Since November of 2016, with almost every vendor from abroad, whether they’re a greenhouse builder from Holland, an orchid breeder from Taiwan, or a ceramics salesperson from Canada, there comes an awkward pause in the conversation. Sometime it comes out of nowhere and the conversation might restart “So . . . Trump . . .”. Other times, some piece of business conversation might lead to the same place. Either way, there I am looking at someone I’ve been doing business with for years, and this person is looking at me wondering if I can explain the chaos in our national government.
Well, I can’t, and I don’t think my first column for In Greenhouses is the best time or place to lay out my feelings on the matter (maybe some other time over a beer!). But maybe I can tell you how business is in Trumpland.
I think the main thing to understand is that, largely, it’s business as usual. The United States economy continues to chug along as it did at the end of the Obama administration, with slow but steady GDP growth and low unemployment. The stock market, after a roaring start in 2017, has been flat this year. There is neither the boom that the president’s cheerleaders crow about nor the impending collapse that some of his detractors would have you believe. 2017 was a good year for us. A little better than 2016.
What we do have is uncertainty. Past administrations took great pains to telegraph their intentions and policy change, when it came, was deliberate. While controversial and costly to employers, Obamacare was the result of a legislative process and a long rollout. This president, however, seems ruled by impulse. A clear example is the possible trade wars caused by unilateral declarations from the White House against not just China but Canada and the EU as well. The resulting tariffs will hit us directly and will not be easy to pass on to our customers. Also, rising budget deficits from tax reform continue to drive up interest rates, creating very real uncertainly when it comes to long-term investments.
Where does this leave a humble orchid grower? I’m not sure. Ask me again later on.
Orchid grower in the USA.
At the end of the 1970s, the Overgaag family, with a background in vegetable growing, emigrated from the Netherlands to California to start a new nursery. Westerlay Orchids thrived and has now evolved into one of the preeminent orchid growers in the United States. The company has seen significant growth in recent years in particular, as American consumers are increasingly developing a real feel and passion for phalaenopsis. The focus is currently on optimising operational management, but the grower remains on the lookout for new opportunities in the market.
The region surrounding the city of Carpinteria forms the heart of horticultural production in California. The area, which is part of Santa Barbara County, is home to fields and greenhouses that stretch as far as the eye can see, bursting with fruit, vegetables and flowers. “There’s also been a rise in cannabis growing for medicinal purposes here,” says Toine Overgaag. He has been President of Westerlay Orchids for some years.
The company’s name refers to the former Westerlee auction in the Westland region of the Netherlands. The roots of the family can be found there. “My grandfather was a tomato grower in ‘s Gravenzande, and my dad and uncle switched to growing chrysanthemums later,” he says. “But two captains on one ship wasn’t ideal, so in 1978 my parents decided to cross the pond to the USA.”
Dot com bubble
To keep a long story short: Joop and Lucia Overgaag started growing cut hybrid tea roses in Carpinteria, initially on 1.5 hectares but expanding in later years. To begin with it wasn’t on the cards that Toine Overgaag would take over the family business. “After graduating I worked as a management consultant in Los Angeles for a few years. When the dot com bubble burst in around 2000, I lost my job. I decided to start working for my parents for a while and enjoyed it so much, I made my temporary move a permanent one. The fact that my father wanted to shift the company’s focus to growing other plants was also a strong draw. At the time competition from roses sourced from Colombia and Ecuador was getting bigger, which pressured the prices. I saw growing a new crop as a challenging opportunity.”
The family decided to switch from roses to orchids. In 2002 they started growing potted cymbidiums. “An advantage of orchids is they are more complicated to bring in from abroad,” he says. “So we reckoned there would be less competition. Orchid growing is also highly capital intensive, so it’s not open to everyone. And on top of that, through the intervention of a small-scale Australian grower, we were given the chance to start with a special selection of potted cymbidiums.”
The grower admits that the transition, although gradual, was not without its bumps and victories. In the early days, supplying a high-quality product was difficult. “That was primarily down to our lack of experience with orchid growing and the often poor quality of the planting material we had to work with. To sum it up, it was a steep learning curve.”
Tapping into the market also took some effort. “We sold our roses to wholesalers, but those customers hardly did any business with potted cymbidiums. So we had to go knocking on doors with our flowers and it took some time to get supermarkets enthusiastic about the product.”
Leap of faith
At the same time they kept their eyes and ears open to other opportunities in the market. In around 2005 they noticed explosive growth in the American market for phalaenopsis. “The blooms were often inferior quality, but consumers were still prepared to pay for them. We sensed a good business opportunity,” says Overgaag.
They decided to take a leap of faith: in 2006 they started to cultivate phalaenopsis. This also proved to be far from simple at the outset. “It was especially difficult to source good planting stock,” he says. “We originally imported bare root plants from China and then Europe, but they dehydrated too much in transit. We decided to start propagating our own stock. It took a while, but we mastered the art and now phalaenopsis cultivation is the main pillar of our business.”
The company has undergone significant growth in the past five years in particular, with production figures tripling. “To start with, we were just a shade too small for our biggest customers. And the demand for phalaenopsis has mushroomed recently; this variety of orchid keeps on gaining in the popularity stakes in the US and is rapidly becoming a commodity product. We now produce some 2.8 million plants annually and rank among the top three growers in the western US. Our annual production of potted cymbidiums is still 200,000 units too!” explains Overgaag, who acquired the company from his parents in 2009.
Today the company operates on a surface of 9 hectares glass, spread over three different sites. One site is dedicated to cymbidium cultivation, one to phalaenopsis propagation and one to cooling and growing on of phalaenopsis. “The plants are propagated in a Venlo model greenhouse, but for growing on and cooling we still use the greenhouse built by my father in 1978 to his own design. Our cultivation system is based on Dutch standards and practice. All the technology and installations in the greenhouses come from the Netherlands; the climate computer, energy saving screens, irrigation systems, internal transport system and so on. We also have a Dutch cultivation adviser and I make an annual trip to the Netherlands to catch up on the latest developments.”
Westerlay grows a staggering 55 different varieties of phalaenopsis and 40 different varieties of cymbidium. “We offer a huge range of colours, but despite that, white is the principal bloom colour with phalaenopsis. The emphasis with cymbidiums is on hues of rust, green and red,” he adds.
The plants mainly find their way to supermarket chains in the western states of the US. “We supply Safeway, Trader Joe’s and Kroger,” Overgaag says. “Orchids have captured a significant share of the American supermarket segment for flowers: you come across phalaenopsis in practically every supermarket these days. We generally supply our orchids in pots, with a label insert and sometimes as part of an arrangement with other plants. Our customers want a frictionless supply process. Meeting their needs is how we provide distinctive added value compared with our competitors.”
The grower does not supply on a contract basis, but regularly sends samples to the headquarters of the retail chains. “The individual branches can then see whether they want to order a certain item or not. Another advantage is that we have our own retail store that sells direct to consumers. That keeps us on trend with what consumers really want.”
The company supplies plants all year round, but there are clear peak moments in demand. Orchids are immensely popular items around Mother’s Day, Valentine’s Day and Easter. “Demand from July to December is generally lower. We grow fewer plants during those months; the greenhouse doesn’t necessarily have to be full to bursting point. There’s no point supplying if there’s no demand. In this respect, my philosophy diverges from growers in the Netherlands – they often want to utilise their production capacity no matter what.”
Although Overgaag is satisfied about how things are going, there are points that need attention. According to the grower the point of sale presentation often leaves a lot to be desired. “The phalaenopsis plants are not always presented at their best at the supermarket; the sleeve has been removed, or they are overwatered or underwatered,” he says. “That’s mainly because the staff lack specific product knowledge and often don’t devote enough time and attention to proper care. To make some progress on that point, we ask our sales reps to visit the larger accounts to give tips on plant care.”
Labour conditions are also a continual point of focus. He employs an average of 130 staff; in the greenhouse, the office and the store. “The majority of our workforce in production are Mexican. As a lot of local companies are always trying to recruit staff, we make every effort to keep our employees happy, for example by providing good labour conditions and a realistic salary level. This investment is more than worthwhile; people are glad to work for us. And, don’t forget, motivated staff are willing to go the extra mile.”
Looking forward, one of Overgaag’s objectives is to increase production efficiency. “We do benchmark against Dutch growers and I think we can make significant improvements by refining our production process. As an illustration, we want to boost the percentage of plants with double spikes, now at 70%, to a higher level. Sustainability is also a priority, as buyers are finding green credentials increasingly important. For that reason we are MPS-A certified and are working towards gaining GlobalGAP. We also want to install a solar array in the future to generate electricity.”
The grower is also open to possibly expanding the current product range. “We are constantly alert to market opportunities; a fact we have proven in the past decades. We believe that is what grants you a license to survive. If we encounter an exclusive house plant that offers potential, and complements our current range, we would certainly take it on board.”
In 1978 the Dutch Overgaag family started growing hybrid tea roses in California. In 2002 they switched to potted cymbidiums, which were joined by phalaenopsis in 2005. Phalaenopsis is now their chief product and ranks among the major orchid producing companies in the west of the US. The orchids are supplied direct to supermarkets. Entrepreneur Toine Overgaag’s operational management is focused on process optimisation and sustainability, and he is considering expanding his product range in the future.
Text and images: Ank van Lier.