Just as you’ve seen a huge jump in gas prices: the same thing has happened in the cocoa market. Local conditions are preventing/restricting exports.

Without the cocoa bean there would be no chocolate of any type, it is the only source of cocoa powder, chocolate liquor and cocoa butter. Without the cocoa bean your only option would be the fake chocolaty flavored vegetable oil that other companies try to pass off as chocolate.

The downside to using real  gourmet chocolate is that  it is expensive and has been getting more expensive.

Below is a cropped screen shot taken from the International Cocoa Organization (http://www.icco.org), they keep track of the wholesale prices.

As you can see the cost of the cocoa beans has sky rocketed since 2005, it’s now twice what it was then and while the chart does not show it yet, the prices have continued to climb to record highs, as I write this the price for just the raw cocoa bean is over $3600 a ton.   Prices have changed due to availability, better wages for the growers and speculation by commodities traders. 

It’s really hard to export when people are running around blowing things up and shooting. Chocolate and gas prices have jumped, you’ve seen the effect at the pumps and FedEx and UPS have raised their fuel surcharges to cover their higher costs. That means we pay more for shipping and as a result we have to charge more for shipping.

Packages do not fly around the country without jet fuel, and after they land: the delivery trucks need their fuel as well.  Some chocolate covered strawberry companies have taken to using two day service as the basic delivery method for chocolate covered strawberries, we feel that a product delivered this way ends up with a very short shelf life and is not as fresh, and if anything goes wrong: the product is quickly ruined. You can tell when a company is using these methods by seeing if they charge a rush surcharge for Tuesday delivery or a special surcharge for next day delivery.

Saving a few dollars on shipping costs may look like a bargain, but if the shipment is delayed for any reason (weather, security, the business not opening on time, or a dozen other possible issues) then you are talking about delivering strawberries that were made 4 days before, those berries are going to be pretty rough and most likely ruined. There are no magic gel packs that are going to last 3 days, UPS and FedEx do not offer door to door refrigerated deliveries for any amount that you would be willing to pay for a single box of strawberries, and even if it were available a refrigerated strawberry still has a very limited shelf life.

To deliver chocolate covered strawberries nationwide you have to do some things right, you can’t ship them cross country and have have them show up next week, the best strawberries are delivered after spending a minimal time in transit (next day works best).  So even though you may order today for a delivery next week: we will make them up just before we give them to FedEx/UPS and if everything goes correctly they arrive the next day.  This results in a gift that is fresher than one sent by other methods (such as a planned two day delivery).

If a few weeks Valentine’s Day will be upon us, and a good portion of the country will be doing something for their special someone.

Today we’ll look at two types of situations, one where the public thinks something is wrong and others where something is actually wrong.

Spike in prices: are they gouging?
Roses and chocolate covered strawberries are perishable; they cannot sit in a warehouse for months, or even a few days, and still be any good.  (last year we stopped someone from ordering a Valentine’s Day Chocolate Covered Strawberry gift box that he planned to put in the closet for a few weeks.. it would have been an ugly surprise)

From the growers perspective:

Everybody wants the same thing on the same day, plants (strawberry and rose) have to be planted and prepped so that on this one day of the year they have the most product available, that is not an easy thing to do. It’s extra work (and fertilizer) to make all those flowers and strawberries ripen at the same time. Cold weather can quickly ruin all those roses and create shortages (like we are expecting this year).

Those same strawberries and roses need to be harvested by hand, that means bringing in a lot of extra people, training them to harvest correctly, and then the labor for the actual peak days of harvest. All those extra people are more expensive than normal because all the other growers in the area also need extra staff.

Logistics: Trucks, trains and plains:
It’s the middle of winter, if you think about it: Where are flowers being grown this time of year? Certainly not New York, Vermont, Colorado or Utah, it is ski season after all, snow and flowers don’t mix. That means the roses have to brought in: trains are to slow, and trucks are only used for the final part of the trip from the airport to the refrigerated warehouses. That means tons of are being flown into the country & even if you fill a cargo plane with flowers: it really adds to the cost.

Strawberries are only grown in a few places this time of year, California, Florida, Mexico as well as a few other places that are far outside the country. There are no ‘special’ large long stem strawberry plants, these are the biggest strawberries that are available on the existing plants, but the extra size and different of methods of harvesting and packaging (to prevent bruising) all add to the price.  All it takes is one cold weather event (freezing) in any of these areas and a significant amount of product will be lost. January freezing happens in Florida or California every few years, ruining the product that would ripen into the fruit or blooms that become the fruit that would be used at Valentine’s Day.  The growers try to limit the damage from the cold weather through various methods: helicopters to circulate air over the fields work in some situations, in others they have to encase the plants in ice and hope for the best. I’ve been hearing about really cold weather in Miami, so the chances are that the Florida strawberry crop is not going to be that useful during the peak time of year.

Grower summary:
The prices are higher because everybody wants the exact same thing on the exact same day during a time of year that it’s risky to grow.  That peak effort has a lot of higher costs in all segments from forced ripening, picking, and delivery.

Florist and strawberry manufacturers, we’ll take these two separately.

Florists:  local florist are in a rough spot, they have generally smaller locations and there often is not enough room to properly handle the huge volume of flowers that have to be stored and prepped for delivery, they also don’t have the delivery staff needed for all those deliveries. This means they need to get extra storage space and a lot of extra staff for deliveries. Even the sites that ship from warehouses need extra space for the big day. That extra space and staff costs a lot of money.

Strawberries are even more perishable than flowers, they have to be dipped the same day they are shipped to preserve freshness. Volume for the peak day will be over 100 times higher than other days of the year. All that extra production means extra staff, and that staff needs days of training. Extra shifts are a given: regular employees will probably be working 18-20 hours a day for three days straight. That is a lot of expensive overtime.  We also have to get extra storage space for supplies (boxes, gel packs, insulated containers and the rest), perishables (fruit) and finished/boxed product.  For the fresh fruit and the finished product ready for the FedEx/UPS pickup, refrigerated trucks solve part of the problem, but they are not cheap. Plus there is a lot of hardware,  such as all the extra melters, dipping stations, tempering.. even tape guns that are needed for all those extra people.

That box of machine made chocolates you saw in the drug store was probably made several months ago, it’s not the same type of product as something perishable like chocolate covered strawberries.

Summary: At least some of the price rises you see in the gift industry are market and conditions driven, the costs are a lot higher but so is the volume.

But what about the other unethical companies in the gift industry?
Nothing has changed in the last year… and parts have gotten worse.

Companies that advertise chocolate covered strawberries but the product is not made with chocolate? They are still at it (read more and even more), unforgettably fake chocolate is not what they advertise.

Companies that are being sued for the easy saver scam? Visa and MasterCard or the California Attorney General have not shut them down  (read more), not being able to trust a a company to protect your credit card information is very basic and their customers say they violated that trust.

Companies advertising “fresh from the grower” who really truck their flowers around the US to regional warehouses? (They even say they are fresher than local florists but those several days on the road to their regional warehouses say differently (it’s the same group as the “Easy Saver Scam”)) plus they even use local florists to deliver some of their flowers.

Surprise “care” fees at checkout? Of course.. (same people as above)

Corporate discriminatory Religious policies? Yep they are still at it (read more)

Fake Free shipping? The FTC seems to be sleeping on this one. They are not supposed to raise prices and then claim free shipping.

In the gift industry it seems like the government is not really doing it’s job correctly, and the largest players in the gift industry seem to be running amok while the regulators sleep, which seems to be a pattern in the enforcement segment of government. We are too small to play games like they do, and frankly we’d rather spend the time making a better product (and web site) than pay a bunch of lawyers to separate you from your money.

To understand what is happening you have to look at how they are shipping it and what they are shipping.

For the first example lets look at a purchase of a book. A book it not time sensitive, it can take a week or two to get to where it needs to be and it’s still a book. Places like the larger book stores have warehouses around the country and the book is shipping using the least expensive way possible. In this case the shipping may actually be less that a dollar, no big deal.

Next lets look at a clothing purchase, some jeans, a few t-shirts… again it is not time sensitive, it’s shipped by the least expensive method possible and the shipping was probably less that you would have gotten last year with a discount coupon.

So basically shipping things by slow/ground methods are pretty inexpensive but it’s not for time sensitive items. Perishable items need to be shipped so they arrive before they melt or go bad and that pretty much rules out the really cheap shipping. You could guess what a shipment of ice-cream would look like if it took a week to arrive.

All the ‘free shipping’ offers have created the impression that all shipping should be free, but when you are comparing ground (slow) and express(overnight) the shipping is not in the same class. When you ship a package using an overnight service it is sent by air and jet fuel is not cheap.

In an age when the airlines are charging $50 to check luggage, the undiscounted rate for sending a package cross country is about the same. If you ship a lot of packages (like we do) you get a discount from the base rates, but past a certain point there are no more discounts from the carriers.

Everybody has heard the phrase “there is no such thing as a free lunch”, and in the case of overnight shipping and perishable products it’s true. In the perishables industry the various companies are “simulating” free shipping in one of three ways:

1) Raise the prices, yep when the cost of the product price has been raised to cover the cost of the shipping the shipping is then ‘free’. You actually don’t save any money this way, it may even cost you more because now that the product cost includes the shipping you may end up paying tax on the price including shipping.

2) Cut the cost of the product, packaging and the shipping cost by using a 2 day service rather than an overnight one. Cheaper ingredients and shipping so that it arrives later gives the product a extremely short shelf life and no ‘cushion’  in case of carrier or weather delays.

3) Changing the product mix or limited item free shipping, the ads say ‘free shipping’ but it’s on limited items, those items may only be shipping by the less expensive methods or already have the cost of the shipping built in.

When shipping chocolate covered strawberries you need to protect the product from heat and keep them chilled to keep them fresh. Some companies are leaving out the gel pack and shipping the strawberries using a 2 day service. Leaving out the gel pack reduces the shipping cost in two ways, the weight is less and the box does not have to be as big. Without a gel pack to keep the box chilled the strawberries are going to start to go bad very quickly. Would you want to eat strawberries that have been sitting on the kitchen table for two days? Of course not, but that is what 2 day shipping without gel packs is.

So you  can see that ‘free shipping’ really’ is not free someone always pays the UPS/FedEx bill.