War of the roses

Amid the daffs and dahlias, there's the scent of trouble in the air at Britain's florists. Their non-profit co-op, Interflora, is up for sale - but will the rebels bunch together or wilt in the face of corporate firepower? Susie Mesure reports
13 January 2005


From contrite husbands to amorous young men, dinner-party guests to grieving friends, for the past 80 years saying it with flowers has been synonymous with Interflora. Pick up a telephone anywhere in Britain and sit back while your order is relayed to a local florist who will carefully transcribe your bons mots, hand pick your bouquet and deliver it into the hands of your loved one. Isn't life perfect? Well, not quite.

At the other end of that phone, it's secateurs at dawn, as the powers that be at Interflora battle it out over the organisation's future. Since its inception, Interflora has been a not-for-profit trade association existing in the timeless, tranquil business vacuum of flower arranging. But all that could be about to change. Interflora is for sale, and in the process it could become a hard-nosed business.

Many of Interflora's 1,850 members are enraged by their trade body's move to end their floral history by selling up to an outside investor. And they're not going to give up without a battle. To this end, reputations have been trawled through the mud; there have been threats of gagging orders, and charges of profiteering and secret meetings. Interflora has become a hot (flower) bed of intrigue and intimidation.

One florist, who was too frightened to give his name, says: "It's a shame there is no governing body who can investigate the sale. I'm not happy, but anyone who speaks out is being pushed to one side and threatened with court proceedings." Scores of die-hard associates have raged against the board's attempt to hand control of the bouquet-delivery network to 3i, one of the world's most powerful private equity groups.

The members are powerful combatants. The last time Interflora's directors attempted to meddle with the status quo, eight years ago, the entire board was ousted after a bitter grassroots revolt. But time is running out for those unhappy with this latest challenge. The final countdown is under way to 23 January, when the proposed £21.3m sale will be put to the vote. If more than three-quarters of members back the deal, some florists are scared of the new corporate beast that the sale will unleash.

Despite the promise of a secret ballot, many florists are reluctant to speak out against the deal. They worry that their hostility could cost them Interflora business - business that can spell the difference between make or break for struggling flower-shop owners. Many rely on the orders they get from Interflora HQ to keep their shops afloat. And ill-chosen words could certainly cost rebels their Interflora membership: the board is free to expel those it deems troublemakers.

The drama started 16 months ago when Steve Richards, a former Manchester United executive, was installed to drag the business into the 21st century. Interflora's quest for growth is stymied by its status as a company limited by guarantee. This prohibits it from borrowing money and means if it goes bust, its only security is a pledge from each member to cough up one shilling (as decreed in its by-laws). Members run their own shops but pay a subscription fee to fund the mutually owned body, based in Sleaford, Lincs, which manages the central ordering process. If Richards gets his way, his detractors say, Interflora's new owners will transform it into a profit-obsessed machine that will put corporate shareholders first and member florists second. 3i will control half the new company, leaving just one-third in the hands of the florists who built it up. The five-member board, which has pushed hard for the sale, will receive a 16 per cent stake for a nominal sum.

Alex Lyons, who runs Laughton Nursery, in Laughton, East Sussex, is one of many who are anxious. "I'm a good advert for Interflora. I have always been behind absolutely everything it has done. But I'm appalled by the proposed sale and the society's actions." She thinks the board, headed by Richards, has "bullied" the network's members into acquiescing. "Florists have been scared by him. Steve is a very forceful guy. He has said we will die if this deal doesn't happen."

Another florist goes further: "The deal is being railroaded through. People aren't sure what's happening. An old-fashioned piece of history that has taken people decades of hard work to build up will go." She won't give her name for fear of "any backlash" against her business. "Which says it all really," she adds.

Interflora may be the country's oldest flower-delivery network but, sadly, when it comes to the ruthless world of selling bouquets its legacy counts for nothing. As with greengrocers, butchers, chemists and even the humble corner shop, florists are threatened by the growing might of supermarket giants who stop at nothing in their determination to take over the high street.

These days, Tesco, Marks & Spencer, Next and even the internet are all muscling in on the £1.5bn cut-flower market. Interflora's market share has more than halved during the past five years. "Why bother with Interflora when you can find florists all over the world on the internet," says one former Interflora customer who now prefers Google.

Which is where Richards comes in. He is adamant that unless Interflora abandons its "anachronistic" structure it is doomed. "The irony is that to work better, members will have to lose control. A trade association, with its politics, actually holds back the business," he asserts.

But many members believe the board's fear of the organisation's "politics" is simply being used as a smokescreen to press ahead with a sale that its detractors believe will simply enrich the management at the expense of the florists.

Tensions between one group campaigning against the deal - the Interflora Stakeholders' Association (ISA) - and the board reached fever pitch earlier this week during a heated meeting to rally support that left rebels convinced of victory.

"Why are we selling off the family silver? It's rather drastic to think that the only way to become more commercial is to sell up," says David Adair, the rebel leader. His alternative is for Interflora members to set up a trading entity within the association itself that could raise fresh funds.

ISA's sympathisers are scared that if the deal with 3i goes ahead their new owner will start dictating all manner of new rules about how they run their shops. One unnamed florist says: "They could demand we adopt a corporate image and force us to pay for it, which could put a lot of small shops out of business." Another, pointing out that florists will turn from members of an association into "customers", fears fees will rocket, that the group's headquarters may "steal corporate clients" and - the biggest concern of all - that 3i could actually set up another network in competition with Interflora. A trial project, codenamed "Mercury flowers", has already been set up to look at the so-called "boxed" flower market - orders under £20 at which Next is proving particularly adept.

Older Interflora members rue the divisions that have split an association that in its heyday was much more than just a trade body. Richard Felton, who runs Felton Flowers, in London's Docklands, says: "In the 1940s and 1950s, Interflora was the most wonderful social organisation. All the old family businesses would meet at functions." He adds, wistfully: "All those fun-loving dinners at the Savoy are now long gone."

Felton has more reasons for nostalgia than most: his grandfather and his partner's grandfather were founder members of the first Interflora council, convened in the old Covent Garden flower market. The pioneers' ingenious idea was to combine the expanding telephone system with a fast-improving transport network to build a nationwide flower-delivery chain. Interflora still works on the same principle today.

But Interflora's board believes the association will wilt and die if it does not change. "A member-controlled organisation has shown itself incapable of coping with the challenges of the market place," says Richards, who is the first retailer to run the association, and the first commercial chief executive for seven years. He knows that Interflora, which is hampered by its not-for-profit ethos, needs money to upgrade its computers, develop its website, create a central database and fund marketing campaigns, such as its recent festive jingle on Classic FM. Richards reckons the ad helped Interflora members enjoy their best Christmas in eight years: underlying orders rose 6 per cent in December.

His arguments - plus the prospect of a £5,000 to £12,000 windfall - have already won round hundreds of florists. Sarah Horne, who runs her own flower shop in Leamington Spa, is one. "We're an emotional lot us florists. We're very good at what we do but we don't have the experience of going up against the likes of M&S and Tesco. The members have control, but all we can really do is put the brakes on. We can't drive things." She adds: "I will still be trading on the same basis and taking relay orders, but I will be more confident that the management team will be driving more business and hopefully more orders."

Felton will also back the deal. "I'm a grandee. It's a tricky one but I think it's the right move forward. I'm very keen to see some fresh ideas from 3i about how to promote Interflora more and make it more financial. We live in a tough old world, it's do or die." He'd like to see Interflora pay bonuses to those members who drum up the most orders. "It's terribly important that the financial incentive is greater."

With so little time left for either side to muster support, the fur is well and truly flying. Detractors rip into each of the board's assertions that the new structure will put florists first, mocking management pledges that their future is safe. "They won't care about members' shops as long as their profits are going up," says Adair.

Rebel florists, who believe the offer undervalues the association, are particularly worried that 3i will simply sell Interflora on to a higher bidder. The problem with the so-called safeguards inserted by Interflora to stop 3i simply making a quick buck on its deal is that they only apply for the first 12 months. After that, florists are given the option of matching any offer for the business, but even the board admits the scant allotted timeframe would make this tough to achieve. Plus the chance of them managing to put up the necessary cash would be slim to non-existent.

As minority shareholders in some of the country's best-known companies are only too aware, the perils of defeating a takeover bid are such that Interflora's rebels have their work cut out to garner enough support to stop the sale. Approval from three-in-four florists is a tall order, but by no means an impossible one.

"Obviously I'm confident we've come up with a deal structure that sufficient members would vote for otherwise we wouldn't have taken it to this stage," says Richards.

Meanwhile, Interflora's rebel florists must wait until 23 January to learn whether they have won their war of the roses.