Where Einstein Meets Edison

The Orchid (Market) Thief: How to Challenge an Industry

The Orchid (Market) Thief: How to Challenge an Industry

Mar 15, 2010

The United States orchid market currently represents over $100 MN per year in revenue1. Although orchids were once exclusive to the avid gardener, their popularity has grown, in part because of lower-cost plants in retail stores like Home Depot and Trader Joe’s. Despite their increased popularity, orchids sold in the US are predominantly domestically grown because the US controls the importation of soil, in which orchids are currently transported2.

When Dennis Szesko, an MIT Sloan student and Mexican native, first asked himself how he might grow orchids abroad and then import them into the US, he uprooted conventional wisdom. He asked whether he could grow orchids without soil or any other organic substrate, circumventing foreign soil limitations. He had heard offhand comments from a friend and orchid aficionado about growing the plants on cork, Styrofoam, and other materials that do not stay wet. In less than a year, Szesko had invented a plastic matrix, which looks like a small cube of fencing, on which orchids can be grown.

Although Szesko solved one problem by providing a substitute for soil, he created another; he needed an orchid that could grow on this material. Life without soil means that a plant’s roots would exist in one of two states over the course of a day—briefly soaked or completely dry. Again, Szesko found a straightforward solution. He turned to the Barkeria orchids in the Toluca region of Mexico. Orchids indigenous to the region are accustomed to two seasons, either wet or dry.  The wet season entails nightly rains followed by strong winds that dry off the plant’s roots. In short, Barkeria orchids are accustomed to being soaked every night and subsequently dried. During the dry season, there is very little rain at all. Thus, these orchids are well-suited to flourish on an inorganic substrate that doesn’t retain moisture and also resistant to the conditions they might be subjected to during shipping.

Going Commercial

Commercializing these ideas first required investment. The business case was quite appealing in that there was a significant arbitrage opportunity. If Mexican-grown orchids could be shipped to the US, significant profit margins would result. Fortunately, Szesko found an angel investor who was both interested and patient.

Using land provided by his investor, Szesko began growing orchids on a few acres outside of Toluca. However, growing orchids is tedious. Szesko needed to train a staff and develop certain tools. Commercially grown orchids start off as small clumps of meristematic tissue, i.e., a harvested part of an adult plant that can be induced to grow into a new plant. After a year of growing in the lab, orchids spend two years in a greenhouse before they are large enough to be decorative.

In addition to training a staff, Szesko needed to solve other problems. As he settled on the idea of a plastic growing matrix, he realized that dirt presents the plants aesthetically and helps prevent the plant from tipping over. Eliminating dirt meant fulfilling these two functions in a different way. Ultimately, this led him to use custom-ordered plastic pots that create a tight fit for his plastic matrices, and together the two pieces hold the plant upright. He also developed special tables that hold the pots upright. Tables of orchids are placed under shade cloth, which reduces the ambient light to the ideal levels for the orchids while still allowing plenty of rain to soak through.

Next Steps

The first commercially viable batch of orchids will be ready later this year. Szesko, however, still has a handful of serious business questions ahead of him. For example, he wants to position his product as prestigious. Szesko is hoping to find early adopters among high-end hotels and restaurants that would appreciate displaying a plant that is exotic even among orchids. The goal is to differentiate the plants as luxury products. Szesko can also rattle off other challenges. How to increase production while still using outdoor greenhouses? Which of the different varietals that they are growing should be the most heavily promoted bloom? How to win customers but not oversell his ability to deliver the product?

Where do the Ideas Come From?

When you speak with Szesko you understand that he has a clear sense of the significance of these questions. However, you also realize something else–Szesko’s passion for orchids will probably lead him to success. It’s that same drive that has gotten him this far.

He first became interested in these plants while viewing a collection at the Cosmovitral Botanical Garden just outside Mexico City. When Szesko asked where those orchids were from, he was shocked to learn that they were all indigenous to Mexico. By contrast, most of the orchids that are popular with American growers and most of the cut orchid flowers sold commercially are indigenous to Asia. Not long afterward, he sought out and won a grant from the Mexican government to catalog regional orchids. What followed were a few years of driving and hiking to find, photograph, and collect orchids, oftentimes at great peril. “My job was literally to drive out into the middle of nowhere then walk six to twelve hours and look for incredibly difficult to locate plants. I now know the countryside from Mexico City to Guatemala, but I’ve had Dengue twice, was attacked by killer bees, was bitten by a scorpion, and accidentally hiked with a poisonous snake in my pack for two hours.” Szesko also recounted a situation in which he and a friend who had joined him for the day were shot at with automatic rifles. The windshield of his car was shattered, his friend’s arm was grazed by a bullet, and escape from the situation only came by driving backward on a mountain road while ducking.

Epilogue

According to many, Szesko is the typical entrepreneur, in that he is deeply inspired by the subject matter of his business. Without any formal botanical training, he’s made himself an expert. In fact, he expects to be naming two new species from fieldwork later this year. Moreover, without any prior experience in commercial agriculture Szesko envisioned and implemented a simple innovation that might have significant value, along with other possible impacts. First, he will be exporting a Mexican product in a renewable manner while bringing employment to that country. Moreover, Szesko’s business model could be recreated in other countries with low labor costs. In short, this passionate entrepreneur is on his way toward financial success while benefiting larger social concerns.


References

  1. Hoag, Christina. “Orchid Industry One of South Florida’s Fastest Growing.” Miami Herald 30 Jan, 2004 http://www.accessmylibrary.com/article-1G1-118698130/orchid-industry-one-south.html
  2. USDA Animal Plant and Health Inspection Serviceshttp://www.aphis.usda.gov/plant_health/permits/organism/soil/index.shtml