A flourishing industry looking and moving ahead
The proverbial bloom is not nearly off the rose when it comes to the Dutch floral industry. A recent analysis of Rabobank and FloraHolland reveals growing international competition. Rabobank recommends that flower and plant growers make efforts to further specialise.
Valentine’s Day is the global flower industry’s Christmas – the biggest day of the year, when millions of people all over the world buy flowers or plants for their loved ones. But plants and flowers are popular gifts and ornaments year round – and not just on 14 February. How else would you account for the 50 euros a year Germans splash out on flowers on a per-capita basis, in addition to the nearly 30 euros they spend annually on plants? Western Europe, the United States and Japan are the world’s largest markets for flowers and plants, an industry which accounts for 20 billion dollars annually worldwide.
The Netherlands: top of the heap
Global flower and plant exports amount to a 20 billion dollars annually. With more than half of the global flower trade originating in the Netherlands, the country is far ahead of any other in the world. As those who travel across Holland discover, swathes of its countryside are dotted with large greenhouses, used for breeding flowers and plants. Suppliers and buyers do business in massive compounds that serve as marketplaces (founded as ‘auctions’), while virtual marketplaces have been emerging alongside traditional physical marketplaces. The cooperative FloraHolland is the largest flower and plant marketplace in the world. ‘We feel it is our duty to help the floriculture industry to flourish and to permanently supply good and sustainable flowers and plants to people all over the world’, FloraHolland manager Cees Hoekstra says.
‘Mapping’ trade flows
Rabobank and FloraHolland teamed up to create the ‘World Flower Map’, a graph showing all major trade flows for flowers and plants worldwide. In late January 2015, Rabobank and FloraHolland presented the map at the IPM, the world’s leading horticultural trade fair, held in Essen, Germany.
As well as unveiling the map, Rabobank also presented a report on the future of the floriculture industry. Cindy van Rijswick, an analyst at Rabobank Food & Agribusiness Research, co-authored the report with Ruud Paauwe, Rabobank’s Sector Manager for Horticulture.
Floriculture is a capital-intensive business
Around 6,000 flower and plant producers in the Netherlands are Rabobank customers, alongside a large number of floral trade businesses. In terms of outstanding loan portfolio in the Netherlands, the floriculture industry is smaller than the dairy farming industry and roughly the size of the arable farming sector. As Ruud Paauwe explains: ‘Floriculture is a capital-intensive industry. The greenhouses used in the sector are state-of-the-art and whole parts of the cultivation process are highly automated.’
Competition or not, the Dutch floriculture industry continues to go from strength to strength. Paauwe: ‘The Netherlands serves as something of a knowledge hub when it comes to breeding, growing, trade, marketing and technology. This gives our country a clear edge over other countries involved in production. The fact that customers from all over the world have access to FloraHolland’s extensive range of products also contributes to our competitive advantage.’
Consumer spending is stable
What are some of the main trends affecting nurseries and other floriculture businesses?
- Consumer spending on flowers and plants is stable in the major markets of Western Europe, the United States and Japan. This is the result not only of the economic crisis, but also of growing sales at lower-priced stores. Another trend is the growing popularity of competing gift items.
- Markets which have shown growth – including Central and Eastern Europe – currently seem to be more unstable than the established markets.
- Remote destinations – where flowers can be produced at a low cost and for which shipment by air would be too expensive – have become more accessible as larger volumes of flowers are shipped by sea container. This has caused a shift in the markets.
- Competition from low cost countries has increased. While the Netherlands still accounts for 52% of the global trade in cut flowers (including both its own production and imports from other countries), the likes of Colombia (with a 15% market share), Ecuador, Kenya and Ethiopia are all gaining ground.
- The emergence of online technologies and growing supermarket sales have caused the importance of shorter chains, along with increased cooperation, fewer links and improved information provision.
So what are Dutch floral businesses to do? Scaling up production and competing on price is decidedly not the way for Dutch businesses to go. Rabobank recommends that flower and plant growers make efforts to further specialise in species that cannot be as readily produced in other parts of the world. At the same time, the various chain partners need to start working even more closely together – and building on their strong position in the production of inputs such as seeds, seedlings and cuttings.
Another option is to start venturing outside of Europe, in the wake of the several dozens of Dutch entrepreneurs who have already moved their operations to East Africa or South America. Rabobank provides support to the majority of these businesses. Their experience has shown that operating in such remote locations can be very challenging at the best of times, requiring a high level of resourcefulness and perseverance. As Paauwe explains, Dutch growers have the option to only share their valuable professional expertise in the remote location, without actually opening production sites there.
Increasing profit margins
As the industry continues to grow and develop, FloraHolland finds that it has a role to play right alongside the growers. ‘Working to increase profit margins for our members – that has really always been our mission. As part of ongoing efforts to achieve that mission, we are currently optimising the logistics system and improving standards, and we consistently work to help reduce costs and improve the quality of processes and services. Another one of our key responsibilities is creating opportunities for the sector’, says FloraHolland’s Cees Hoekstra. ‘Together with our supply chain partners, we are also involved in efforts to get consumers to spend more money on flowers and plants’. Even if Valentine’s Day only comes once a year.