United States of Each of the
Major Cut Flower Species for Selected Years .............. 608

C-1 Data Used in Elasticity Analyses Not Appearing
Elsewhere .......................................... .. 762

C-2 Regression Coefficients of Variables Used for
Analyses of Wholesale Cut Flower Demand .................. 763

C-3 Comparison of Average Monthly Wholesale Market
and Shipping Point Prices for the Commodity
Price Pattern Study, 1978-1980 ........................... 768

0-1 U.S. Domestic Production of Major Cut Flower
Species: Number of Blooms, 1956-1981 .................... 772

D-2 U.S. Domestic Production of Major Cut Flower
Species: Wholesale Value of Crops, 1956-1981 ............ 773

D-3 U.S. Domestic Production of Major Cut Flower
Species: Number of Producers, 1956-1981 ................. 774

D-4 U.S. Domestic Production of Major Cut Flower
Species: Production Area, 1,000 Square Feet
(Gladioli in Acres), 1975-1981 ........................... 775
















LIST OF FIGURES


Figure Page

3-1 Four types of chrysanthemums: Clockwise (from upper
left) are the single (daisy), fuji, incurved and
decorative types ................................... .... 45

3-2 Four types of chrysanthemums: Clockwise (from upper
left) are the anemone, pompon, spider and "feathered
decorative" types ................... ... ......... .. ...... 47

3-3 The incurved chrysanthemum (left) is shown here as
typically raised in the standard form; a decorative
chrysanthemum (right) shown raised in the pompon
form .................................................. 51

3-4 Standard chrysanthemums are often marketed with a
nesh bag placed over each blossom ........................ 55

3-5 Gladioli as seen in a New York City wholesale house ...... 58

3-6 Demonstration of the closing of a heat blanket over
a rose bed ............................................. 62

3-7 One grower foregoes the initial rose pinch and
allows buds to develop ................................... 64

3-8 Some species have unusual growing requirements ........... 69

5-1 Plots of Death Rate, Hospitalization Rate, Marriage
Rate and Birth Rate, Per 1,000 Population, 1958 to
1979 (1958 = 1.00) ....................................... 206

5-2 Estimates of (Real Price) Demand Per 1,000 Persons
for Cut Flower Arrangements Over Time .................... 209

5-3 Estimates of Quantities Purchased Per 1,000 Persons
for Various Real Price Levels of Cut Flower Arrange-
ments Over Time .................................. ..... 210

5-4 Monthly Price Variation: Average Wholesale Market
and Shipping Point Prices Compared for Fancy Grade
Standard Carnations, 1978-1980 ........................... 245


xviii










Figure Page

5-5 Monthly Price Variation: Average Shipping Point
Prices for Fancy Grade Standard Carnations Shipped
from California, 1978-1980 ............................... 246

5-6 Monthly Price Variation: Average Shipping Point
Prices for Fancy Grade Standard Carnations Shipped
FOB Miami, 1978-1980 .................................... 247

5-7 Monthly Price Variation: Average Wholesale Market
and California Shipping Point Prices Compared for
Miniature/Spray Carnations, 1978-1980 .................... 248

5-8 Monthly Price Variation: Average Wholesale Market
Prices for Miniature/Spray Carnations, 1978-1980 ......... 250

5-9 Monthly Price Variation: Average Wholesale Market
and Shipping Point Prices Compared for Standard
Chrysanthemums (Large Extra Large), 1978-1980 .......... 252

5-10 Monthly Price Variation: Average Wholesale Market
and Shipping Point Prices Compared for Cushion Type
Pompon Chrysanthemums, 1978-1980 ......................... 255

5-11 Monthly Price Variation: Average Wholesale Market
Prices for Cushion Type Pompon Chrysanthemums ............ 256

5-12 Monthly Price Variation: Average Shipping Point
Prices for Cushion Type Pompon Chrysanthemums,
1978-1980 ............................................. 257

5-13 monthlyy Price Variation: Average Wholesale Market
and Shipping Point Prices Compared for Assorted
Type Pompon Chrysanthemums, 1978-1980 .................... 259

5-14 Monthly Price Variation: Average Wholesale Market
Prices for Assorted Type Pompon Chrysanthemums,
1978-1980 ............................................. 260

5-15 Monthly Price Variation: Average Shipping Point
Prices for Assorted Type Pompon Chrysanthemums,
1978-1980 ............................................. 261

5-16 Monthly Price Variation: Average Shipping Point
Prices for Imported Assorted Type Pompon
Chrysanthemums (FOB Miami), 1978-1980 .................... 262

5-17 Monthly Price Variation: Average California
Shipping Point Prices for Assorted Type Pompon
Chrysanthemums, 1978-1980 ................................ 263










Figure Page

5-18 Monthly Price Variation: Average Wholesale Market
Prices for Daisy Type Pompon Chrysanthemums, 1978-
1980 ................................................ . 265

5-19 Monthly Price Variation: Average Shipping Point
Prices for Daisy/Novelty Type Pompon Chrysanthe-
mums, 1979-1980 ................................. ... .... 266

5-20 Monthly Price Variation: Average Shipping Point
Prices for Florida Produced Daisy/Novelty Type
Pompon Chrysanthemums, 1979-1980 ......................... 268

5-21 Monthly Price Variation: Average Shipping Point
Prices for Imported Daisy/Novelty Type Pompon
Chrysanthemums (FOB Miami), 1979-1980 .................... 269

5-22 Monthly Price Variation: Average Wholesale Market
and Shiping Point Prices Compared for Fancy Grade
Gladioli, 1978-1980 ..................................... 271

5-23 Monthly Price Variation: Average Wholesale Market
Prices for Fancy Grade Gladioli, 1978-1980 ............... 273

5-24 Monthly Price Variation: Average Shipping Point
Prices for Fancy Grade Gladioli, 1978-1980 ............... 274

5-25 Monthly Price Variation: Average Shipping Point
Prices for Florida Produced Fancy Grade Gladioli,
1978-1980 ................................................ 275

5-26 Honthly Price Variation: Average Shipping Point
Prices for California Produced Fancy Grade
Gladioli, 1978-1980 ...................................... 276

5-27 Monthly Price Variation: Average Wholesale Market
and California Shipping Point Prices Compared for
Hybrid Tea Roses (25" and Longer), 1973-1980 ............. 278

5-28 Monthly Price Variation: Average Wholesale Market
and California Shipping Point Prices Compared for
Sweetheart/Miniature Roses (10" and Longer), 1978-
1980 .................... ................................ 280

6-1 A Precooler in Operation and a Close-up of the
Built-in Portholes in the Boxes .......................... 311

6-2 Diagram of Market Channels for the Majority of
Harvested Cut Flower Supply .............................. 313

6-3 View of Part of the Boston Flower Market ................. 316









Figure Page

6-4 Breakdown of Sales of Merchant Wholesale Florists ........ 323

6-5 Breakdown of Cut Flower Production Sources for
Mass Marketers, 1978 and 1982 ............................ 330

6-6 Main Flows of Cut Flower Production from Inception
to Consumer .................. ......................... 340

6-7 Depiction of Possible Breakdown of Outlets Where
Consumers Shop for Flowers ............................... 342

8-1 Number of Producers of Each of the Major Cut Flower
Species, 1963-1980 ...................................... 601

8-2 Depiction of Possible Shifts in the Demand Curve
(from D to D') Resulting from an Increased Demand
(a) or a Reduced Demand (b) .............................. 624
















Abstract of Dissertation Presented to the Graduate Council
of the University of Florida in Partial Fulfillment of the Requirements
for the Degree of Doctor of Philosophy


A COMMODITY SUBSECTOR ANALYSIS
OF THE
U.S. CUT FLOWER INDUSTRY

By

Marvin Neal Miller

August 1983

Chairman: Cecil N. Smith
Major Department: Food & Resource Economics

This study used a commodity subsector analysis to detail the U.S.

cut flower industry. Industry conduct, structure and performance were

evaluated in an attempt to discern where the industry is at present and

to suggest options for future direction. Ways in which conduct and

performance could be improved were outlined, and present and potential

problems of the industry were explored.

Following a review of the literature on the commodity subsector

analysis methodology, the horticultural characteristics of various cut

flower species, as they may affect the marketing of product, were

described. Supply considerations were then addressed. Trends have been

for fewer domestic growers, each responsible for greater production, and

for U.S. supply increasingly becoming partly the responsibility of

foreign operators. Colombia accounted for 90 percent of U.S. cut flower

imports in 1980; the Dutch and the Israelis are both contributing

greater volumes as well.


xxii









Consumption patterns were reviewed. Traditional retail florists

account for 90 percent of sales dollars, but mass marketers are gaining

in importance. Chief occasions for consumption remain funerals and

holidays. An analysis of the retail demand for cut flower arrangements

suggested an inelastic demand was operating. Due to the assumed

inelastic nature of cut flower supply, flexibilities were used in the

study of wholesale demand for particular species; inflexible price

coefficients were generally found. An examination of commodity price

patterns showed prices to peak near holidays; summer months typically

account for the price lows.

Market channels for the 30,000 retail florists, 2,000 wholesalers,

3,900 flower farms and other less traditional marketers were delineated.

Growers appear to be more concentrated than other groups. Vertical

integration is prevalent, as many firms attempt to bypass established

middlemen.

Subsector behavior and performance were analyzed. Pricing, value

added, profits, product loss, the accuracy with which supply offerings

match demand preferences, risk, the competitive environment, conflict

and issues causing change were among the topics discussed.

The dissertation concluded with an outlook toward the future

characteristics of the subsector, given its pattern of evolution, and a

discussion of the present and potential problem areas in the industry.


xxiii















CHAPTER I
INTRODUCTION


The U.S. cut flower industry has changed considerably over the past

several decades; this change continues at a rapid rate today. Modern

technologies, coupled with the economic pressures of inflation, rapidly

increasing heating and transportation costs and changing supply and

demand patterns have transformed the cut flower industry from one where

local florists largely depend on nearby growers for supply, to an

industry where demand is often satisfied by growers, shippers and whole-

salers who supply local florists and/or supermarkets with flowers grown

all over the world. The change has indeed been significant. An exami-

nation of the industry as it exists today is, therefore, warranted.


Problem Statement


The cut flower industry has been a constantly evolving segment of

the U.S. horticultural trade. Although advances have affected all of

horticulture, the cut flower industry has, perhaps, been among the most

touched. Scientific advances, in such areas as breeding and crop pro-

duction (including hybridization, growth hormones, fertilization and

pesticides, etc.), coupled with technological advances in greenhouse

managerial practices have transformed parts of the industry from home-

stead operations manned by family members to large corporations with

many hundreds of workers and many acres of production. Economic

pressures have further changed the industry as inflation and world









political problems have forced labor and fuel prices to escalate in

recent years. As labor and fuel usually constitute the two largest

costs of production for the cut flower industry, the effect has often

been substantial.

Yet through this adversity, some firms have shown little or no

change over the past several decades, this being possible because of

various niches being served. Many a community is still being served by

a florist who relies almost solely on the production of the greenhouse

attached to his shop, or a florist who "employs" his wife as his sole

designer.

The diversity of an industry and the absence of a recent cataloging

of industry status are, at times, defeating in furthering industry

progress. Documentation of the current situation in which an industry

is found, and the analysis of that circumstance, often allows for a

determination of industry efficiencies and inefficiencies. Furthermore,

suggestions of improvements in industry performance are often evident.

This, then, is the objective for this analysis of the U.S. cut flower

industry.


Methodology


A commodity subsector analysis is the selected methodology of

examination for this research. This approach evaluates industry con-

duct, structure and performance in an attempt to discern the current

state of an industry and to discover probable options for where the

industry may be headed in the future. This analysis, subsequently,

outlines ways in which industry conduct and performance can be improved

and explores present and potential problems of the industry.








A commodity subsector approach ". . involves analyzing the entire

production-distribution system for a commodity. Thus, it involves both

horizontal and vertical interactions between the firms and industries

which participate in the subsector. In addition, an attempt has been

made to explicitly identify changes in the organization or coordination

of the various subsectors . ." [Yuen et al., 1978, p. 1].

Marion [1976a] points out that, when concerned with the organiza-

tion and performance of a subsector, one is largely involved in analyz-

ing the controlling forces in the subsector and the degree, if any, that

control over strategic aspects within the subsector may be changing.

Marion further suggests that one needs to be concerned with the effects

of alternative patterns of control on subsector performance. Here

Marion includes discovery of the extent to which coordination is

achieved (i.e., do supply offerings match demand preferences in

quantity, quality, timing and location) and analysis of the technical

and operational efficiency of the entire subsector, the equity of

distribution of returns, right, risks, information and responsibili-

ties, the accessibility of the subsector and ultimately the reli-

ability and stability of subsector performance [Marion, 1976a, p. 11.

Although contemporary commodity subsector analysis methodology has

only developed over the last decade, it has already been widely adopted

in researching the U.S. food system. Most of the recent work is a

result of activities of the North-Central Project 117 (NC-117) Food

System Research Group, which is conducting research entitled "Studies of

the Organization and Control of the U.S. Food System." From this

research committee, a general outline of the recommended procedure to

follow when conducting commodity subsector analyses was developed.









This outline was used as the basis for this work, with slight modifica-

tion to adapt the outline to the cut flower industry.

The already conducted research on commodity subsectors, largely

that of the NC-117 Food Systems Research Group, has also generated many

hypotheses. Many of these hypotheses can easily be adapted to other

industries, including the cut flower industry. These hypotheses, which

will be introduced in Chapter II's review of literature as warranted,

will be combined with the previously mentioned outline, to guide this

commodity subsector analysis. An effort will be made to relate these

premises to the U.S. cut flower industry.

There are, however, two distinctions which must be made. First,

the cut flower industry is very definitely agricultural in nature

although retail florists would, for the most part, question whether or

not they are typical agribusinesses. Secondly, some differences from

the reported research might be expected, for this research has largely

dealt with the food industry. Although flowers are now carried in many

supermarkets (very often in the produce section), flowers definitely can

be distinguished from food. On the other hand, production methods of

flowers, whether they be field grown or raised in greenhouses, are not

dissimilar to production methods of other horticultural food crops

(whether field or greenhouse grown). It is with these points in mind

that the commodity subsector analysis of the U.S. cut flower industry

will now be undertaken.


Dissertation Organization


After Chapter II's review of literature, Chapter III will con-

tinue with a description of the general characteristics of the cut









flower commodities. Chapter IV will discuss domestic production, trade

and international markets as they affect the U.S. supply. Chapter V

will focus on consumption and will include a presentation on elastici-

ties of demand and commodity price patterns. Chapter VI will then

describe the subsector organization. Past and present behavior and

performance of the subsector will be analyzed in the seventh chapter,

and Chapter VIII will prognosticate the expected future. Chapter IX

will deal with present and potential problems in the subsector and will

include the outlining of opportunities for improving industry

performance. The dissertation will end with a chapter of summary and

conclusions.

Appendix A contains this author's initial impressions of the U.S.

cut flower industry as garnered from interviews of various operators

located throughout the country. Appendix A will be frequently cited as

a reference source. Appendix B contains a list of the over 150 persons

interviewed and/or firms visited during the author's travels. Appendix

C will include data used in the analysis that are not found elsewhere in

the dissertation. Appendix D includes updated data from Floriculture

Crops not available at the time work was started; as the series has

been terminated by the U.S. Department of Agriculture (USDA), the

complete data set is herein provided.
















CHAPTER II
REVIEW OF LITERATURE


Contemporary commodity subsector analysis research has only

developed over the last decade. Yet, it has already been widely adopted

in research on the U.S. food system. This work, which has largely been

conducted by the North-Central Project 117 (NC-117) Food Systems

Research Group as composed of members from 18 Land Grant colleges in

cooperation with the U.S. Department of Agriculture (USDA) has, to a

large extent, been the developing agent for recent commodity subsector

analyses. This research has yielded several papers on various sub-

sectors, as well as a proposed methodology for conducting research;

these will be used as a guide in this analysis of the cut flower

industry. Hypotheses and general information on subsectors have also

been generated by the NC-117 staff; it is this information and pertinent

hypotheses that will be reviewed here.

The words structure, conduct and performance, long used in dis-

courses of the industrial organization fields, have permeated the

commodity susbsector analysis literature. Structure, conduct and

performance have been used as the basis for suggested outlines of the

analysis procedure by some authors. Henderson [1975], for example,

suggests adapting the structure-conduct-performance framework of

industrial organization theory to commodity subsector analyses. Marion

[1976a, p. 2] supports this notion emphasizing that conduct, which is

often neglected by industrial organization writers, in favor of









emphasizing relationships between structure and performance, should not

be similarly ignored in subsector analysis. Marion [1976a] states that

coordination, one dimension of the conduct variable, is of particular

interest in commodity subsector analyses. Hence, conduct needs to be

closely examined, along with the structure and performance variables.

Discussion of industry structure almost immediately leads to the

topic of market concentration. Although not a prime issue among recent

writers specifically assessing various subsectors, market concentration

is widely discussed in the literature of industrial organization, con-

sidered the parent field of commodity subsector analysis. Here, market

concentration is often considered using such means as the Standard

Industrial Classification (SIC) Codes (at, for instance, a four-firm

concentration level), Bain's Index, consumer surplus, Lorenz curve, etc.

The objective is to obtain a measure of conglomerateness, or how near an

industry is to either being perfectly competitive or monopolistic. In

this sense, the number of buyers and sellers in the industry becomes a

point of concern.

Other structure variables would include the degree of product dif-

ferentiation, the absence or presence of any barriers to entry (or exit)

or the potential for such barriers and the cost structures in the

industry.

Conduct in industrial organization literature includes many vari-

ables relating to firm behavior in marketing and production of firm

output. Pricing behavior, product strategy and research and innovation

are included among conduct concerns, as are advertising, legal tactics

and any other issues relating to how firms accomplish exchange.









Performance is the third industrial organization category to inves-

tigate when examining a firm or an industry subsector. Profitability

and stability are perhaps the best indicators of firm or industry

performance. However, progressiveness (research and development,

improved technologies, etc.) and employment (changes or stability) are

also important indicators of performance. A firm's or industry's pro-

duction and allocation efficiency and an industry's distribution (or

redistribution over time) of income, equity and responsibilities are

also used as indicators of performance.

Discussions of the structure, conduct and performance of the cut

flower industry will depend, no doubt, on the segment of the industry

and the scope of the segment under discussion. The florists serving a

large metropolitan area will find themselves in a much different posi-

tion than those florists serving small rural communities. The wholesale

segment of the industry will have a different structure and different

expected conduct and performance than will the retailers, the wire

services or the growers. A closer examination of the structure, conduct

and performance is called for.

Of the three terms, structure, conduct and performance, conduct has

received much of the attention in the definitional literature of sub-

sector analysis. Henderson states that "the subset of conduct variables

that appears most relevant to vertical analysis focuses primarily on

coordinating activities between buyers and sellers rather than on com-

peting activities among buyers or sellers" [1975, p. 6]. Henderson

[1975, p. 8] further suggests that coordinating practices (from least to

most specific) include (a) spot transactions, (b) contracts consummated

after the production decision has been made, (c) contracts consummated









prior to the production decision and (d) vertical integration through

common ownership.

Henderson [1975] suggested the following hypotheses:1

HI: As the absolute number of buyers or sellers or both
declines in two vertically tangent stages of a market,
the types of coordinating practices used move away from
spot-type transactions toward increasingly specific
agreements.

H2: The greater the number of parallel channels that exist
in a vertical market structure, the greater the array
and range of coordinating practices used.

H3: The greater the number of intermediate units that exist
in a vertical channel (or the longer the channel), the
greater the use of coordinating practices toward the
spot transaction end of the range.

H4: The greater the perishabililty of product, the greater
the use of coordinating practices toward the adminis-
trative, or highly specific agreement, end of the range.

H5: The greater the number of intermediate units that exist
in a vertical channel, the greater the technical ineffi-
ciencies in the channel.

H6: The further that the coordinating practice moves away
from the spot-type transaction and toward a highly
specific agreement, the greater the technical efficien-
cies that result.

H7: The further that the coordinating practice moves away
from the spot-type transaction, the greater the alloca-
tive accuracy in both quantitative and qualitative terms.

H8: The further the coordinating practice moves toward the
administrative, highly specific agreement, the slower
the rate of change and adoption of new practices, tech-
nology and product forms by market participants.

H9: The greater the array or range of coordinating practices
that are evidenced in a market, the greater the range in
the degree to which equity obtains in that market.



1A11 hypotheses throughout the dissertation will be numbered as
Hi for reference later in the text.









H10: The further that the coordinating practices move away
from the spot-type transaction, the smaller the variance
in equity that obtains over time.2

Analysis of industry marketing channels will determine the applica-

bility of Henderson's hypotheses to the floriculture subsector.

Whereas, the industry is largely oriented towards spot transactions

(involving growers, wholesalers and retailers) and vertically integrated

firms (such as florists who raise their own flower crops in their

greenhouse-flower shops), the industry also has experimented with con-

tract negotiated crops in recent years. These contracted crops, with

contracts being consummated both before and after the production deci-

sions are made, have largely been spurred by the mass marketers, who

have long used contracts in negotiating much of their merchandise.

In any case, it can be said that the floriculture industry of today

exhibits all four of Henderson's coordinating practices somewhere in the

subsector.

Structure, conduct and performance, although each defined differ-

ently, are definitely interrelated in the literature as well as in

practice. Marion, for instance, uses the term coordination to

describe ". . the process of harmonizing the functions of a subsector,

i.e., as conduct" [1976a, pp. 7-8]. Marion continues, "The result of

good coordination is a match between seller offerings and buyer

preferences" [1976a, p. 8]. This "harmonizing process" is, however,

used by Henderson [1975, p. 10] to describe allocative accuracy, which

he includes in a list with technical efficiency, progressiveness and

equity considerations as the determinants of market performance.


2Hypotheses H1 to H10 are taken verbatim from Henderson [1975,
pp. 12-13].










Yet, Henderson emphasizes the relationship between allocative accuracy

and vertical coordination. It is through this allocative accuracy

definition as used by Henderson, that one begins to note the cohesive-

ness of the structure-conduct-performance paradigm. Henderson states

that

. allocative accuracy refers to "goodness" of the match
between what sellers want to or do sell and what buyers want
to or do buy. As such, this may be the singularly most
important performance dimension associated with vertical
coordination. This has both quantitative and qualita-
tive dimensions. [1975, p. 10]

Parker [1976, p. 21] shares with Henderson the role of relating

conduct to performance variables. Parker states that the implication of

complacent conduct is that higher present and even higher future costs

will result due to a lack of progressiveness, that characteristic being

one of Henderson's performance criteria. This lack of progressiveness

results from a lack of pressure on companies for innovating according to

Parker.

Marion [1976a] probably does the most to tie the structure-conduct-

performance framework together. Marion relates the structure-conauct-

performance paradigm to what he calls the technological determinism,

behavioral and institutional schools.

Technological determinism, according to Marion, "concentrates on

the design of systems from a logistics-production economics point of

view" [1976a, p. 2]. Technological determinism "tends to focus on the

reasons for changes in subsector structure, particularly integration and

disintegration. Structural changes are attributed largely to technical

efficiency and/or risk sharing incentives" [Marion, 1976a, pp. 2-4].









The behavioral school emphasizes how the system functions,

stressing the conduct affecting inter-firm vertical relationships.

Marion tells of the cybernetic feedback-control approach, which places

emphasis on the relationship between decision rules, delays and decision

points, and performance in matching supply and demand. A second

behavioral approach is the conflict-cooperation approach, which places

"emphasis on behavioral analysis of conflict, cooperation, and power in

vertical channels, their effects on the coordination process, and on

matching S and U [supply and demand]" [Marion, 1976a, p. 4]. Finally,

Marion tells of the market failure approach of the behavioral school.

This approach "focuses on the causes of subsector structural change,

particularly vertical integration" [1976a, p. 5].

A final conceptual school, the institutional school, emphasizes the

market structure, coordination-adaptation and legal-institutional

approaches to concentrate on structure-performance relationships. In

the market structure approach, focus is directed to the effects of

vertical structure on industry structure, conduct and performance. The

institutional structure of systems, the structural evolution of the

system and the coordination and adaptation of the system are emphasized

in the coordination-adaptation approach, which considers the entire

subsector. Technical efficiency, adaptability, allocative accuracy and

distribution of rights, returns and risk are the performance dimensions

considered in the coordination-adaptation approach. The legal-

institutional approach is the last conceptual school approach discussed

by Marion [1976a, pp. 5-6]. Laws, institutional arrangements and equi-

table distribution of rights, risks and returns (relative to investments

of various participants) are the concerns here.









Marion also offers what he calls an "iso-coordination" curve. The

curve, which is presented almost in the form of a hypothesis (and is

indeed, subsequently referred to as such), suggests "that the degree of

coordination achieved (S-D match) is a function of the technology of

coordination (how much can supply be regulated re: quantity, quality,

timing and location and how much can demand be influenced) and the

dispersion of control" [Marion, 1976a, p. 8]. Curves convex with

respect to the origin, ranging from low to high levels of coordination,

are diagrammed on a graph, the axes of which are technology of coordina-

tion (low to high levels beginning at the origin) and dispersion of

control (disperse at the origin and concentrated levels at the upper

bounds). Marion [1976a, pp. 8-9] points out that the technology of

coordination includes factors affecting the ease with which seller

offerings and buyer performances are synchronized throughout the

subsector. Thus, similar firm size, similar firm location, agreed on

product characteristics, parallel seasonality patterns, ability to

store products, favorable weather patterns, etc., all would favorably

affect the technology of coordination level. Hence, Marion's iso-

coordination curve "hypothesis" will now be added to the list of formal

hypotheses, as follows:

H11: The degree of coordination achieved (S-D match) is a
function of the technology of coordination and the
dispersion of control, with greater coordination
resulting from higher technology of coordination and
more concentrated control of the subsector.

Improved communications between growers, wholesalers and florists

have definitely led to greater supply and demand matches. Several wire

service groups and local allied florist groups have made it a practice,

in recent years, to inform growers of flower needs for upcoming









promotions where heavier than usual needs of specific species will be

needed. Supermarkets, to a large extent, have followed this practice in

holiday ordering of potted blooming plants for many years. Furthermore,

recent efforts by the wire services at computerization of their trans-

actions have definitely resulted in greater synchronization in the

subsector, with even greater potential synchronization possible in the

future.

In an earlier paper, Marion [1976b], in discussing vertical coordi-

nation and exchange arrangements, pointed out that "where several

vertically related entities within a subsector are linked by markets,

the 'market prices' are assumed to provide coordination of productive

endeavors by the incentives or disincentives they represent" [1976b,

p. 179]. Marion pointed out that coordination should be differentiated,

as a process, from the mechanisms that influence that process. The

process of vertical coordination, according to Marion, is the way(s)

the various functions of a vertical value adding system are brought into

harmony, regarding the what, when, where and how (which

resources are used) goods are produced and marketed, and the adjusting

and adapting procedures needed to respond promptly to changes in demand,

new technology or other shifts in profit incentives [Marion, 1976b,

p. 180].

Coordinating mechanisms, on the other hand, include the facilitat-

ing methods of the marketing process. Markets of all types, private

treaties, vertical ownership, cooperatives, bargaining associations,

market orders, information systems (including grades and standards),

transportation services, credit services, government and trade programs

and practices all are considered coordinating mechanisms by Marion









[1976b, pp. 180-181]. Marion points out that coordinating mechanisms

can influence the "coordinating decisions environment" by (a) incen-

tives, (b) information flow, (c) adequacy of necessary inputs to be able

to respond to incentives and (d) management alertness and ability

[Marion, 1976b, p. 182].

Marion ends his article by listing several hypotheses for which he

purports no accuracy; he instead suggests the hypotheses may offer only

a supply of thought provoking material. The hypotheses are, neverthe-

less, added to the previous hypotheses list as the following:

H12: Technical efficiency in multi-stage segments of sub-
sectors increase as the linkages between these stages
approach vertical integration.

Ancillary Hypothesis: Vertical integration and con-
tracts which transfer substantial control tend
accelerate the adoption of new technology,
improve quality standardization, improve the
scheduling of product flow, and stabilize
facility utilization.

H13: Technical efficiency at any stage in a subsector gener-
ally increases as the size and specialization of the
enterprise increases. With increasing specialization,
however, comes increased risk and often increased
financial investments. Where risks are substantial,
increases in firm specialization will be inhibited
unless enterprise sharing arrangements (public or
private) are available to allow sharing of risks.

Ancillary Hypotheses:

a. Increased specialization results in reduced
flexibility. The desired level of specializa-
tion, therefore, depends upon the rate of
change in subsector demand and supply. With
rapid change, flexibility is more important
to firm and subsector performance than tech-
nical efficiency.

b. Since increased specialization reduces a firm's
alternatives, it also tends to erode its
bargaining power and makes it more vulnerable
to exploitation and inequitable distribution
of risk, responsibilities and returns.









H14: When compared to a loosely coordinated subsector, a
tightly coordinated subsector experiences lower total
cost per unit of output, reduced levels of risk, lower
prices to consumers, greater output, and lower total
profits per unit.

H15: Coordination of supply and demand is a function of
pricing accuracy, information flow, cooperation
between subsector members, and influence over demand.

Ancillary Hypotheses:

a. Processing and distribution firms are in the
best position to coordinate food subsectors due
to their access to information on consumer
preferences and their ability to influence
demand.

b. System linkages that transfer control forward in
a subsector and which are relatively long in dura-
tion increase the amount of information communi-
cated to and the market responsiveness of
producers.

c. Cooperation in a subsector is a function of con-
sistency of firm goals, equality of bargaining
power and level of information.

d. The larger the number of stages and the more geo-
graphically dispersed, the more difficult the
communication of accurate information through the
subsector. Communication is improved as inter-
mediaries are eliminated and firms at different
stages deal more directly with each other.

H16: Synchronizing of supply and demand is improved when one
stage in a subsector has significant control over supply.

Ancillary Hypotheses:

a. Coordination of supply and demand improves as
the concentration of the dominant stage in a
subsector increases.

b. Commodities in which marketing orders allow for
supply management and allocation enjoy better
coordination than similar commodities without
marketing orders or with marketing orders that
concentrate on influencing demand.









H17: Internal coordination (vertical integration) encounters
some of the same problems as market coordination. Where
markets are technically and allocatively efficient and
free from manipulation, where grades and standards are
adequate and where sufficient information is available,
market coordination will be equivalent or superior to
internal coordination.

Ancillary Hypothesis: In large part, vertical
integration and control transferring contracts
result from the failures of existing markets.

H18: The benefits from increased coordination increase with
the perishability of products, the importance of careful
scheduling between stages and the importance of quality
specification.

H19: Adaptability of subsector is a function of the ratio of
cooperation to conflict, degree of market coordination,
rate of growth of demand for output, sparseness of
government guarantees/controls and the equality of power
between different stages in subsector.

Ancillary Hypothesis: For commodities where
government farm programs provide price stability
and an assured market, producers are relatively
insensitive to changes in demand.

H20: The equity with which rights, responsibilities and
returns are distributed among subsector participants is
a function of the equality of bargaining power between
subsector dyads and historical patterns of property
right distribution.

H21: Large firms enjoy advantages over small firms in con-
tracting or vertical integration. Contracts with large
contractees are more economical to administer. Large
contractors are better able to absorb the risk and
administrative burden of vertical integration or control
transferring contracts. Thus these modes of exchange
tend to stimulate increased concentration.

H22: Vertical integration or contracts which substantially
alter control increase the barriers to entry into the
integrator or contractor industry. Contracts which
reduce the level of risk in the contracting industry may
reduce the barriers to entry into that industry, however.
The rate of entry/exit into the contracting industry
following the adoption of contracts should indicate the
perceived desirability of the risk-returns-freedom
trade-offs.









H23: Vertical integration or disintegration activity (or
variants thereof) is positively related to the rate of
growth or decline of commodities and the rate of tech-
nical change. That is, a subsector experiencing little
growth or decline, and few technical changes would be
expected to be organizationally stable.

H24: The primary goal of firms in contracting for the sale
of their output is to reduce market and price
uncertainties. Their interest in contracting is posi-
tively related to their level of specialization and
past variability of product prices, and negatively
related to current price levels.

H25: The primary goal of firms in contracting for input
supply is to gain sufficient control over quantity,
quality, and the delivery schedule of inputs to assure
efficient plant operations and the ability to satisfy
market demands.

H26: The incentives to contract are greatest for buyers
when inadequate supply is available, and greatest for
sellers when surplus supply exists and markets are
glutted. Hence, there is a natural conflict of inter-
est which encourages breaking contract commitments.

H27: In most subsectors, firms at different stages have
conflicting goals, do not accurately understand the
goals and preferences of firms at the other stages,
and are not "system oriented." Hence, conflict is
more prevalent than cooperation.3

Marion's [1976b, 191-193] hypotheses emphasize the importance of

coordination to a subsector. Although absolute proof of some of the

hypotheses may be lacking, many of these will be supported by observa-

tion of the cut flower industry, as the analysis will show.

Geographically dispersed stages of a subsector, perishability of

product, variability in size of subsector participants, advantages of

contracting and its effect on the subsector, and existence of con-

trasting goals within the subsector are all mentioned by Marion in

these hypotheses. These characteristics most certainly apply to the cut


3Hypotheses H12 to H27 are taken verbatim from Marion [1976b,
pp. 191-193].










flower industry and will allow these hypotheses to be addressed as they

pertain to the subsector.

Yuen et al. [1978] suggest the following hypotheses concerning

coordination and structure; these are now added to the hypotheses list:

H28: Producer collective action to coordinate production and
marketing will occur under the following structural
conditions:

a) Production of the commodity is highly geographically
concentrated;

b) Producers are typically highly specialized or highly
dependent on the commodity as their major income
stream;

c) Limited flexibility of resource use in the short run
typifies the farm production stage (Human Capital
and Fixed Assets);

d) Growers face a limited number of alternative buyers
for the raw commodity or there is threat of buyer
exit;

e) The raw product is highly perishable; and

f) There are perceived inequities in risks, responsi-
bilities, and returns between producers and buyers.

H29: High levels of coordination on product quality and timing
between two stages of a subsector do not insure that
overall subsector vertical and horizontal coordination
will be achieved. Further in those cases where vertical
coordination is high throughout the subsector, horizontal
coordination may not be achieved.

H30: Vertical coordination mechanisms currently in use in
agricultural subsectors are short-run oriented, focused
primarily on interaction between two stages, and suffi-
ciently devoid of horizontal control to facilitate long
run resource adjustments.

H31: Backward vertical integration will be used only when
there are

a) Unstable supply of product within desired
specifications;

b) An inability to secure product through alternative
sources;









c) An inordinate profit rate for suppliers;

d) A volatile price structure for inputs avoidable
if the buyer runs the assets for self supply;

e) Compatability of production operation and
management with current enterprises, and

f) High technical complementarity between
enterprises.

H32: Forward vertical integration will be used only when
there are

a) Unstable market outlets (price and availability);

b) An inability to effectively market products
through currently available outlets;

c) An inordinate profit rate for buyers;

d) Compatibility of production operation and
management with current enterprises; and

e) High technical complementarity between
enterprises.

H33: Production contracts will occur where there is a need
for close technical coordination between adjacent pro-
duction stages which would be conducive to vertical
integration except that

a) Capital requirements, management constraints
or limited returns discourage joint ownership
of adjacent stages;

b) Risk of the joint enterprises would make owner-
ship prohibitive for a single firm;

c) Legal restraints prevent joint ownership; and

d) Optimal plant sizes are compatible at adjacent
stages for combined ownership.

H34: Coordination between processors and retailers for
unbranded products tends to be based on frequent con-
tract with the evolution of standard working arrange-
ments which may infrequently be specified through
formal contracts. This is especially true for perish-
able products.









H35: Coordination between processors and retailers for
branded products is controlled by the brand franchise
holder. The access of brand franchise holders to a
variety of merchandising strategies allows them to
control product quality and influence product movement.

Corollary: Private label coordination is predomi-
nantly controlled by retailers through
pricing and merchandising strategies.
Private label processors only have the
ability to influence wholesale price.

H36: Development of vertical coordination mechanisms which
contain multiple product specifications may improve
communication between stages but increase the com-
plexity of collecting and disseminating information.
As these mechanisms increase in importance the prices
reported for more standardized exchange terms such as
those at terminal markets become less representative
of trading. This contributes to the problem of "thin
markets" and may add to the incentive to develop
alternative coordination mechanism.

H37: In markets where vertical integration, production con-
tracts and formula price contracts become predominant,
there is increasing price volatility ana greater
potential for price distortion or manipulation in the
residual spot market.

H38: In the presence of strong oligopsony at manufacturing
or retailing and strong horizontal control by growers,
intermediate processors will be squeezed. Thus growers
may be forced to integrate into processing to maintain
market outlets.4

Although most of the work on commodity subsector analysis has been

done in the last decade via the NC-117 Food System Research Group, there

was a period in the late 1950s and early 1960s during which much work

was done on vertical coordination. The work of this earlier period was

perhaps best summarized in a USDA publication entitled "Vertical Coordi-

nation in Agriculture." Authors Mighell and Jones define vertical

coordination as ". . the general term that includes all the ways of


4Hypotheses H28 to 138 are taken verbatim for Yuen et al. [1978,
pp. 13-16].









harmonizing the vertical stages of production and marketing. The

market-price system, vertical integration, contracting, and cooperation

singly or in combination are some of the alternative means of

coordination" [1963, p. 1]. Mighell and Jones continue to explain that

vertical coordination would include all of the ways in which vertical

stages of production are "controlled and directed." This, they say,

leads to an obvious dichotomy of integrated and non-
integrated kinds of coordination. Coordination of stages
takes place both within and between firms. Internal coordi-
nation is controlled by the firm's own administrative
structure; external coordination is carried on between
firms through the functioning of the pricing system and
market structures. [Mighell and Jones, 1963, p. 10]

They continue by pointing out that ". . integration (either vertical

or horizontal) is brought about by the same forces of industrial

evolution that lead to specialization" [Mighell and Jones, 1963, p. 10].

Economic change and progress are themselves a result of the continuing

specialization and integrating process. They continue, "the adoption of

any new item of technology, and improved practice, disturbs the existing

equilibrium of economic forces and leads to a different pattern of

vertical and horizontal integration" [Mighell and Jones, 1963, p. 10].

Mighell and Jones use a chapter of their report to discuss the

economic theory of efficiency and coordination. They point out that

efficiency, as achieved in production where the isoquants fall tangent

to the budget line to yield the expansion path, is similarly represented

for optimum plant size on a graph (whose axes are cost and output) by

the point where the long run average cost curve is at its minimum. This

point, the long run minimum-optimum, represents the efficient size

[Mighell and Jones, 1963, pp. 19-23].









Mighell and Jones point out that, in addition to the gains in

efficiency achieved by choosing to operate a plant at this long run

minimum (optimum) point, further cost reductions might be achieved from

the operation of several (identical) plants at this point. Possible

exploitation of purchasing and distribution economies of scale or

management proficiencies are examples of where even further cost abate-

ments might be realized. It should be emphasized, however, that as with

too large a plant, the opportunities for a firm to lower unit costs by

increasing numbers of plants will cease at some finite size of the

operation [Mighell and Jones, 1963, p. 23]. This may explain some of

the problems that several larger multi-shop florists have had with

continuing expansions; diseconomies of scale often set in, instead of

the expected continued economies of scale being realized.

Campbell and Clevenger [1975] seem to echo Mighell and Jones over

10 years later. They suggest that "an institutional approach to

vertical coordination is a way of looking at problems of organization of

a vertical production system. It focuses attention on transactions and

transactions systems. It calls to attention problems in organizing a

system toward a set of objectives" [Campbell and Clevenger, 1975, p.

13].

Marion [1976b, pp. 186-187], in writing about structure and

performance, tells of a market structure conceptual framework in which

he places emphasis on the impact of changes in vertical organization on

the nature and effectiveness of competition. The consequences of

integration are said to be represented best by two contrasting points of

view, one associated with the University of Chicago, and the second









associated with Bain, Scherer, Mueller and Helmberger [Marion, 1976b,

pp. 186-187].

The University of Chicago opinion is based on two models. Results

of the first model suggest that upon integrating a perfectly competitive

industry with an industry controlled by a single-firm monopolist, the

monopolist will have a profit motive for integrating only when economies

of scale result from vertically integrating the operations. In the

second model, successive monopolies of vertically related industries

integrate, with consumers being better off than when each industry is

controlled by a single monopolist. Output increases while prices

decline. Proponents of the University of Chicago perspective encourage

vertical integration because they say results of integration either have

no effect on, or actually promote competition, increase efficiency or

are undertaken by firms for faulty and, therefore, completely irrational

reasons [Marion, 1976b, pp. 186-187].

The second view, that of writers such as Bain, Scherer, Mueller and

Helnberger, is that vertically integrating firms usually are firms lying

between perfect competition and monopoly. As such, they say, it is

incorrect to talk about the results of integrating a monopolist with a

perfect competitor or with another monopolist, when typically integrat-

ing firms are actually somewhere along the oligopolistic continuum

between perfect competition and monopoly. Entry barriers, discrimina-

tory pricing and other pressures can be motives for integrating.

Examination of the structure of the markets of the integrating firms is

essential to determine the effects of mergers on future structure and

conduct [Marion, 1976b, p. 187].









Marion summarizes existing literature by suggesting four concerns

relating to changing vertical structures. Marion cites the effects on

(a) technical efficiency; (b) vertical coordination (including pricing

efficiency, information availability, firm adaptability, supply matching

demand, etc.); (c) distribution of rights, responsibilities and returns;

and (d) competition as the issues of concern when considering various

vertical arrangements [Marion, 1976b, pp. 187-188].

Parker [1976] suggests the importance of market concentration in

evaluating structure. He states that

the best single, generally available measure for evaluating
competitiveness of industries is the level of market
concentration. The degree of product differentiation between
the outputs of competing sellers (that is, the extent to
which buyers have preferences for specific brands and the
difficulty faced by outsiders wanting to enter into a product
area) is important but the existence of this leads to, and
therefore, is highly correlated with market concentration.
[Parker, 1976, p. 8]

Integrating firms and market concentration are becoming an increas-

ingly important topic in agriculture, and the cut flower industry is no

exception. Although there exist many towns which are served by single

florists or by a single chain of florists, many argue that the biggest

departure from the free enterprise system, as it relates to floricul-

ture, is found in the wholesale segment of the industry. Even in some

larger metropolitan areas, florists often are placed at the mercy of

only a handful of wholesale suppliers. Long standing customers are

seldom threatened. However, new, and in some cases untraditional,

retailers sometimes have difficulty finding a consistent supply of

product. Many wholesalers feel threatened by retaliating retailers who

may boycott them for selling to newcomers in the market place. As such,

some of these new retailers have found it necessary to vertically










integrate by purchasing their own greenhouses ano raising their own

product.

In a 1978 paper, Edward Jesse provided a good indicator of the

complex problems one deals with when discussing performance. His

paper's title, "Measuring tiarket Performance: Quantifying the Non-

Quantifiable," itself offers a good clue of these problems. Jesse

[1978] discusses performance objectives, indicators and extremes for the

food industry. The eight objectives Jesse suggests are generalized as

follows:

(1) To assure an abundant and reliable supply of goods and
services at economical prices, and to stimulate the
production and distribution of the goods and services;

(2) To facilitate and promote the production and distribu-
tion of that combination of gooos and services which
best reflects the preferences of consumers (through
adequate market signals) and the real relative costs
of production;

(3) To create incentives for increased productivity in
each activity of the total system;

(4) To provide productive and rewarding employment oppor-
tunities in the system (level and type of employment
and compensation);

(5) To equitably and fairly distribute rewards of the
system (level and price spreads), and especially to
assure government policies and programs (where
applicable) are, in the aggregate, fair and equitable;

(6) To discourage uneconomic uses and spoilation of
natural resources and the environment;

(7) To encourage social desirable population settlement
patterns (e.g., for production purposes: to encourage
settlement in areas of available labor pools, etc.);
and


(8) To encourage a sense of belonging and effectiveness
among participants in the system (morale).









Jesse suggests that these objectives, together with appropriate indica-

tors and extremes (the indicators of each objective and the possible

extremes for each indicator vary with the industry being discussed), can

"reflect an exhaustive specification of what an ideal economic system

should accomplish" [Jesse, 1978, p. 9].

Much of the work on performance of an industry is related to con-

sumer information services and related customer oriented matters.

Padberg [1975], for instance, points out that there is a need for

concern about the consumer's well-being when discussing performance. He

suggests that there are qualitative dimensions of economic performance

which must be considered along with the production efficiency profit

levels, and selling costs, which make up the quantitative dimensions of

performance. The qualitative dimensions offered by Padberg include

(a) availability of economy alternatives, (b) product safety, (c) con-

structive product image and (d) adequacy of consumer information

[Padberg, 1975].

Devine and Marion [1978], in a paper entitled "The Influence of

Consumer Information on the Structure, Conduct and Performance of Food

Retailing," discuss an experiment in which they monitored prices before,

during and after a consumer information program. These authors noted

that previous work had suggested that imperfect markets may result, in

part, from poor consumer information, especially when the various

commodities under consideration by buyers are extremely diverse and

complicated [Devine and Marion, 1978, p. 3]. Devine and Marion [1978,

p. 2] then suggest four hypotheses relating to the food industry (all of

which were confirmed by their research), which are offered below in a

generalized format:









H39: Significantly different prices for a standard product
(or group of products) would be charged by competing
sellers prior to the dissemination of comparative price
information.

H40: The public dissemination of comparative price informa-
tion would reduce the dispersion of prices across stores
and lower the average market price level.

H41: The level of consumer satisfaction with stores and
products would increase significantly in the market as
a result of the comparative price information program.

H42: The perceived and estimated value of comparative price
information would exceed the cost of providing such
information.

It should be emphasized that Devine and Marion [1978] refer to a

standardized product. Similarly, these authors' mention of the previous

research (which suggests that extremely diverse and complicated products

may result in imperfect markets, if there is poor consumer information

about these products) implied a need for better information and/or

standardization. Dale C. Dahl [1975], in his paper "Public Policy

Changes Needed to Cope with Changing Structure," argues that "consumers

should be given the advantage of a technical evaluation of all food

products that they buy. If there are different qualities of the product

being sold, these qualities should be identified according to some

comprehensible standard of reference and this information should be

posted clearly in retail stores" [Dahl, 1975, p. 212].

An argument could easily be made for extending this standardization

beyond food products and beyond the consumer retail segment of

industries. After all, most graded food is indeed standardized by

manufacturers, growers, distributors or wholesalers and not by the local

supermarkets in which it is purchased. (Unit pricing, where adopted,

may be an effort by retail supermarkets to provide some of the informa-

tional benefits of standardization to consumers.) Dahl [1975] seems to









encourage extending standardization as he urges grades and standards be

adopted even for farm inputs for price reporting purposes and to encour-

age technical competence. Dahl [1975, p. 212] says that defining input

product standards can be left to the input industries who can themselves

determine the "representative" products.

While standardization of floral arrangements is not advocated

(although wire services do feature "standard" arrangements), standard-

ization of the quality of the flowers used has been advocated by some.

Although a grading procedure has been used in the past for some flower

species (and is still variably in use for some species), size and

freshness grades have not been uniformly adopted in the cut flower

industry. Operators even vary in the number of flowers they put into a

bunch depending on the species being packaged, the wholesaler or grower

packaging and the region of the country (or world) that the flowers are

being packaged in or are destined for. Once packaged, freshness of

flowers marketed can vary tremendously as well. Use of preservatives is

not universal on either wholesale or retail levels. Hence, flowers

marketed could have tremendous variability in quality. Information on

the flower condition would, therefore, be an asset.

The information process for food products has been extended further

to open dating, a method of dating perishable products to give consumers

an indication of relative freshness. Open dating refers to the fact

that the dates are discernible to consumers (as dates), as opposed to

closed dating (in a coded form), where dates are perceived only by those

familiar with the particular code. Research has shown that supermarkets

have somewhat changed their control and handling procedures when using

open dating. Consumers have returned a generally favorable response to










these added efforts. Product spoilage was greatly reduced. However, it

should be noted that consumers, while exhibiting pleasure with open

dating, generally were not sensitive about using open dating to its

fullest advantage. One conclusion was that the results accrued due to

distributor's efforts rather than consumer sensitivity about the program

[Padberg, 1977, p. 7]. A study by the USDA showed that store losses, in

terms of dollar values and packages requiring rehandling, dropped after

open dating was instituted. Shopper complaints about purchasing spoiled

or stale food also diminished, this by 50 percent. Yet, in this study

only 41 percent of the consumers polled even noticed the dates on the

product packages [USDA, ERS, 1973, p. iv].

One of the information processes sometimes available involves the

price publications of the Market News Service of the USDA. The Market

News Service reports prices resulting from market transactions at the

wholesale or farm level. Henderson refers to the Harket News Service

as reporting prices which are "pseudo-opportunity prices for actual and

potential buyers and sellers" [1979, pp. 117-118]. Henderson refers to

these USDA price reports as being indicators which are used as measures

of aggregate market performance in that they are rough corollaries of

market-determined prices. The Market News Service currently reports

prices for floricultural crops for several cities across the nation.

A related problem is that of thin markets, i.e., markets which have

small volume or small numbers of transactions involved in price deter-

mination [Hayenga, 1979, p. 1]. Poor information and/or poor communica-

tion facilities is on the list of causes that Powers [1979, p. 35]

offers for thin markets. Structural elements that limit entry into the

market, the natural size of a market (if, for example the total









potential size of a market is still too small to make for a liquid

market), poor product quality and technical inefficiencies that make it

costly to operate market facilities (hence, resulting in insufficient

market liquidity) are also offered by Powers as causes of thin markets.

Although thin markets do not necessarily result in unsatisfactory market

performance, the chief concern is with markets where vertically

integrated firms, long-term contracts, etc., dominate. Price and/or

product manipulations may occur which result in abusive treatment of

customers, largely due to scarcity of market determined reference

prices [Hayenga, 1979, p. 11. Thin markets may fail to provide "a

reasonably stable, efficient, equitable, minimal risk means of

transferring ownership of a product from buyer to seller, and provide

prices which are accurate signals of supply-demand conditions,

particularly due to insufficient market liquidity or possible market

manipulation" [Hayenga et al., 1979, p. 10].

It is because of this thin market possibility that market informa-

tion assumes greater importance and that Market News price reports,

where available, take on even greater consequence. However, it should

be noted that even with the Market News Service, market thinness is not

necessarily alleviated. As a matter of fact, thinness of markets which

have access to Market News reports raises the concern of information

accuracy. Reported prices in thin markets may not necessarily reflect

actual market opportunities for many buyers and sellers or for the full

diversity of product types (grades, weights, other physical character-

istics, etc.) [Henderson, 1979, p. 118].

Henderson [1979] raises five issues regarding the efficacy of

market reports, given the existence of a thin market. These issues








yield five possibilities which include the following actions: (1) the

volume upon which the reported market prices are based could be

reported, (2) non-price market information could be expanded, (3) one

could ignore thin markets, (4) one could tie standard terms of contract

or trade to the market reporting system (standards) and (5) one could

simulate or formulate prices based upon prices of related products

traded in less thin or more price-representative markets [Henderson,

1979, pp. 118-120]. Powers [1979, p. 32] seems to echo Henderson's

sentiments as he states that the two most pressing problems of thin

markets are (1) measuring market liquidity and (2) generating useful

market information.

Now, with this basis of previous commodity subsector research

having been established, the cut flower industry will be explored.

Reference to this research, especially the listed hypotheses, will be

frequent, with attempts made to show the links between this research and

the cut flower industry.















CHAPTER III
CUT FLOWERS: GENERAL COMMODITY CHARACTERISTICS


"Flowers add to our joys and comfort us in our sorrows, and I am

sure that in war we will need them more than ever." So wrote Eleanor

Roosevelt, wife of the President of the United States, during World War

II. At a time when some products were being rationed and when many

others were removed from the marketplace altogether (because the govern-

ment had deemed them luxuries rather than necessities), it is worth

noting that flower production was not curtailed and that the flower

business remained relatively undaunted [Williams, 1960, p. 280].

Flowers, as a product group, have been variously described as being

luxuries and necessities, niceties and essential nourishment for the

soul. Whichever they are, there are many characteristics of flowers

themselves which affect the industry that raises, markets and works with

flowers. The general commodity characteristics of cut flowers will be

described in this chapter.


Product Description


Over 350,000 species of plants have been reported and, with the

exception of the known ferns and some algae, fungi and mosses, all

flower as an essential part of the sexual reproductive process

[McConnell and Sheehan, 1981]. Although commercial propagation often

uses asexual methodologies, nature frequently depends on flowers for

regeneration. If the flowers are to be cut from a mother plant for









a cut flower industry, however, these regenerative capabilities are all

but lost. Yet, it is this flower removal upon which the cut flower

industry is dependent. These cut flowers, along with plants with their

flowers still attached (i.e., potted blooming plants), potted foliage

plants and cut greenery, subsequently form the nucleus of the floral

trade.

Although almost all species have flowers, not all species present

likely candidates for inclusion in the cut flower industry. As a matter

of fact, fewer than 10 percent of the world's species have been screened

for any purpose, and only about 1 percent have been thoroughly screened

for any possible use by man [Vicker, 1981]. Most species do not exhibit

the attractive or unusual flowers that many floral patrons appreciate.

Other flowers do not lend themselves to being cut because of size, an

extraordinarily high degree of perishability, an unpleasant odor, messy

exudations or the like. Still, there are other plants which have not

been researched to the degree necessary to predict or control flowering,

such that commercial production is feasible.

It is this last feature, that of being able to predict or control

flowering, which is of utmost importance to the cut flower industry

today. While not all species are flowered under artificial conditions,

the cut flower industry today relies on commercial flower forcing for a

large portion of the flowers of some of the major species on the market.

It is the synthesis of appropriate light, water, nutrients, temperature,

etc., that allows growers to mass produce chrysanthemums year-round

(instead of just in the fall), to force poinsettias and Easter lilies

when potential purchasers have grown accustomed to buying them and to









time other species for peak production for the holidays and other

occasions when demand is greatest.

Hence, one could say that the ideal flower to be used for cutting

is one that has a pleasant odor, has relatively good keeping qualities,

is easy to produce such that dependable quantities can be had at

reasonable costs and at predicted times and is a flower with general

consumer appeal. The flower species that have met these or similar

criteria over the years have been limited; yet, the count has probably

always been higher than the number of species commonly in use around the

country. Although there are reports of the use of many additional

species [Joseph, 1981], standard and miniature/spray carnations, pompon

and standard chrysanthemums, gladioli and hybrid tea and sweetheart/

miniature roses constitute the vast bulk of flowers that florists regu-

larly use nationwide. Upon entering many shops during slack periods, a

buyer may not be able to find even these species, much less varieties

such as snapdragons, asters, daisies or bulb crops. Furthermore, many of

today's younger florists have never worked with, or perhaps even seen,

such species as bachelor buttons, cornflowers, delphiniums, Sweet

William, ginger, heather, freesias, anemonies or cut violets.

Hence, one must ask why have certain species maintained or

increased their popularity, while others have been virtually neglected?

The answer may relate to factors such as perishability of the flowers or

appealing fragrance. The answer may lie with florists' tastes and

desires. However, the answer may go much deeper.









A Product with Meaning


A flower's popularity may relate to consumer habits and consumer

familiarities with various species. It may relate to consumer purchas-

ing patterns. A flower's popularity may, on the other hand, be

ingrained in demographic or socio-economic characteristics.

For example, the members of the post-World War II baby boom are

maturing and now comprise the majority of the primary consuming

population. Influences affecting this particular group will then be

multiplied several times their "normal" impact due to the tremendous

size of this generation. Furthermore, their progeny, coming in waves

known as "echo booms" [Fialka, 19823, will likewise be influenced as

individuals form households and have families. Coincident with the

gradual maturation of this population has been some shifting in flower

use patterns, e.g., non-use of funeral flowers. Any personal values

affecting these use patterns will probably be handed down en macsse to

the following generationss.

Use of some flower species may be tied to other factors such as

holidays or specific occasions. Valentine's Day is becoming more

important to the florists' trade. Therefore, the rose, which has a

romantic connotation for many, has seen increased use in mid-February.

On the other hand, use of gladioli has declined along with the custom of

sending funeral flowers and other memorials. Memorial Day, too, has

lost a tremendous amount of favor as a florist's holiday (Table 3-1),

except for some isolated areas near the Rocky Mountains.

While books have been written on the meaning ascribed to various

flower species and flower colors (e.g., Cole [1970]), no one in the













Table 3-1. Percentage of FTD
Various Holidays,
Years


Holiday Orders Attributed to
U.S. & Canada, for Selected


Holiday


Mother's Day
Christmas
Easter
Valentine's Day
Thanksgiving (U.S.)
Memorial Day
All others




Mother's Day
Christmas
Easter
Valentine's Day
Thanksgiving (U.S.)
Father's Day
All others


Percent of Orders


1974-75


36.1
33.7
15.5
9.6
2.7
0.5
1.9


Christmas
Mother's Day
Easter
Valentine's Day
Thanksgiving (U.S.)
Mother-in-law's Day
All others


SOURCE: Fossum [1981.


1969-70


1979-80


34.5
33.9
13.1
12.4
3.4
1.3
1.4









industry has ascertained whether roses connote romance if red or purity

if white, due to mythology, due to consumer demand or due to the tastes

and preferences of florists. In either case, there has long been the

suggestion that flowers have meaning; The Society of American Florists'

motto of "Say it with flowers" suggests this, perhaps to the point of

implying that what you are saying is only as important as what you say

it with! Of course, this would only apply to those flowers purchased

for others and would not include the fast growing segment of the

industry pertaining to flowers for a consumer's own use. Yet, one would

have to concede that flowers, especially as a gift-giving alternative,

often are "a product with meaning."


Various Cut Flower Species and Other Inputs


There are many species "providing" flowers for sale as cut flowers.

Many of the species have characteristics about them which make their

marketing unique. Roses, for instance, often have thorns, which make

their merchandising nothing less than a touchy subject. Carnations,

although readily storable, are considered by many to be the most

perishable of flowers due to their high susceptibility to ethylene gas.

Cut flowers are not often sold alone at traditional retail (and now

some mass markets) outlets. Greenery and other inputs go into making a

floral arrangement or boxed bouquet. These will be briefly discussed as

well.

It is because of such distinctions that brief product descriptions

of major species and groups of cut flowers and other inputs will be

outlined below, as examples to illustrate product diversity. Much of

the following, as cited, was gleaned from the classic floricultural








text, Commercial Flower Forcing, by Laurie et al. [1969]. Other

information comes from the author's own horticultural training and

experiences.


Carnations (Diantvhu carLyophyUk- -Catyophytlaceae). The

carnation, in terms of numbers sold, is the most popular cut flower

species in the U.S. In 1980, carnations outsold roses in the U.S. over

two-to-one; they are imported in greater numbers than any other flower

species. The natural variation of flower color is widely supplemented

by tinting. The vascular system of this species allows it to readily

absorb tints, and some firms have even established reputations as

carnation-tinting specialists. The flower's color versatility is

complemented by the carnation's adaptability in use, as standard and

miniature/spray varieties are both used in colorful carnation and mixed

flower arrangements. Both standard and miniature/spray varieties are

used extensively in boutonniere, corsage and wedding work. Occasionally

florists will "feather" standard blossoms to reduce size and give a more

dainty appearance. Standard carnation varieties are also widely used in

casket sprays and other funeral arrangements, as the long graceful stems

seem to add solace to the funeral piece. The small size of miniature/

spray carnations makes their use for hospital arrangements ideal, as

hospital display space is often limited. Some growers also sell bags of

standard carnation flower heads which are used for flower leis.

Although carnations could be cropped indefinitely [Laurie et al.,

1969], U.S. growers typically maintain plant beds for only two years.

There are instances where cut flowers are harvested for at least three

or four years from a single planting, but limits to maintaining flower









quality and disease problems often preclude this. On the other hand,

economic considerations have sometimes even dictated the practice of

double-cropping carnations with other greenhouse crops during the same

year. (Carnations have been planted for production of only the initial

flowering and then removed, yielding the greenhouse space to higher-

valued bedding plants or a holiday potted plant crop, for instance.)

Carnation production requires extensive labor, but even the labor

requirements can vary drastically. Producing standard varieties

requires much labor for disbudding lateral flower buds, while the

production of miniature/spray varieties usually demands labor for the

removal of apical shoots to encourage branching and simultaneous

blossoming. In areas where temperatures fluctuate widely, or where

growing conditions vary tremendously due to fertility, moisture and/or

temperature combinations, splitting of the calyx occurs [Laurie

et al., 1969]. When such "splits" regularly develop, additional labor

is required to band flower calyces, prior to their opening, to prevent

or reduce damage. Rubber bands, plastic collars or a type of trans-

parent floral adhesive tape are most commonly used. Although banded

flowers are not typically down-graded (unless splitting does occur),

some tradespeople may discriminate against them. Colorado carnations,

because of their general freedom from splits and lack of any associated

preventive banding, are often requested by name; hence, in many markets

they retrieve a premium price. Conversely, when carnations develop bad

splits, they are down-graded to their own grade (i.e., "splits") and

retrieve the lowest prices.

Labor is also needed for "stringing" carnation supports, as the

plants develop long stems. Placement of the supports, originally made









of string weaved throughout the bed but now often wire and string or

bamboo combinations, can require varying amounts of labor, depending on

the growing patterns of the crop.

There are three main producers of carnation cuttings in the U.S.

(Yoder Brothers, Inc., Pan American Plant Corporation and Colorado

Carnations, Inc.). However, many carnation producers maintain some

cutting propagation facilities of their own. If among the group of

self-propagators, larger growers often must either maintain separate

labor crews or reduce production or production standards to complete all

of the cut flower production and propagation tasks. Separate growing

facilities are often maintained for stock plants, propagating areas and

crop production areas.

Carnation crops can be timed for holidays or other occasions.

About 90 days is required from a May pinch and about 150 days from an

October 1 pinch, in the Midwest, until blooming. However, in areas with

cooler and less bright summer conditions, the length of the first

flowering following the lay pinch may be longer; in areas with higher

winter light intensities, the flowers following the October 1 pinch will

develop faster. Sometimes growers make supplemental plantings for crop-

ping specific cultivars for certain holidays [Laurie et al., 1969].

Carnation supplies can be amplified because of this flower's

adaptability to dry storage. Flowers, so stored, are usually harvested

in a tight bud stage and maintained out of water at 0-20 C. Other

storage methods, although not widely adopted, include hypobaric storage.

Supplies can also be amassed due to this flower's response to

silver nitrate, silver thiosulfate and related solutions. Reports of

treated flowers lasting for up to 33 days have been advertised by one









grower-shipper, as something that one could regularly expect from this

special handling. More about such techniques will appear in later

chapters.

One problem that is most often associated with carnations is damage

from contact with ethylene gas. (Orchids also frequently exhibit

ethylene gas damage.) After exposure to this gas which is emitted by

maturing fruits and vegetables, florists' greens, aging flowers and

decaying plant material, etc., carnations develop a condition known as

"sleepiness." Sleepiness is the condition in which petals of the

carnation turn upward [Laurie et al., 1969). Sleepiness virtually

eliminates the affected carnation's marketability. It has been perhaps

most evident in supermarkets where floral sales' areas are often

adjacent to produce departments and where overnight flower storage

frequently occurs in a produce department cooler.

Marketing of carnations varies with the source and is described in

detail elsewhere in this dissertation. It will be noted here, however,

that Colorado and California growers typically sell their flowers in a

fully-opened stage. South American imports typically arrive to market

in a tighter bud stage. Miniature/spray carnations are usually marketed

with 25 to 35 buds per bunch with some flowers open and others just

showing color. Standard varieties are usually sold at wholesale with 25

blooms to the bunch.


Chrysanthemums (Cllysaivtlihem m onuiotum-Compositae). The

chrysanthemum flower, or "mum" for short, is actually an inflorescence

of many florets [Laurie et al., 1969]. Blooming is a photoperiodic

response. With proper control of light (darkness of a certain time









period, actually triggers the response), the plant may be forced into

bloom at any time of the year. Unlike carnations and roses, chrysanthe-

mums are planted for only one cutting and then removed from the planted

bench. Chrysanthemums are also widely used as a potted flowering plant,

and "pot mums" probably represent the number one potted blooming plant

on the market.

The flowers are classified by kind and arrangement of the florets

(single, anemone, decorative, pompon, fuji, spider, incurved or reflexed

types), as well as the kind of growth pattern used (resulting from

various cultural techniques; flowers are grown in standard, spray or

disbud forms). Some of the chrysanthemum's florets, known as ray

florets, only possess female flower parts. Others, known as disk

florets, are composed of both male and female flower parts and are

formed of extremely short petals [Laurie et al., 1969].

One prominent type of chrysanthemum used as a cut flower is the

"single" or "daisy" type. This flower has one or more center rows of

ray flowers with disk florets at the center held in a daisy-like

arrangement. Closest in form is the "anemone" type chrysanthemum.

Here, the center florets are more developed, revealing a tubular shape,

forming a center cushion [Laurie et al., 1969]. Anemone type chrysan-

themums resemble some forms of shasta daisies, another member of the

Chrysanthemum genus. (Figures 3-1 and 3-2 show eight types of

chrysanthemums.)

The ray florets of the "decorative" type chrysanthemum are longer

on the outer rows of petals than for the inner rows of petals. This

yields a flower with a flatter appearance [Laurie et al., 1969].






























Figure 3-1. Four types of chrysanthemums: Clockwise (from
upper left) are the single (daisy), fuji,
incurved and decorative types.


[Photographs courtesy of Yoder Brothers, Inc.]










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"Pompons," as a flower type, have ray florets over the entire

flower head. Small button type chrysanthemums technically exemplify the

pompon flower type.

The term "pompon," however, dominates the trade to suggest the

spray form of chrysanthemum culture. Spray chrysanthemums represent the

form resulting from growing methods in which the apical buds are removed

to yield a multi-flowering stem. Single, anemone and decorative, as

well as pompon type chrysanthemums are widely grown as spray

chrysanthemums [Laurie et al., 1969]. To a more limited extent, fuji

and spider type chrysanthemums (described below) are also raised as

spray forms. Wholesale market reports describe spray chrysanthemum

forms as pompon chrysanthemums of the daisy (single) type, of the

cushion (pompon and decorative) type or of the novelty (button, fuji and

spider) type. Pompons regularly appear on the market in shades of

lavender, yellow and white. In the autumn months, bronze and dark red

are also often added to the available color spectrum.

The "spider" type chrysanthemum has tubular ray florets, sometimes

with hooked ends, in which the outer florets are often much longer than

center florets. "Fuji" type chrysanthemums are similar in appearance to

the spider type but never have hooked ends; center florets are of about

equal length to outer florets [Laurie et al., 1969]. Spider and fuji

type chrysanthemums are regularly available in yellow and white. Other

colors are available on a more limited basis.

"Reflexed" type chrysanthemums have ray florets with long petals.

The outer florets curve downward, resulting in a less formal flower than

other types [Laurie et al., 1969].









Finally, the "incurved" type chrysanthemums are larger flowered

types with long petals of ray florets curving upward and inward. The

result is a large globular flower (Figure 3-3). This type is, by and

far, the dominant type raised in the standard chrysanthemum form.

(This cultural form is usually raised on an unpinched plant with a

single flower per stem. Fuji and spider type chrysanthemums are also

raised in the standard cultural form [Laurie et al., 19691.) The

incurved flower type has traditionally been popular used singly as a

corsage in the fall, and hence, it has received the common nickname of

the "football mum." Florists often use them, with chenille stems (pipe

cleaners), to add (with glue) facial features (e.g., eyes, mouth, etc.)

to use in novelty arrangements. Standard incurved varieties are

typically available in yellow and white, although one occasionally finds

bronze, red or lavender.

One other cultural form is the "disbud" form. "Disbuds," as they

are called, are raised similarly to standard forms but have a smaller

flower and shorter stem. They are often raised more crowdedly on the

greenhouse bench or bed. They typically are raised for local sales only

[Laurie et al., 1969].

Standard form chrysanthemums, because of their size, are often used

in large floral arrangements, such as those needed for funerals or

church pieces. Size has also led to some limitations on use, especially

as florists trend towards smaller, "more personal" arrangements. Pompon

chrysanthemums, on the other hand, can be employed in smaller arrange-

ments, as individual flowers or by the stem in larger pieces. Pompon

chrysanthemums are frequently utilized by themselves in arrangements but

are also adaptable as "filler flowers" to complement other flowers used


























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as focal points. Disbuds, depending on size and type, vary in their

use, as well.

While many different problems can plague chrysanthemum production

and marketing, chrysanthemums regularly suffer from only two problems in

the marketplace--botrytis and leaf miner scars. Botrytis blight, or

gray mold, is a fungus resulting from contact between flower petals and

water. The resulting browning of the petals makes flowers virtually

unsaleable, except at greatly reduced prices. Botrytis often appears in

areas such as flower shop coolers, where high moisture occurs.

Leaf miner larvae tunnel through the leaves of chrysanthemums,

resulting in brown colored irregular patterns on the leaves. At one

time, leaf miner scars were seldom found on the chrysanthemum foliage

seen in the marketplace, except on discounted merchandise. Today,

however, the leaf miner has become so widespread and control so

irregular that flowers with marred leaves have been "reluctantly

accepted" in many markets. To some extent, leaf miner scarred foliage

has even become expected.

The marketing of chrysanthemums varies somewhat from grower to

grower and region to region. Pompon chrysanthemums are typically

bunched with the size of the bunch varying widely. At one time, Laurie

et al. [1969] report, 9- and 16-ounce bunches were common; yet, these

even varied with market supply. Today, bunch size, stem length and stem

count can vary with season, market supply, grower and even market or

customer to which the grower is shipping. Pompon chrysanthemums are

often bunched using twist-ties or rubberbands and then "sleeved" using

plastic or cellophane wrappers. Grading, except for bunch size, is

virtually non-existent.









Standard chrysanthemums are often marketed by the box with boxes

containing layers of flowers carefully arranged. Due to the high

incidence of the shattering of flower petals in incurved standard

chrysanthemums, these are often marketed with a mesh bag being placed

over each flower head (Figure 3-4) and/or heavy use of tissue paper

around the layers of flowers. Standard football mums are often graded

by flower size.

Chrysanthemums also display a relatively long post-harvest life.

This life can be further extended by maintaining storage of the flowers

dry (out of water) at 0-2O C. Laurie et al. [1969] reported that,

properly stored, chrysanthemums can be maintained for as long as three

weeks.


Gladioli (GladctiqLu qtandinlous-liLidaceae). The gladiolus flower,

as sold, is a spike of several florets, which open in succession from a

point located about midway from the bottom of the spike to the tip of

the spike. The flower spikes, because of their size, tend to restrict

gladiolus flower use to large centerpieces, wedding or funeral work or

church or other large commercial applications. However, some florists

have used individual florets in corsage work or have shortened spikes or

used miniature gladiolus varieties as focal flowers in smaller

arrangements.

The flower spikes are typically shipped dry, today in bunches of 10

spikes, with only a few florets showing color. Retail florists

typically force the florets into bloom by placing spikes into water upon

arrival. Snapping the tips off the spikes also encourages a more

uniform flower opening. Still the problem exists that florets near the


























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bottom of the spike will have faded by the time florets near the tip

have fully opened. (Snapdragons, too, exhibit this problem but not to

the same degree as gladioli.)

Gladioli, or "glads" for short, are largely produced in Florida and

California in winter; florists are supplied by a succession of northern

states as summer progresses. The fact that production today is confined

to the outdoors requires warm weather and plenty of land. More land is

devoted to gladiolus production than to any other cut flower crop.

Unlike almost any other cut flower crop, gladiolus production employs

many traditional field practices of cultivation. Rows of corms are

planted in tractor-tilled fields, and plants are cultivated, irrigated

and fertilized in a manner similar to row crop farming. The extensive

capital requirements for land, machinery and labor (for planting,

harvesting of spikes and, later, corms, and the cleaning of corms), have

kept supply from expanding greatly.

After cutting, during shipment and while on display at wholesale

and at retail, care is taken to maintain the spikes in a vertical

position. Geotropism, a response to the earth's gravity, is exhibited

in gladioli (and some other species, such as snapdragons) by a bending

upward of flower tips (from the horizontal). Hence, the upright

position is maintained rather than that of the horizontal (Figure 3-5).

Gladioli are susceptible to botrytis blight, a fungus. Therefore,

caution is taken during marketing to prevent floret contact with water.

Florets may become lucid from botrytis, if subjected to overly moist

conditions. Consequently, retail florists often display gladioli on the

showroom floor to keep them dry, as well as to encourage florets to


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Roses (Rosa hiybiida-Rosaceae). Roses, perhaps, fill the classic

perception of a cut flower in the minds of most people. This status may

have evolved from the prominent use of the species for gifts of affec-

tion, by its dominance in garden club contests and/or by the almost

royal nature afforded the rose when used in beauty contest awards.

Certainly the rose has achieved a royal status in the pricing structure

of the cut flower industry, as the rose continuously commands top prices

among the major cut fower species. The Floral Report [The Floral

Index, Inc., 1979] notes that roses contribute to one of every four

florists' cut flower sales and provide florists with 21 percent of cut

flower sales and 15 percent of total sales in a typical year.

Roses come in many colors and, in some cases, multiple colors per

flower. Red roses are often used for romantic sentiments, while white

roses are frequently seen at weddings because of the connotation of

purity. Other colors available include several shades of yellow, pink

and coral or orange. Several multiple color combinations also occur.

(Flowers Speak [Cole, 1970] outlines the supposed meanings of many

flowers and flower colors.) Red roses account for about 77 percent of

the roses sold in the U.S. Peach or coral-colored roses account for

about 10 percent of roses sold, while the yellow, pink and white colored

flowers account for the remainder [Anonymous, 1982b].

Roses are typically planted in greenhouses during the first half

of the year, this coinciding with the period following Christmas,

Valentine's Day or, most typically, Mother's Day [Laurie et al.,

1969]. As these three holidays constitute the periods of peak rose

demand, growers will usually not discard old plants until after flowers

have been harvested for one of these holidays. Once old plants are









discarded, beds are cleared out and prepared for new plantings; this

normally includes steam or chemical sterilization.

New plants, usually purchased from commercial suppliers, typically

yield their initial flower cuts two to four months later, depending on

cultivar and cultural practice. The plants then are usually maintained

for three to five years of production. Presence of disease or changing

marketability of a particular cultivar often curtails this period, while

a disease free planting with continued strong flower production and high

cultivar demand may keep a particular planting from being discarded for

several additional years. Some growers have reported keeping beds in

production for as long as nine years or as short as one year, depending

on the above factors. However, as a planting is usually relied on for

production for many years, rose cultivar selection must be considered

long-term production decision.

Replanting of beds is normally done on a rotating basis throughout

an operation to avoid drastic production variations and to spread the

added work load over several different years. As cropping continues on

a particular bed, greenhouse height limitations usually require periodic

sharp pruning of rose plants. This pruning is often performed during

the months) following Mother's Day. Summer's generally reduced flower

demand (and already lowered prices) and increased summer light (which

keeps the natural production levels higher than during the winter

months) allow such prunings to be performed without drastically

affecting a producer's cash flow.

Light intensity is considered the most important limiting factor

in rose production. Although no photoperiodic effects have been

ascertained, natural production peaks occur in the summer, when light









intensity is the strongest (that is, unless plants are severely pruned).

Conversely, lowest production levels naturally occur during the winter

months. As rose demand patterns are somewhat reversed (as confirmed by

price variations, to be discussed later), growers often supplement

winter light levels with High Intensity Discharge (HID) or sodium

vapor lamps. The need for the highest possible light intensities also

provides reason for roses to be most often raised under glass greenhouse

glazing, especially in the more northern latitudes, as glass transmits

light better than other covering alternatives.

Other greenhouse practices followed by rose producers include the

application of shading compounds in the summer to reduce the heat that

comes from increased light intensity and the use of heat blankets to

contain heat in winter (Figure 3-6). While heat blankets could be used

for many crops, the higher priced rose crops, and this crop's need to

remain warmer than some other greenhouse crops, provide greater incen-

tives for rose growers to make use of such innovations.

Pinching of rose plants is often performed to time the blooming of

rose plants for specific holidays or time periods. Local weather condi-

tions affect crop timing. Hence, crop timing is often not precise.

Poor timing can result in a grower "missing" the price peaks of a

holiday period. For this reason, some growers refuse to take part in

this kind of gambling. For most, though, an averaging of critical pinch

dates, based on past performances, is followed with some success. In

late spring or summer, about 5 1/2 to 6 weeks are required for flower

production following a pinch; during the darker winter months, an

additional 2 to 2 1/2 weeks or so are usually needed, depending on



























































Figure 3-6. Demonstration of the closing of a heat blanket over a
rose bed. (The higher returns to rose growers allow
them to afford such energy efficient technologies.)









greenhouse conditions, cultural practices and cultivar [Laurie et al.,

1969].

Hybrid tea roses do not produce the numbers of flowers per square

foot that floribunda roses (sweetheart varieties) provide. While

typically only about 10 percent of a rose range may be used for sweet-

heart rose production, the numbers of flowers usually produced do not

follow the same proportions. Up to twice the number of sweetheart roses

may be produced per floribunda rose plant as for hybrid tea rose

varieties [Laurie et al., 1969]. Whether due to marketing practices

or consumer demand, sales of the hybrid tea roses also far exceed those

of sweetheart roses. Hence, prices demanded for hybrid tea roses are

naturally higher.

Roses are often sold at retail in boxed arrangements (frequently by

the dozen), in vased arrangements of roses, or in mixed flower arrange-

ment combinations. In addition, both the hybrid tea and sweetheart

varieties are used as boutonnieres, in corsages and in other types of

wedding work. Funeral arrangements, especially casket sprays, often

feature hybrid tea roses, while sweetheart roses, because of their small

size, are ideal when used for hospital arrangements. Hybrid tea roses

are also frequently floated in bowls of water or brandy snifters; these

are commonly known in the trade as rose bowls.

Recently, one grower has experimented with the selling of trays of

(just) rose buds. The buds were the result of permitting newly planted

rose bushes to develop their initial flowers rather than the more

typical pinching of the first flower buds. The buds were being marketed

for corsage and wedding work (Figure 3-7).

















































Figure 3-7. One grower foregoes the initial rose pinch and allows
buds to develop.
(He markets the resulting short stemmed flower blossoms
to florists for corsage and wedding work in an aluminum
tray with floral foam and water in the bottom.)


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Another recent introduction is that of the intermediate rose

varieties. Usually retailed as hybrid tea roses, these cultivars

produce slightly smaller flowers (although still larger than that of

sweetheart roses) but have the normal stem and foliage appearance of the

regular hybrid tea varieties. Some demand has been created because of

the more dainty blossom appearance and the slightly different colors

available with these intermediate rose varieties.

Marketing of roses is nothing short of a touchy subject. The

thorns that are characteristic of almost every variety pose a special

handling problem. Rose defoliating machines, which have been available

for some time, provide some relief for flower handlers. Yet, the

average dealer must still pay a greater heed to detail when working with

roses than when manipulating other species.

The high perishability of this species (relative to others) also

provides an added challenge to rose marketers. As a result, research on

floral preservatives has often centered on roses. Special handling

recommendations have been espoused for roses immediately after cutting,

an hour after cutting and for subsequent marketing stages. Roses are

often packed in ice for shipping, something which occurs very

infrequently for other species.

Roses are almost always wired when sold through traditional retail

florist outlets. Bent neck frequently occurs, as roses often display

difficulty in taking up water as needed. The wires help to mask this

phenomenon.

Roses, unlike some other species which essentially just "brown"

with age, continue a quite evident bloom development and maturation

during their marketing. A larger more open flower seems to be preferred









by many florists when greater color is desired (e.g., wedding arrange-

ments, funeral casket sprays). The same is true for all occasions due

to customer preferences (or customer training) in many parts of the

South. In the Midwest and Northeast, however, blooms are often marketed

in a tighter bud stage, except perhaps, for wedding or funeral work.


Other cut flower crops. Many other species of cut flowers are

marketed on a regular or seasonal basis. Bulb crops such as tulips and

narcissus regularly are marketed in winter and spring months. The

spring, summer and fall flower gardens often provide cut flowers such

as peonies, iris, lilies, daisies, celosia, dahlias, zinnias and

chrysanthemums. Many florists make use of branches of flowering shrubs

and trees, some of which are forced in winter; pussy willows, forsythia

and many species of Puinus (e.g., cherry and peach) are used in this

regard.

Other flowers have what must be considered somewhat specialized

uses, and hence, production is often limited to a few growers or to

small plantings (as in a grower's auxiliary greenhouse). Stephanotis

(Stephazotut 6tlo.ibLmda) and Gardenias (Gardejln gft rditlota) are among

these, as their use is usually restricted to wedding ana corsage work.

Orchids also have typically been restricted in use to wedding and

corsage work, although one occasionally finds orchid blossoms incorpo-

rated into other arrangements. Production of these flowers is usually

done by specialists who often restrict their efforts to just one or two

of the major orchid species. Cattccya, P(haaaenops.,s and CpnbidLLun

orchids are the commercially produced greenhouse orchids; Crnbi4cidu









and Vaduda orchids are occasionally produced in outdoor semitropical

areas [Laurie et al., 1969].

Other species also have exacting requirements. Snapdragon produc-

tion, for instance, usually involves the use of different varieties and

cultural conditions during the course of the year, rather than the

alteration of the greenhouse environment in which they are grown.

Asters provide another example as they are often staked when grown.

Birds of Paradise, when about ready to bloom, frequently have paper bags

placed over their buds to keep opening blossoms intact (Figure 3-8).

Some flowers, which are regularly available, must be considered

minor types. Higher prices or their more exotic nature keep their use

limited by many florists. AZ6;ttom A, t Anthuiwum, GevbetAa, Lilies,

Protea and StAeRitzia (Birds of Paradise) are among these. In many

cases, supplies of these and other genera are imported from other

countries or specialized production areas in the U.S., e.g., Hawaii or

Southern California.

Sometimes florists find themselves using what are normally con-

sidered potted blooming plants in cut flower arrangements. Poinsettias

and Easter lilies, if leftover after holiday plant sales, will often be

cut for such uses. Remaining flowers are often cut from potted bulb

crops, if some of the flowers in the container have already withered.

Occasionally, florists will even cut ivies or other vines from foliage

baskets to complement their pieces, or take blossoms from blooming

foliage plants such as SpcutlhphyLJ wn or Bromeliads.

The cut flower markets regularly carry many species of what are

known as filler flowers as well; these are used to complement other

flowers in arrangements. Varieties such as Gypsophluia and statice are






























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regularly available in most markets. On a more seasonal basis, Acacia,

Ach-diea and Ast-ibe are also used as filler flowers. These flowers are

typically grown by specialized growers who raise large fields of these

crops in appropriate climates.


Other inputs. Besides cut flowers used either at focal points or

as filler flowers, greenery and some floral accessories often accompany

the flower arrangement or bouquet. For instance, few flower arrange-

ments are sold without some cut foliage in them. Leatherleaf fern

(Ca maedaphne calyjcLuata), plumosus fern (Aspcaragus p uno-du),

Pittospouwm, salal (GauLtheAla shaton), Podoc.aLpu, Euca yptus, huckle-

berry (GayLussacia baccata) and evergreens (Pinus, Aibowvitae, Buxtus,

etc.) are regularly available. Various hollies, firs, spruces and

others are seasonally available near the Christmas holiday.

Cut foliage production, too, is usually done by specialized

growers. Southern Florida is the locale where many ferns, especially

leatherleaf and asparagus ferns, are raised. The states of Oregon and

Washington provide much of the broadleaf hardwood material as well as

evergreens. Southern California is the home of many Eucalyptus

producers, while other California operators account for some of the

other cut foliage production. Much of the domestic supply of cut

foliage is imported from Latin America; Mexico and Guatemala are major

exporters, and Cfhamacdoniea is the major product provided.

Dried (cut) flower species are also used by many florists in

otherwise fresh arrangements. Several firms, the largest of which are

in California, specialize in the processing of various species into

dried or glycerine-treated bunches. Often, natural stems are removed









and wire stems added. Strawflowers (HeLicItywln, spp.), EucalCptIw,

baby's breath (GyjpsophftLa) and many woods-, bog- and swamp-grown species

are among those used as dried flowers. Sometimes crops such as wheat,

sorghum and other grains are also used in this regard.

Even with the plethora of plant material utilized, the average cut

flower presentation is still not all natural. Many florists insert

wires in some species for added support or for durability of the fresh

effect. Several companies specialize in making floral wires of differ-

ing gauges for various uses. Many species, when used in corsages,

boutonnieres, nosegays, etc., have their stems "taped," and a slightly

binding but non-adhesive floral stem wrap is widely marketed for this

purpose. Vases, baskets and other containers, as well as boxes, are

used to aid in the presentation of floral arrangements and gifts. Added

support is offered by the use of various floral foams, styrofoam

(shredded or in blocks) or chicken wire, and these are often taped

(adhesive) into the containers. Many florists also add preservatives to

the water in flower vases. Pretreated blocks of floral foam are

marketed with water-proofed wrappings for use with boxed flowers; these

provide both water and preservatives to flower stems when they are

inserted through the covering. Cards, in envelopes, attached via

strings, stakes or tapes, ribbons and foil often are used to complete

the presentation.

Finally, most flower arrangements include a fair share of what in

the industry is referred to as "artistic talent." Not only do floral

designers contribute the physical labor of the handling and care of the

flowers, but in many cases, designers share the experience of a floral

design course or curriculum and years of experience. Many of the









industry trade shows include "floral design schools" where trained

florists share ideas with beginners. Some florists even affiliate with

the American Institute of Floral Designers or other organizations

accrediting "superior floral talent."


Quality Specifications


One of the biggest controversies in the industry today may very

well be the issue of grades and standards. This issue is debatable

because many in the industry maintain it to be a "dead subject"; yet,

all recognize the importance of having quality flowers. The other bit

of contention revolves around the establishment of any set of industry

standards. Those whose product exceeds the minimum for the highest

standard become incensed at the thought of their product being grouped

with lesser specimens; those who do not have product meeting the minimum

standards question the authority of anyone to establish the criteria

involved and their decision making process in deciding what the arche-

types for the industry should be.

The problem of grades and standards is not new. As far back as

1955, Warren Trotter, in his dissertation entitled "Problems in Market-

ing Florist Crops" (Cornell University) noted that standard grades for

floral products had been considered for many years. Trotter [1955]

also noted that grades had never been uniformly adopted. To say that

problems of meeting a uniform minimum standard for the industry's

produce still exist would be true; to say that no progress has been made

since Trotter presented his conclusions would be debatable. Some

localized, some species-particular and some individual producer grades

have materialized. Many of these are based on the work of the North









Central Regional Committee established in 1956 by the USDA and the

Society of American Florists to establish market grades and standards

for many cut flowers [Anonymous, 1968]. Unfortunately, these grades and

standards have not been uniformly adopted either.

Roses, for example, are usually marketed by stem length, with

longer-stemmed flowers (supposedly) denoting a higher grade. Bud size,

stem strength (as measured by a flower's deviation from the perpen-

dicular) and, in some cases, degree of openness are also used to

determine grade; graders will frequently shorten the flower stem's

length when these other characteristics do not mesh with the stem length

specifications of a superior grade. A few firms also use some kind of

date coding on the flower wrappers to denote the date of cut. This,

however, is often ridiculed by growers who insist that knowledge of the

post-harvest handling conditions would provide a better determinant of a

flower's quality than would knowledge of its date of cut.

Roses have been subjected to more work involving grades and

standards than most flowers. Hence, they are usually graded, although

grades are not necessarily uniform throughout the industry. Stem length

is almost always denoted on the package wrap, and salesmen frequently

sell by quoting stem lengths or even by pricing at so many cents over

the stem length (e.g., $0.30 over the stem would make a 20-inch rose

sell for $0.50 and a 30-inch rose sell for $0.60, i.e., $0.30 over one

cent for each inch of stem length).

Many industry operators, however, argue that stem length has

nothing to do with the flower's quality even at the time of cut.

Nevertheless, it has been hypothesized that a correlation may

exist between stem weight and what are considered desirable










flower characteristics. This hypothesis was forwarded by research work

at Cornell University during the late 1940s. However, the research did

not initially include roses. Roses were later adapted to the Cornell

Standard Weight Grades by using weight per inch of stem. The grades

were later renamed the Society of American Florists Standard Grades, but

they have never been uniformly adopted [Trotter, 1955, pp. 68-69].

Roses, Inc., a trade organization of rose growers, has since established

a set of grades based on 4-inch increments, which are widely used by the

industry. One-, two- and three-inch variations of these are employed by

various growers, however.

Some grading of carnations materialized as the prominence of the

Denver Wholesale Florists grew in the 1960s. Eastern carnation growers

had trouble competing with the excellent quality and yields of Colorado

growers who had tremendously high amounts of winter sunlight. At the

Colorado industry's peak, each top-grade carnation received a gold

colored tag clipped around the flower's neck. Still today, Denver

Wholesale Florists' carnations often received a two- to four-cent

premium in the marketplace, perhaps due to their rigid grading

practices. The organization's numbers have dwindled as California and

South American producers have gained market dominance; however, the

rigidity with which standards (which today conform to those of the

Society of American Florists criteria) are applied and checked at Denver

Wholesale Florists may still surpass that of elsewhere in the industry.

The Society of American Florists carnation grades are among the

most widely referred to flower grades. The rigor of their application

by various growers in the industry may leave much to be desired.









The grades are based on bloom size, stem length, straightness of stem

and stem strength, as well as absence of defects in the flower.

The existence of grades for other flowers varies greatly. Some

growers have, for example, packaged pompon chrysanthemums by a constant

specified weight (e.g., 9, 14, 16, 20 or 22 ounces) and then use the

number of stems per bunch to give some indication of quality. The

implication was that the fewer stems needed to make up that weight

signified higher quality flowers. Problems with such grading emerged

when some growers began using five- and six-foot stem lengths in their

bunches and only used two or three stems to "make the weight." Florists

typically had to shorten the stems for most uses. Today, very few

pompon chrysanthemums are marketed in weighed bunches. However, the

methodology of weighing product has been widely adopted by many growers

of some of the "filler flowers," e.g., GypopWiai (baby's breath) and

statice (often bunched in 8-, 14- or 16-ounce bunches). Standard

chrysanthemum growers typically size their flower heads, but these sizes

may vary from grower to grower. Growers of snapdragons and gladioli

frequently use a grading mechanism that relates length of the inflores-

cence to that of the entire stem. Orchids are sometimes graded by size

of bloom. Any grades of other flowers are variable with the grower and

often relate stem length or blossom size to the grade.

The interesting fact to note is that throughout the entire grading

controversy, growers have consistently failed to implement such flower

factors as are used in flower judging contests. This may change in the

future as the Society of American Florists has announced plans to

reformulate industry grades, basing the definitions of "quality" on

flower judging criteria [Anonymous, 1982c]. Furthermore, no matter what









the current grading process presents to the market, flowers do get sold.

There is never any indication of flower freshness, unless the flowers

are dated. Yet, statements about freshness seem to be key marketing

elements for sales, especially at wholesale and retail levels. Unless

dated, however, there is almost no visual determination possible to be

made about flower freshness as long as flowers fall within the market-

able range, i.e., until noticeable deterioration occurs. As this

marketable range may last up to several weeks for some species, there is

much pertinent information lacking for the making of rational marketing

decisions. As most of the flowers sold remain in the distribution

system for at least a few days, a dating scheme could be a big asset for

many.

Flower packaging in the industry is standardized for some species,

even though the standards are very informal. Roses and carnations are

typically packaged in bunches of 25 flowers. Gladioli, snapdragons and

many of the bulb crops come in bunches of 10, while Marguerite daisies

are usually found in bunches of 20 flowers. Miniature/spray carnations

are usually bunched with 25 to 35 buds showing color at the time of

packing. Many of the larger or more expensive flowers are sold by the

piece, although packaging may depend on box or package size used and/or

flower size, as in orchids, anthuriums, proteas, etc.

More on grades and standards will appear later in this dissertation

to show how a more stringent quality classification might improve

industry performance.









Other Product Differentiation


Given identical quality, it is very difficult to differentiate

between one flower of a certain cultivar and another flower of the same

cultivar. Nevertheless, many claims of product differentiation have

permeated the industry. While the majority of the claims do revolve

around quality comparisons, some attempts at non-quality product

differentiation have taken place. Some cut flower growers, shippers and

wholesalers have tried to differentiate their flowers based on product

handling. Advertisements such as "Member, Chain of Life Program" or

Teleflora's adherence to the Good Housekeeping Guarantee are examples.

More recently, some of the Colombian growers have trademarked various

names for their carnations that have undergone various chemical

preservative treatments. Israeli miniature/spray carnations have

occasionally been marked, even at retail (in the mass market), in

sleeves reading "Produce of Israel." Many other firms label flower

sleeves, wrappers and boxes as well.

Other differentiating characteristics are evident to the experi-

enced observer. Colorado carnations can usually be differentiated from

most other domestically grown carnations because of the absence of any

flower collar, type or band. (Most producers must use such binding

around the flower's calyx due to the splitting that occurs from extreme

variations in day and night temperatures.) Furthermore, all domesti-

cally produced carnations are sold completely open, whereas most of the

South American imports are shipped in the bud stage and are not opened

until they reach the wholesale or retail levels of the marketing system.




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