It was Jan Paul Rijke’s (55) last week with Intergreen this week. The commercial director has been working with the retail supplier for 20 years. Time for a change. An interview with Rijke about Brexit and about doing business with British retailer Tesco. Rijke: „Luckily, our customer realises they can’t put a gun against our head and leave us with nothing.”
Only a few days left, says Rijke in his office in Naaldwijk, a stylish space filled with green plants. He’s been with Dutch Flower Group, including Intergreen, for 20 years. Intergreen supplies plants and flowers to Tesco and has an annual turnover of around €160 million. Rijke is now nearing the end of that adventure. He is leaving. On good terms, as they say. “Yes, it’s definitely my own decision”, he emphasises. “I’m leaving a fantastic employer. I’ve got great colleagues and friends here. And I don’t dislike my job. I’m sure there are going to be days when I wish I’d stayed on, but all in all, I know I’m making the right decision.”
Why are you leaving Intergreen?
“Firstly, because I’ve been working here for exactly 20 years. That’s a nice moment to go. Secondly: I am 55, still young enough to try something else. And thirdly: there have been some changes in the company. We’ve got three directors now. One of them was spending a quarter of his time on a joint venture in the United States, but he’s coming back now. It means there are basically three people to fill two positions. That’s going to cause friction. I don’t like that; I’d rather make space.”
Don’t you feel it’s poor timing, on the verge of potentially a hard Brexit?
“We’ve been struggling with Brexit for three years now. I made the decision to leave Intergreen last November. At that moment, Brexit had been on and off at least three times. I’m leaving two directors behind. I’m sure they’ll be able to take over from me without any problems.”
Rijke gets up and walks over to a table to pick up a handful of coffee stirrers to demonstrate how Brexit has been affecting Intergreen over the past couple of years. Supermarkets work with favourite price points, he explains. They sell a bouquet for 5 or 10 pounds, for example. The exchange rate of the British pound dropped from €1.40 to €1.09, which means that we can no longer use the same number of ‘stirrers’ in a bouquet. He continues by pointing out two other aspects. Social services in England aren’t as good as in the Netherlands. Unemployment benefits and redundancy payments are considerably lower. “The British consumer is more cautious in times of crisis anyway”, according to Rijke. Vegetables are a ‘must have’, plants and flowers are ‘nice to have’. The British don’t need plants and flowers, but they’ll buy them when consumer confidence is high enough. So, Brexit affects our sales in that sense too. When Boris Johnson came into power with his aggressive approach, consumers got nervous and bought fewer flowers.”
Could you express the impact of Brexit in figures?
“We mainly look at sales. During the first half year, we were a few percent ahead of budget. That advantage is getting a bit smaller now. According to the latest forecast, we’ll end right on our budget. Our sales are all done in British pounds and then converted into euros. If the exchange rate goes down, our turnover in euros goes down. We did observe a small decline in sales, but it wasn’t huge. Anyway, we’re expecting to meet the budget, which isn’t bad at all.”
Does Brexit lead to retailers trying to squeeze you?
“That’s a question I’ve been asked again and again the past 20 years. It depends. If you make sure you’re well organised and not ‘squeezable’, they can’t squeeze you. It’s important to stick to agreements; supply the right quality within the agreed time. But of course, there’s always pressure. Retailers are seasoned negotiators, so it’s normal to expect some fierce discussions. If you can’t handle the pressure, this isn’t the job for you.”
Does Tesco respect Intergreen’s margin?
“We’ve got a very small margin and we want to hold on to that. The exchange rate of the British pound was €1.40 three years ago, it’s €1.09 now. That’s a huge difference, more than 20%. It has an enormous impact. People say Brexit is yet to come, but in that respect, we already have it behind us. Luckily, our customer realises they can’t put a gun against our head and leave us with nothing. Our focus is on whether people are still buying plants and flowers. The most important thing is that business continues.”
How strict are retailers when it comes to agreements?
“I used to do a lot of business in Germany. Germans are known for being very strict. Not keeping your word is a much bigger deal in Germany than in England. If you have an appointment at 9 a.m. and you call to say it’s going to be 9.15 a.m. because you’re in a traffic jam, they don’t like it. That’s in their nature, it really sets them off. The British are a bit more flexible. Doing business in England is nice, you’ve got to understand their culture. But Germans are also good to do business with.”
Intergreen is completely dependent on Tesco, don’t you think that’s risky?
“Intergreen does indeed depend on Tesco and that’s been a conscious choice of DFG. It shows Tesco that we’re committed. Within Tesco’s category ‘produce’, we are the biggest supplier after the banana trader, so they depend on us too. But it’s easier for Tesco to drop us, than for us to drop them, of course. Even if there’s some mutual dependence. Tesco ranks their suppliers. We are in the highest ranking, which means that they don’t view us as a supplier, but as a partner.”
All of DFG’s companies must be able to look after themselves. Does that work against you now?
“Our shareholders are flower people. They’d never think a company had to go after two months of bad results. They understand. Their attitude is more like: we’re going to solve this together. What do you need? What’s your plan? Those conversations are very helpful.”
Would Intergreen consider spreading the risk a bit more?
“No, we wouldn’t. We can’t all of a sudden enter the French market, for example. That’s a completely different game. Intergreen only works with Tesco. You might say that’s just one customer, but it’s a very diverse customer. For example, we supply plants as well as flowers, we offer different formats, and Tesco is based in several different countries. England is the largest, but there are Tesco stores in Ireland, Poland, Hungary, Czech Republic and Slovakia as well. So, in a way, we’re already spreading our risk. If we were to enter the French market tomorrow, simply for reasons of risk spreading, we wouldn’t have the people, the production or the infrastructure for it. It really is a completely different game. Our focus is on the British market.”
What does Brexit mean for growers? Are you putting any pressure on them?
“We are very transparent. We wouldn’t say to our growers: we used to buy flowers for 100 eurocents and we’re only going to pay 80 eurocents for them from now on due to Brexit. We pay growers a price that’s based on the cost price plus a margin and Brexit doesn’t change that. But we do share our concerns with growers in an open manner. We do business with around 30 growers. Intergreen has a turnover of €160 million, so those nurseries are pretty large. We want to be important to our growers. We buy large quantities. Up to 60-80% of their production, and in some cases, their entire production. Growers are real partners for us. If we think we might be buying fewer flowers, we discuss this with them.”
What’s your biggest fear for when Brexit finally happens?
“Brexit is a British affair, but a crisis on the British market could of course lead to an oversupply of plants and flowers for a while, which wouldn’t be great. There will be more supply than demand and everyone knows what that does to price formation. It won’t be easy for growers. Some growers will go down and that doesn’t serve anyone. I also think it’s going to have quite an impact on the discounters. Brexit is politics. To use a metaphor: the EU and the United Kingdom are both at the bottom of the swimming pool, seeing who can hold their breath for the longest. When it gets close to the 31st of October, they’ll look each other in the eye, and perhaps they’ll come up at the same time to try and find a solution. That’s what I’m hoping for anyway. Great Britain is a very important country for Europe and for DFG. DFG has a turnover of €1.6 billion. More than half of that comes from supermarkets. Half of it is from the UK. Great Britain is a hugely important market for DFG.”
What kind of developments have you noticed in the UK’s retail channel?
“What’s becoming clear, and that isn’t just true for England, but throughout Europe, is that Aldi and Lidl – the discount channel – are getting stronger. Five years ago, Tesco still had 30% market share in the UK, but it’s gone down to 27%. That’s quite a loss. And that hurts. It’s gone to Aldi and Lidl for the largest part.”
Does that have anything to do with Brexit?
“I don’t know. We can see the same in Germany, France, the Netherlands, on all European markets. It is true of course, that Aldi and Lidl benefit from a crisis period. A few years ago, we met with Tesco’s new CEO. He showed us an overview of the products they sell less than once a week. The list was endless. Aldi and Lidl sell 1,600 different products, Tesco about 16,000. The CEO also pointed out that competition is growing. Tesco is trying to streamline their organisation and save costs. Four months ago, 5% of their employees were made redundant. At the same time, Aldi and Lidl are becoming more like service supermarkets. The difference between Tesco and the discounters is getting smaller. Having said that, Tesco definitely feels the pressure of the discounters. And that doesn’t apply just to the United Kingdom, it’s true all over Europe.”
How important is shop floor data for Intergreen?
“In Germany, 15% of all plant and flowers are sold in supermarkets. In France, that figure is lower. In the UK, it’s more than 65%, making plants and flowers a very mature supermarket product category. There’s lots of consumer data, quantitative data and scan data available in the UK. You can see exactly which products were sold in which store. That’s because it’s such a mature business there. Turnover is high and that makes it worthwhile to set up those kinds of systems. In France for example, you can’t get that kind of data.”
Do you receive data from Tesco?
“We buy data. There are companies that buy raw data from the retailers, turn them into bite-sized chunks and sell them on. Ten years ago, our workforce included many designers. These days, we divide consumers into different segments. We determine price points for homogeneous consumer groups, and create our bouquets based on that. So, our designers have been joined by new colleagues: customer insight managers and business control. They all work together on the design of the bouquets. They meet once a week and forward their ideas to Tesco. We don’t fill the shelves on the actual shop floor, that’s something Tesco do themselves.”
Anything that could be improved in the supermarket?
“There’s always room for improvement. That’s a European problem. The number of hours a supermarket manager can spend on plants and flowers is only limited. And every time there are cutbacks, it’s reduced further. The supermarket manager prefers spending his time on fruit and vegetables, because they are a necessity. Attention for the plant and flower shelves has always been under pressure. We’re trying to help by supplying our flowers in buckets, Procona containers, with collar. They can be placed straight in the display without any hassle.”
Have you started purchasing more outside the Netherlands due to Brexit?
“One thing that’s been gaining popularity is sea cargo. We’ve already been doing it for a few years with flowers from Colombia, which are shipped to the UK by boat. Not just because it’s cheaper, but also with an eye to CO2 emissions, which is high on the agenda of retailers these days. It has stimulated the import. Sea cargo from Kenya is a bit more complicated. The journey from Colombia is shorter, the infrastructure is better, boats can go faster and they don’t have to stop as often. The flowers can be shipped on a banana boat. Flowers from Kenya would first have to be transported to Mombasa and from there make their way past the coast of Somalia, where they might come across pirates, and on through the Suez Canal. It’s a longer journey, which involves more handling. The types of flowers that we purchase in South America, like chrysanthemum and alstroemeria, are also more suitable for sea cargo than the roses we buy in Kenya. We are trying ocean freight from Kenya, though. Some rose varieties are more suitable than others.”
Does the auction still play a role for Intergreen?
“We do business with growers, and the auction still facilitates payment. We certainly don’t encourage growers to leave the auction. We’re very much aware that that would lead to an auction with nothing else but leftovers, which isn’t how we see the future. However, there does need to be a connection between added costs and added value. That’s a healthy debate, which we continue to have with the auction.”
What are Jan Paul Rijke’s plans?
The common thread running through Jan Paul Rijke’s career is doing business with supermarkets with private label products. He started working for Intergreen 20 years ago. He’s only 55 years old. The big question is: what’s he going to do next? “There’s a number of things I definitely won’t do. I’m not going back to working for a boss five days a week. And not four days either. And I’m not going to sell flowers to supermarkets for other exporters. That’s out of the question. DFG has been very good to me, so I would never do that.”
So, what is he going to do then? “I want to learn how to fly. It’s a hobby, but it can take up a lot of time. I’m also renovating my house. Drastically – I’ll have to move out for eight months. And I’m planning to make myself available for young entrepreneurs for three days a week. To help them with advice, and maybe offer financial support. I’m a member of a private equity club that specialises in scale-ups. So, if someone says: Jan Paul, could you provide coaching for my people, I wouldn’t mind spending a few days per week on that.”
Rijke is also considering getting more financial training. “My background is purely commercial and when I speak with financial people, I sometimes feel I’m missing something.” But most of all, Rijke wants to focus on the good things in life. “It was a conscious decision to stop now, while I’m young enough to try something else. It doesn’t mean I no longer need to work for a living. Even if I’m lucky to have a great wife who earns well. We could go out for dinner less often and drive a smaller car. But not working at all wouldn’t make me happy, so we’ll see.”