clear strategy in several areas targeting the various changes in world
cut-flower trade, investment in floriculture will continue to yield declining
profit margins and erode shareholder value in the long term - particularly in Africa. This is what has already caused some
investors to quit, and others to merge as they seek consolidate and drive down
operating costs – which is only a temporary measure.
Netherlands has for a long time remained the center of the global floral
business, with the first floral auction having started in The Netherlands in
Netherlands continues to play a vital role in the development of floriculturalgenetics, intense
flower cultivation in small farm areas, and the extensive use of pesticides and
fertilizers, has caused the soil in The Netherlands to become heavily
polluted. Leading floral trading
cooperatives from The Netherlands and elsewhere have for this and other reasons
gradually shifted their attention to countries where the climates are better, land
cheaper and more easily accessible, and labour costs lower. Production costs in these emerging grower
locations are also lower, with less use of chemicals and fertilisers, use of
natural heating, and generally lower costs of energy.
Change in grower
new grower locations has further been enhanced by the various benefits that
Governments such as Ethiopia, have offered investors in support of investments
in flower farming. Floriculture, today,
accounts for 20% of Kenya’s exports.
As a result of
this shift, The Netherlands has moved away from traditional flower production
to flower trading, with the flower auction at Aalsmeer maintaining
its status as the largest flower market in the world,
despite the sharp decline of cut flower production in The Netherlands. Today, The Netherlands is still the world’s
largest exporter of flowers providing in excess of 50% of all floral products
sold in the world, followed by a distant Columbia at 13%, Kenya and Ecuador. It is projected that the global floral trade
will peak USD 200 Billion by the year 2015.
The Netherlands’ hold on the global cut flower trade, the Dutch horticulture
industry is half the size it was ten years ago.
Costs have risen steadily in the Dutch cut flower sector in recent
years, while the sales price per stem has fallen.
spread of flower farming out of The Netherlands, independent growers in Kenya,
Ethiopia, Ecuador and Colombia have brought tough competition to the global
market and put Dutch prices under pressure.
Holland’s horticulturists have responded by introducing increasingly
efficient cultivation techniques and by continuing to focus on cost reduction.
Change in distribution
of flowers is also changing, with supermarkets competing with traditional
flower shops, which in turn compete with online florists, particularly in the
U.S. Even within the auction system,
wholesalers no longer have to walk around the auction to physically inspect the
goods; through the internet, they are now able to follow multiple auctions at
the same time.
changes in the world’s flower trade, 60% of the world’s cut flower trade, is
still transacted through The Netherlands, though with a significant amount of
cut flower products now finding their way to new markets in China, Japan,
Russia, and Hong Kong, among other emerging economies.
Change in customer
wholesalers and retailers now want flowers that are versatile and trendy, as
the end-user begins to gain more and more control of the floriculture supply
chain. Tastes and preferences are
rapidly changing too; one day people want highly scented varieties, the next
day they want huge blooms, and then they want new colours too! Since a grower can only change a variety once
approximately every four years, it is difficult to keep up with these changes,
without well thought out, and efficiently implemented strategic actions.
Change in terms
The cut flower
business particularly in third world countries is the target of pressure from
activist groups championing the protection and preservation of women and
children’s rights, environmental preservation, and equitable gain from the
exploitation of natural resources.
Fair Trade is
an organized social movement that aims to
help producers in developing countries to make better trading conditions and
promote sustainability. In doing this,
Fair Trade levies fees and various, stringent operating standards for local
producers in exchange for the respected “Fair Trade” label that, in turn,
enhances acceptance of the producers’ products in markets that support Fair
Trade principles. The global flower
trade is one such industry in which Fair Trade is a significant player.
Change in compliance requirements
Much as the
cut flower trade across the world seeks to self-regulate, there has been
growing concern for three main things:
high levels of toxic waste that large flower farms generate;
ii. management of the water resources on
which flower farms are dependent for their production;
iii. continued use of environmentally
unfriendly chemical fertilizers
have continued to put the global cut-flower trade under pressure to comply with
various local, regional and international regulations. The ISO 14001 is an international standard and
part of the European Union‘s Eco-Management and Audit Scheme (EMAS)
aimed at achieving the following in organisations whose operations are deemed
to have significant impact on the environment:
i. minimize the extent to which operations
in such organisations negatively affect the environment;
ii. enhance the level of compliance with
applicable laws and regulations, that such organisations achieve;
iii. continually improve such
organisations’ performance in the two areas above.
14001 is not a legal requirement in many areas of the world, it is an important
differentiator of environmentally responsible firms and affords such firms
direct market benefits.
The need for
Until fairly recently, floriculture in
many parts of the world outside the Netherlands was a highly profitable an
almost exclusive business. Changes
within the industry emanating from diversification of growers, diversification
of distribution channels, diversification of markets and the shifting
supply-chain relationships between propagators, growers and marketing companies
calls for fresh and innovative strategies, especially considering the minimum
level of profitable investment that the trade requires
New strategies in floriculture will focus
on four main areas:
1. Product quality;
2. Product variety;
3. Operational efficiency and supply chain
4. Market development; and
5. Environmental sustainability.
Without clear strategy in these key areas
investment in floriculture will continue to yield declining profit margins and
erode shareholder value in the long term.
This is what has already caused some investors to quit, and others to
merge as they seek to consolidate and drive down operating costs – which is
only a temporary measure.