A water rationing mode currently effected in Naivasha, the bedrock for flower farming, is likely to deny the country the revenue from improved sales ahead of the onset of the peak flower season later this month.
Analysts say the move is adding to the troubles the sector is facing. The industry reported a decline in demand for its products in key markets since the onset of global recession last year, as production drops further with the ongoing drought.
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The EU market for fresh fruit and vegetables is declining in volume but growing in value. In much of the eastern European Union consumption is still growing and consumers are shifting from basic fruit and vegetables towards more diverse produce, including exotics. At the same time, the availability there of other food products, such as snacks and fast food, is a source of heated competition for fresh fruit and vegetables. The markets in countries such as Germany, Spain, Italy and France are large but nearly saturated. Only certain market niches and product groups provide opportunities for growth.
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In the 1970s and 1980s, Poland was sometimes called “the Holland of Eastern Europe”, referring to its considerable floricultural production sector. In those times, Dianthus and Gerbera were the main products cultivated. The increasing costs of energy after the fall of communism forced many growers to stop their production in the early 1990s.
Up-to-date statististics on the Polish floricultural sector are scarce. In 2005, the Research Institute of Pomology and Floriculture Poland estimated the value of cut flower and pot plant production in Poland at € 501-536 million in 2003. Approximately € 456 million of the production value was ascribed to greenhouse production (cut flowers, pot plants and bulbs). Another € 45-70 million was ascribed to production in open area.
According to the Polish agricultural census of 2002, the greenhouse area for floriculture was 1,417 hectares in 2002. It is estimated that cut flowers account for about 65% of this area. The open area for the production of floricultural products amounted to 3,176 hectares. Around 15% of this area is used for the production of cut flowers. According to an article in Floraculture International, this area is declining. Industry sources, however, indicate that the industry is very much in transition to more effective production and more cooperation. Polish production is particularly strong in spring and in summer.
Recently published trade data (Eurostat) covering the year 2008 shows that The Netherlands remains the leading gateway for flowers from a number of different developing countries. Nevertheless, one leading supplying country can be recognised: Kenya. Imports from Kenya increased by 13% annually between 2004 and 2008, while imports from Ecuador increased by 20% annually during this period. Imports from Colombia and Tanzania showed significant increases as well. However, the most notable performance was that of Ethiopia. Imports from Ethiopia increased by 193% annually, with imports amounting to € 63 million in 2008. Only four years before, the imports from this country were still negligible. In contrast, imports from Zimbabwe decreased by 18% annually during the review period, due to the unstable economic and political situation.
Source: ProVerde, Eurostat
Analysis of recently published Eurostat data (covering trade until 2008) shows that developing countries accounted for a share of 55% in Spanish cut flower imports in 2008. This is relatively high compared to the EU average of 24%.
Between 2004 and 2008, Spanish imports from developing countries increased by 10% annually. The most important developing country suppliers are Colombia and Ecuador, together accounting for 53% of total imports. Developing countries have particularly large shares in imports of roses and carnations.
In the course of various projects, ProVerde has met a number of flower companies that is listed on different stock exchanges world-wide:
Karaturi Global Limited
Stock exchange: Bombay SE (India)
Quotes via Yahoo Finance: Karaturi quotes
NEHA International
Stock exchange: Bombay SE (India)
Quotes via Yahoo Finance: NEHA quotes
Gruppo Ciccolella
Stock exchange: Milan SE (Italy)
Quotes via Yahoo Finance: Ciccolella quotes
Thomas Fleurs
Stock exchange: Euronext Paris (France)
Quotes via Yahoo Finance: Thomas Fleurs quotes
1-800-Flowers.com
Stock exchange: NASDAQ (USA)
Quotes via Yahoo Finance: 1-800-Flowers quotes
Which flower companies are still missing in this list?
The FloraHolland and Landgard auctions are looking to combine the auction operations (‘clocks’) of Landgard (Herongen and Lüllingen) and FloraHolland Venlo. The two organisations made the announcement today at a joint press conference in Herongen (Germany). Both companies have signed a declaration of intent to form a joint venture based on further review.
Preliminary research by both organisations presents a positive image of market potential and operating results in the event auction operations are bundled in the Euregion. The coming period will see further investigation into how auction operations can be merged at the Herongen location. Current auction turnover of the three locations is more than € 300 million in total. Merging the clock operations of Landgard (Herongen and Lüllingen) and FloraHolland Venlo is intended to result in a single strong, internationally oriented marketplace in the Euregion. A single strong clock operation within the FloraHolland network contributes to reinforcing the position of marketplace users in Herongen in Germany. This applies to members/suppliers as well as buyers. Synergies can also be achieved. Plans for cooperation comprise only the auction operations of both organisations. The aim is to move from three auctions to one at the Herongen location.
Read the entire press releas on the FloraHolland or Landgard website.
Source: FloraHolland / Landgard press release of 9 July 2009
CBI just published a new sector alert for the cut flower sector. CBI’s Sector Alerts aim to provide BSOs and exporters in developing countries with insights and recommendations concerning the latest developments in their sector.
This Sector Alert on Cut Flowers focuses on the consequences of the recent international financial and economic crisis. Challenges and opportunities are highlighted, in order to assist exporters in their market orientation and market entry strategy.
Key-issues covered in this sector alert are:
1. Global economic crisis increases pressure to professionalise cut flowers sector
2. Virtualisation to reduce transaction costs
3. Crisis forces accelerated restructuring of trade channels
4. Potential and risks of sea freight
Besides discussing the implications of the global economic crisis on the cut flowers sector, this sector alert also focuses on opportunities the crisis offers for companies to beat their competitors and lift the flower sector to a higher level.
The sector alert was compiled in collaboration with ProVerde.
You can download the full sector alert via the CBI website or request a copy via ProVerde (use comment to this post).
The main objective of the market study was to identify those tropical ornamentals that offer good export opportunities in the European markets and which can be produced under Surinam conditions. The study covered particularly the markets for tropical flowers, plants, foliage and young plant material (cuttings).
As part of the project, five product brochures have been written describing cultivation techniques under tropical conditions for selected products: palms, Anthurium foliage, Bromeliads, Dracaena cuttings, and ornamental grasses.
The project was carried out within the framework of the national Agricultural Sector Plan (ASP) and on behalf of the Surinam Ministry of Agriculture, Animal Husbandry and Fishery.
The financial and economic crisis has already had a significant negative impact on export levels, profit margins and employment in the flower sector in developing countries.
Regional differences in trade patterns are reinforced by the crisis. Flower exporters from Latin American countries – already heavily dependent on the US market before the crisis – are suffering more severely as the US market faces more serious problems than the EU market. African producers – known for their low prices – face pressure to cut prices even more because of the crisis. All exporters report increased rigour among European buyers in their price and margin negotiations. Moreover, more than 60% of the exporters surveyed are having difficulty obtaining export credits. More than 80% claim to be having difficulties accessing investment capital.
Within the EU, the demand for flowers has declined considerably since December 2008. Demand from the USA was already on the decline before that time. The consequence of this
decline is oversupply, which in turn is leading to lower prices. Importers in The Netherlands indicate that prices have gone down by 15 to 30% since last December. Some flower species are being sold below production cost. Declining order numbers and volumes, together with decreasing prices, have caused a turnover drop among Dutch importers of 0 to 30%, depending on the product range: consumer purchasing behaviour is also shifting, shifting from more expensive and luxurious flowers to cheaper products.
The general expectation among respondents is that these trends will persist in the next 2 to 3 years. According to some respondents, the crisis may also have a positive effect on the sector, causing players to reorient with regard to competitive advantages, innovation and value addition.
Source: CBI sector alert flowers (24 April 2009)