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flowers & ornamentals: articles
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Floriculture Worldwide TRADE AND CONSUMPTION PATTERNS
N.S.P. de Groot Agricultural Economics Research Institute (LEI-DLO) P.O.Box
29703 NL-2502 LS The Hague The Netherlands
Phone:
31.70.3308252 Fax: 31.70.3308199 e-mail: N.S.P.deGroot@lei.dlo.nl
Summary
All over the world, the floricultural sector can nowadays be characterized
as a sector experiencing rapid changes. Due to globalization and its effect
on income development in the different regions of the world, we see a growing
per capita consumption in most countries. At the same time, competition
is increasing worldwide. Besides the traditional centres of production (USA,
Japan, Italy, The Netherlands, Columbia), new production centres are developing.
In Latin America and Africa, production is increasing very quickly. Also
in Asia, countries like India, China, Vietnam, etc., seem to be moving in
the direction of more intensive horticulture. In the traditional centres,
the total area under production will remain stable or increase slightly.
Productivity will go up in these centres. The supply of floricultural products
worldwide will grow. Although it is to be expected that consumption will
grow in the near future, competition on the world market will increase.
Supply is growing quicker than demand. A fierce competition on certain markets
will be the result. On the traditional consumption markets in the USA, Japan
and Europe, the consumer will be more and more critical regarding certain
aspects of the product. Quality, environmentally sound production, a wider
assortment and service, in combination with the price, will the weapons
in the expected market competition. Besides market competition between floricultural
products, it is clear that these products are also facing more and more
competition from other products, especially in the market segment for flowers
and potted plants used as gifts on special occasions (birthdays, etc.).
In the past, these kinds of products where mainly sold by florist shops.
This situation is already changing with respect to the increasingly important
role being assumed by the big retailers. It is to be expected that this
will continue and it is having a big impact on the distribution and commercial
process. While in the past small quantities were delivered to all kinds
of florist shops, the big retailers demand large quantities at fixed times.
This puts pressure on the traditional market places such as auctions and
retail markets. The commercial transaction and the distribution of production
will be separated. This will result in changes to new distribution structures
in the near future. The role of information technology will be to support
this development. The role of the consumers is changing in that they more
aware of what they want to buy. They are becoming professional buyers. Consumers
will ask for wider choices in product quality levels depending on the purpose
of the purchase, as well as for higher levels of service and a wider and
deeper assortment. Selling is no longer a matter of selling simple products
but precisely 'fitted' products for each individual consumer. These items
will be the challenge for research in the next decade. ------------------------------------------------------------------------
1. Positioning The flower industry comprises the cultivation of and trade
in cut flowers, cut foliage, potted plants and bedding plants. The main
representatives of cut flowers are: the rose, chrysanthemum, carnation and
lily. Potted plants and cut flowers have an almost 80% share of the world
trade in ornamental plant products. This article will mainly describe the
trade in flowers and plants. In the flower industry, significant changes
are occurring in the competitive relationships worldwide. European integration,
democratization in Eastern Europe and the liberalization of world trade
in the context of the GATT negotiations will have consequences for international
trade. A number of traditional markets are displaying signs of saturation
while, on the other hand, new countries are trying to get their place on
the market. At the same time, we see new developing markets and in some
parts of the world (USA, Japan) it is expected that per capita consumption
will go up. These many changes make it difficult to obtain clear insight
into the prospects for the floriculture industry. Because of the sometimes
highly changeable exchange rates between currencies, especially the dollar,
the currencies of the original data sources are used. ------------------------------------------------------------------------
2. Available data In almost every country in the world there is some florist
industry but in many countries the available figures are not accurate. There
are several reasons why the data are not accurate: * in developing countries,
part of the production is for the local markets and is not included in the
statistics; * definitions used in statistics are not the same everywhere;
in some statistics, bedding plants, cut foliage/greens, etc., are included,
in others they are not; * most countries have no complete annual production
figures available; * the data about intra-EU trade after 1992 are very unreliable;
* sometimes, the figures used are based on retail values, cif, fob, etc.
This sometimes makes it very difficult to have a good, complete overview
of the developments in the floriculture industry and comparison of the figures
has to be done with care. Parts of this article are based on previous LEI-DLO
studies. ------------------------------------------------------------------------
3. Developments in world demand 3.0 Introduction Cultivation of cut flowers
and potted plants is widely spread throughout the world. It is included
in the statistics of 145 countries. In addition, cut flowers are extensively
grown in many countries on small outdoor plots. Cut flower acreage and production
value in the world are increasing. Based on the seventeen most important
production countries, it is currently estimated at about 60,000 hectares.
3.1 World demand for cut flowers World consumption of cut flowers and plants
can only be given in approximate figures. World cut-flower markets are growing
at a current rate of 6-9% per year. The total consumption in 1985 was about
12.5 billion dollars. In 1990, the consumption rose to about 25 billion
dollars. Due the change in the exchange rate between the dollar and the
guilder, this growth is spectacular. In the nineties, the growth continues.
In 1995, the total world market was about 31 billion dollars. Taking developments
in production, imports and economic variables into account, consumption
of cut flowers is to be expected to rise to 35 billion dollars. In international
terms, the consumption of cut flowers is concentrated in three regions:
Western Europe, North America and Japan. The highest growth is expected
in Japan and the USA. The West European market is becoming saturated. As
a result, its cut flower consumption share is declining. New markets are
emerging in the Eastern European countries. In one segment of the market,
cut flowers are becoming part of the consumption patterns of people with
high incomes. In Japan, domestic consumption of cut flowers will become
more regular then in the past. In the past, consumption was mainly based
on special occasions and institutional consumption (hotels, parties, etc.).
This pattern is changing to a more Western style. Consumption is rising
not only in Japan. In other Asian countries with rising expendable incomes
and a flower-minded culture, consumption will go up. If economic development
keeps accelerating in Latin America, a strong demand increase is also to
be expected here. Growth in cut-flower consumption is greatly dependent
on the economic development of the different parts of world and of course
on flower-minded culture. 3.2 World demand for potted plants Worldwide consumption
of potted plants is increasing rapidly. The total consumption in 1990 was
about 14.2 billion dollars, some 21% higher than in 1985. In 1995, this
market already increased to about 19 billion dollars. Also in this market,
consumption will rise to about 20-23 billion dollars in 2000. Further growth
is expected due to the growing expendable income in a lot of regions in
the world. The US, with about one third of the consumption, has the largest
share of the total world consumption, followed by Germany (about 20%), Italy
and France. 3.3 World export/import of ornamental plants The value of world
import/export is increasing every year. In 1982, the total value was about
2.5 billion dollars. In 1996, the total value was already 7.5 billion dollars
(see figure 3.1). Although the growth is in nominal value, the figures show
a rapid increase in the flows of horticultural products. The biggest import
markets are Germany, USA, France and the United Kingdom. The world's largest
exporter of horticultural products is by far the Netherlands (see figure
3.2), which is responsible for about 60% of international export. The international
trade in cut flowers and potted plants is growing every year. From the total
production of cut flowers and potted plants, only a small part is exported
to the international market. About 75% of the international trade comes
from within Europe. Germany alone accounts for 30% of the world imports
of cut flowers. Besides Germany, the United States, France and the United
Kingdom are big importers. The Netherlands is also a big importer but it
re-exports most of its imports, primarily to Europe. The total value of
the world export of cut flowers rose from 1.25 billion dollars in 1982 to
3.6 billion dollars in 1995 (see figure 3.3). The Netherlands, Columbia,
Israel, Kenya and Ecuador are the biggest exporting countries in the world.
The position of the Netherlands in very dominant in the total export (about
65%, see figure 3.4). When you consider the export from the Netherlands
to other European countries (1.8 billion dollars from the total export value
of 2.1 billion dollars) as interregional trade, the conclusion is that the
international trade is very limited in relation to total world wide consumption.
It is to be expected that the north-south axis will be important to the
export market. Africa will increasingly export to Europe, and South America
to the USA and Canada. Within Asia, there will be a growing interregional
trade with upcoming countries like Malaysia, Thailand and the Philippines.
Australia and New Zealand have possibilities on the niche market in Asia
with high-quality products. The total export of potted plants is smaller,
amounting to about 1.75 billion dollars in 1995. Because of the high transport
costs per unit, the export of this type of product is usually to neighbouring
countries. The main exporters are the Netherlands, Denmark and Belgium.
Figure 3.1 Value of world imports for greenhouse and nursery products, 1982-1995,
in billion dollars Source: USDA, AIPH. Figure 3.2 Value of world exports
for greenhouse and nursery products 1992-1995, in billion dollars Source:
USDA, AIPH. Figure 3.3 Value of world imports for cut flowers, 1982-1995,
in billion dollars Source: USDA, AIPH. Figure 3.4 Value of world exports
for cut flowers, 1982-1995, in billion dollars Source: USDA, AIPH. ------------------------------------------------------------------------
4. Production 4.1 Introduction Production, consumption and international
trade of cut flowers and potted plants in the following main cultivation
regions will be described: 1. Western Europe; 2. North and South America;
3. Africa; 4. Asia. 4.2 Production 4.2.1 Western Europe There are no reliable
figures about the domestic production values of cut flowers and potted plants
in most EU countries. Figures for both area and production value are not
very accurate. In many cases, the different statistics give different figures.
Nevertheless, it is possible to give an indication of the main production
countries in the EU by looking at the area under production and the latest
production figures from the EU commission. Table 4.1 shows the production
area and trend in production area of the most important EU countries. Table
4.1 Area under production of flower and foliage crops in the most important
production countries in the EU (ha: open, under glass) Country Area o.w.
Glass/plast Year Trend (1980=100) Netherlands 8004 5556 1996 155 Italy 7654
4402 1994 95 Germany 7066 2755 1996 124 United Kingdom 7127 999 1996 116
Spain 4325 2369 1994 145 France 3795 1747 1990 64 Belgium 1642 542 1993
121 Greece 990 - 1995 111 Denmark 683 330 1994 118 Source: AIPH statistics.
Table 4.1 shows that The Netherlands has the largest area under production:
more then 8,000 ha in 1996. This country also has the largest area under
glass, with very intensive production. Italy had almost the same area in
1994, although the trend shows a decline in area. Although the total area
in Italy is declining, there is a growth in production area under glass/plastic
(trend = 144). Other leading countries are Germany, the United Kingdom,
Spain and France. Excepting Italy and France, we see an increase in the
number of hectares under production. The growth of the sheltered area was
the biggest in Spain. From 1980 to 1990, this area grew from 1,270 ha to
3,068 (242%). After 1990, there is decrease in area to 2,369 ha in 1994.
A large total area of flower and foliage crops does not automatically imply
great production value. Differences in yield per hectare are considerable.
For example, the yield per hectare in the Netherlands is 70% higher than
in Italy. One explanation for this is that a greater share of production
is carried out under glass. But there are great differences in yield even
with production under glass, due to differences in production techniques.
In France, Italy and the Netherlands, more than 60% of the total production
is carried out under glass. In countries such as Germany, Denmark and the
United Kingdom, this figure is under 30%. Table 4.2 Production values of
flower and ornamental plants of the EU-15 in 1980-1995 (Millions ECU **)
Country Production value 1980 Production value 1995 Index (1980=100) The
Netherlands 1070 3429 320 Italy 681 1771 260 Germany 877 1401 160 France
745 937 126 Spain 154 564 366 United Kingdom 174 419 241 Denmark 156 346
221 Belgium 140 278 199 Sweden 122 158 130 Greece 30 160 533 Austria 48
108 225 Finland 70 104 149 Portugal - 80*) *) Ireland - 30*) *) Luxembourg
- 20*) *) Total 4028 1) 9678 2) 240 Source: Eurostat, data bank Cronos.
1) EU-12. 2) EU-15. *) Including tree nursery production. **) 1 ECU = 1.3
dollar, 1995. -) Not available. In 1995, the total production value was
almost 10 billion ECU, which is about 13 billion dollars. In 15 years, production
value went up by 240%. Besides the influence of inflation, there is an increase
in production due to more intense cultivation per hectare. 4.2.2 North and
South America The North American growers supply about 90% of the domestic
market. The quality of the extensive production, (sometimes) the low dollar
exchange rate and the strict phytosanitary requirements for import have
put the American growers in a favourable position. Floriculture and environmental
horticulture is the fastest growing segment of US agriculture. The total
production value is about 11 billion dollars in 1996 (including flowers,
potted plants, tree nurseries, etc.). Most fresh cut flowers in the USA
are produced year round and protected by a structure of some sort, such
as a greenhouse in which the environment is carefully controlled (circa
4,500 ha) or an overhead structure providing shade and protection from the
wind (10,000 ha, see table 4.3). Table 4.3 - Area under production of flower
and foliage crops in the most important production countries in the USA
and Latin America (ha: open, under glass) Country Area o.w.Glass/plast Year
trend (1985=100) USA 15522 4532 1995 157 Mexico 10000 1994 Columbia 4200
1995 *) Costa Rica 3600 1994 Ecuador 1620 1996 Dominic. Rep. 400 1995 Peru
200 1994Source: AIPH statistics. Exact figures about the production of ornamental
products in Latin America are not available. Its is clear, however, that
the production volume is growing very quickly in this region. Due to the
good climate conditions, the input of (foreign) capital and knowledge, this
region has reached a good export position to both the United States and
the European Union. The two most important producers and also exporters
are Columbia and Ecuador. Traditionally, Columbia was the biggest producer
in this area, but Ecuador, although a relative newcomer, has a lot of potential
to take over this position. Columbia has about 2,500 ha of carnations and
1,500 ha of roses. This country's excellent position is due especially to
the good climatic conditions, constant length of day and stable temperature,
along with cheap land and labour and a favourable geographic location with
respect to the North American market. However, due to rising production
costs, low quality, diseases in certain production areas and a bad environmental
image, this position is under pressure. In Ecuador, the area under production
is growing explosively, increasing by hundreds of hectares per year. Strong
production factors here include the climate, the considerable amount of
sunlight, sufficient good-quality water and cheap land. In recent years,
foreign capital from both Colombia and Europe has been invested in Ecuador.
Production is especially focused on roses with long, thick stems. This product
finds it way to the Russian market, where people are willing to pay good
prices for it. Experts expect that the area under roses will grow to about
2,000 ha by the year 2000. 4.2.3 Africa Cut-flower production in Africa
is highly competitive to any professional grower in the world. Especially
with regard to the European growers the competition is becoming fierce.
The first cut-flower nurseries were established in Kenya in 1969, which
originally is a tea and coffee producing country. Nowadays Kenya is the
largest African cut-flower grower, followed by Zimbabwe, Morocco and South
Africa. Other promising countries on the market are Zambia, Malawi, Tanzania
and Uganda. Traditionally, family farms growing cut flowers are a minority
in Africa. The professional companies consist of large-scale nurseries owned
by foreign investors, banks, wealthy individuals, cut-flower growers from
Western Europe and local governments. At the major nurseries, the number
of employees varies from a hundred to even thousands of people. The managers
of these farms are often recruited from England, the Netherlands, Germany
or Israel. On the other hand, small farms have also been established by
local people in recent years. These countries benefit from a developing
infrastructure, knowledge, transport facilities and entry to especially
the European market due to trade agreements with the EU. Bulk flower production
is intended primarily for export to the European market, although there
is increasing export to the Asian market as well. The quality of the flowers
is very good at the time of harvesting but the products lose quality due
to poor transport conditions. Africa used to produce primarily carnations,
roses and summer flowers. Nowadays the growing of roses is increasing, because
higher prices can be obtained on the export markets. The assortment is focused
on the European market because high transportation costs oblige growers
to strive for a high value per kilogram. Due to the political environment
in certain countries, ongoing investment in floriculture is under pressure.
The future of floriculture in Africa greatly depends on the political circumstances
in the near future. Accurate figures about the area cultivated are not available
but the following table concerning the development of roses gives a good
idea about the dynamics in this sector. Table 4.4 - Area of flowers (and
roses) in Africa (ha) Country Roses Total 1996 1997 Kenya 425 585 1280 (1995)
Zimbabwe 300 360 940 (1995) Ivory coast 690 (1995) Morocco 427 (1992) Tanzania
60 80 Uganda 53 80 South Africa 60 70 Zambia 40 65 Malawi 16 18 Ethiopia
0 4 Total 954 1262Source: AIHP, Cherry Wood's New Roses. In one year alone,
the total area under roses grew by some 30%. Especially in Kenya, the growth
in the area of roses is very high. Four to six large-scale companies represent
about 60% to 70% of the total production. A lot of the total area is in
the open field or under sheltered conditions. But cultivation under plastic
will increase due to better product qualities. With the establishment of
more advanced greenhouses, there are increasing possibilities for growing
a wider assortment of flowers. In addition, growers are more and more focused
on growing all year round. Growers in South Africa are focused on production
for the local market. Other production countries grow flowers mainly to
meet Western European consumer demands. The African countries make use of
certain market opportunities, such as supplementing the European supply
during the winter and cultivating species which are hard to grow in Europe
or which require too much energy due to their long growing times. Although
the African growers have an advantage in terms of production costs (especially
with the miniature rose), they are worried that the fear of pesticides and
the demand for environmentally friendly flowers will put pressure on production.
Since, as mentioned before, the majority of African flower production is
exported to Europe, the volume and value of export gives an indication of
production. The export values are shown in table 4.5. Table 4.5 - Export
of cut flowers and foliage from African countries to Europe (x 1000 kg/
SFR million) North Africa West Africa Central/East and South Africa Total
value ton value ton value ton value 1986 2637 24 333 2 11564 75 101 1991
4372 43 417 3 27472 131 177 1996 4503 33 539 3 46072 255 292 Source: Exmis,
LEI-DLO. Originally, export from North Africa was focused on roses. Due
to fierce competition from other areas, the export focus has shifted to
carnations. In 1991, about 60% of the export value was due to the export
of roses. In 1996, this fell back to about 30%, the same share as carnations,
which had a share of 5% in 1991. Besides roses and carnations, chrysanthemums
are an important export product. But here also, there has been a drop in
market share. Export from West Africa is very limited at the moment. More
significant is the growth in exports from Central, East and Southern Africa.
About 90% of the total export comes from this region. In 1986, less then
3% of the volume came from roses. In 1996, the share in volume has risen
to almost 50%. The growth in export mainly comes from roses and summer flowers.
Most of the flowers from Africa find their way to The Netherlands, England
and France. In Europe, export goes directly through wholesalers. Moreover,
flowers are sold through the Dutch auction system as well. More and more
we see the tendency to bypass the Dutch auctions in favour of direct selling
to retail organisations and wholesale markets. It is to be expected that
separating the product flow and the commercial flow will change the traditional
role of the auction in the near future. 4.2.4 Asia The main production centres
are: * Japan, growing for the domestic market; * Israel; * India and; *
Southeast Asian countries such as Thailand and Malaysia, and Korea and China.
Along with the Netherlands, the US and Italy, Japan is a major producer
of both flowers and potted plants, but its production is mainly for the
domestic market. In 1994, the value of production was about the same as
the Netherlands and the USA. The production of both potted plants and cut
flowers is growing rapidly. Both have doubled in space in ten years to about
18,000 ha of flowers and about 2,000 hectares of potted plants. The limited
but rapidly growing international trade provides a strong stimulus to domestic
cut flower consumption. Domestic consumption is also benefiting from this.
Only one third of the cut flowers are grown under glass or plastic. The
importance of protected cultivation is increasing. A shift is taken place
form seasonal to year-round production. The main cut flower is the chrysanthemum,
followed by the carnation and the rose. In Israel, the total area increased
in the early nineties. During the past four years, however, the total area
has remained stable at about 1,900 ha. About 70% of the cultivation is done
under glass, plastic or other protective cover. Israel is well known for
its product innovation and knowledge transfer. It is the fourth largest
exporter, mainly to the EU. The reduction of import duties by the EU gives
Israel extra export possibilities. Due to the economic situation and the
high exchange rate of the dollar, its export position is under pressure.
As a result of political changes in India, many entrepreneurs are changing
to floricultural activities, which have become a high priority for the Indian
government. Certain areas of India have great potential for floriculture:
* sufficient winter and summer sunshine; * high temperature; * good soil
quality; * good water quality; * different climatic zones for different
type of products; * low labour and investment costs. Due to this positive
environment, the total area increased from about 30,000 ha in ##1990[??]
to about 45,000/50,000 ha in 1995. About 30% of this area is used for products
for the export markets. The rest is more focused on traditional flowers
for the domestic market. The sector is not yet very well organised with
respect to the level of cultivation knowledge and post-harvest activities.
The quality level is not sufficient to meet the high standards of the European
and Asian markets, although progress is being made and the total export
volume is rising (25 million guilders in 1996). Export is hindered by high
freight and tariff costs for shipment to Europe and insufficient cooling
facilities at the airports. Throughout Asia, the production of ornamental
products is rising. In traditional production areas such as Thailand and
Malaysia, production is more and more orientated to the Japanese and (for
special products like orchids) European marketed. In Thailand, more than
7,000 ha is under cultivation for cut flower production. Production is increasing
in the newly developing countries such as Vietnam and China. In China, almost
60,000 ha are used for flower and foliage crops. In a period of three years,
production increased from about 100 million stems to about 400 million stems.
The development of the sector is just in an early stage. For example, standard
quality, post-harvest technology and management skills are not at the required
level at the moment. Most of the production is for domestic consumption,
but there is increasing export to mainly ASEAN countries for special products
like Bonsai and potted plants. ------------------------------------------------------------------------
5. Consumption 5.1 Introduction One can distinguish three main consumption
markets for floricultural products: 1. Western Europe; 2. North America;
3. Japan. 5.2 Consumption 5.2.1 Consumption Western Europe Western Europe
accounts for about half of the world's cut flower production. In terms of
purpose, European consumption of floricultural products is very heterogeneous.
Consumption patterns differs from country to country in Europe. Flowers
are generally purchased for gifts (about 45%), special occasions such as
birthdays and weddings (25%), and home decoration. Consumers expect flowers
to be colourful and beautiful. The emotional aspect is important. The European
market is a high-quality market. Consumers want to purchase fresh products
with long vase lives. The scent of flowers will become increasingly important.
Table 5.1 - Consumption of cut flowers 1990-2000 in some European countries
(ECU million) 1990 1995 2000 Germany 2547 3210 3236 Italy 2156 1638 1736
France 1366 1535 1884 United Kingdom 928 934 1093 The Netherlands 492 595
631 Spain 386 441 569 Belgium/Luxembourg 270 404 497 Austria 310 362 Sweden
268 310 362 Finland 248 289 Norway 220 241 294 Denmark 199 243 Greece 145
138 206 Portugal 101 158 Ireland 44 52 Switzerland 611 680 Source: CBI.
Note: 1 ECU= 1,3 dollar, 1995. The consumption of cut flowers in the EU
has grown rapidly in recent years. Total consumption in 1995 is estimated
at 11 billion ECU. The differences between countries are big. Germany dominates
flower sales, followed by Italy and France. In recent years, the consumption
of flowers has grown in all the countries of Europe except Italy. Table
5.1 shows consumer sales in the European countries. In 1995 the total flower
consumption in the aforementioned European countries was already about 11
billion ECU (about 14 billion dollars in 1995). This market will grow to
almost 12.5 billion ECU by 2000, an increase of 12%. When consumption in
Eastern Europe, which is gradually growing, is taken into account the European
market will be the biggest consumer market in the world. The non-EU country
Switzerland has by far the highest per capita expenditure. The per capita
differences are big. In Portugal, the per capita expenditure is about 10
ECU while in Finland the average is about 50 ECU (Table 5.2). Table 5.2
- Consumption per capita of cut flowers 1990-2000 (ECU) 1990 1995 2000 Germany
32 40 41 Italy 36 29 30 France 25 27 34 United Kingdom 16 16 19 The Netherlands
33 39 42 Spain 10 11 15 Belgium/Luxembourg 25 40 50 Austria 46 53 Sweden
32 35 42 Finland 50 58 Norway 52 54 69 Denmark 31 38 47 Greece 15 13 20
Portugal 10 15 Ireland 11 10 Switzerland 70 87 102 Source: CBI. Note: 1
ECU=1,3 dollar, 1995. 5.2.2 Consumption North America As mentioned before,
the definition of floriculture differs from country to country, making it
difficult to compare statistics. In the USA, the floriculture sector includes
crops such as cut flowers, cultivated greens, potted flowering plants, potted
foliage plants and bedding and gardening plants. In the USA, cut flower
consumption is not as dominant as in Europe. Over the past five years, the
total wholesale value increased about 15%, representing an average growth
of about 3% per year. The quantity of domestic cut-flower production decreased
in the same period. Other international suppliers filled up the gap. The
most important flowers are carnations, chrysanthemums, gladioli and roses.
For the most important flowers, the average import share is between 70%-90%.
Besides the increased consumption of cut flowers, the consumption of potted
flowering and bedding plants also went up. Fresh cut-flower sales to consumers
traditionally have been made by retail florists for use in connection with
weddings, funerals, gifts, special occasions, etc. In the last five years,
there has been a large increase in sales of flower and potted plants through
mass marketers such as super markets, garden stores, flower stands and street
vendors. They offer fresh domestic and/or foreign products, depending on
price, availability and quality. Table 5.3 gives details about the consumption
level in the USA. Table 5.3 - Retail expenditures for floriculture in 1996
in the USA 1996 (billion $) Per capita ($) Cut flowers and cut greens 6.5
27 Potted flowering plants 3.4 13 Potted foliage plants 2.9 11 Bedding garden
plants 2.6 10 Nursery crops, bulbs, etc. 21.2 80 Source: Van Woerden. In
total, per capita consumer expenditure for flowers amounts to 27 dollars,
which is relatively low compared with countries in Europe. 5.2.3 Consumption
Japan Japan is one of the largest consumers of cut flowers. Both the total
consumption of flowers and the average per capita consumption are high.
Individual flower consumption is lower than in the other major industrialized
countries. The reason for this is that 70% of the total consumption derives
from business concerns that handle ceremonial occasions such as weddings
and funerals, from corporate gifts, from floral decorations in hotels, and
so on. Furthermore, the comparatively high costs of a single flower in Japan
tend to disincline consumers to buy. The custom of buying flowers for one's
own use is relatively unknown in Japan. In recent years, there is a trend
to a more European life style. Consequently, the percentage of the total
consumption represented by individual purchases is likely to continue rising.
With a total consumption of 5 billion dollars, this major market is attractive
to suppliers all over the world. Japan's flower market has changed drastically
in the last ten years. Although institutional demand (hotels, national events,
flower arrangements, etc.) has fallen due to the declining economy, non-commercial
demand is growing (JFPC, 1997). Currently, institutional demand has fallen
back from about 40% to 30%. Non-commercial demand, both personal (gifts,
casual flowers, Ikebana and home gardening) and regional (housing projects
and public areas), is becoming an established part of the market. Personal
consumption is about $ 130 per household and about $ 100 for gardening products.
According to the Japanese Flower Promotion Centre, demand for cut flowers
will rise by around 60% by 2005 due to the growth in the casual flower and
personal gift markets. Consumers will look for a wider variety of products
as personal demand grows. The per capita consumption will rise from 50 stems
in 1993 to 76 stems in 2005. This means a average growth of about 4% per
year. Most of the growth will come from domestic production, although import
will increase to meet the growing demand. ------------------------------------------------------------------------
6. Trade of ornamental products 6.1 Export from regions Figure 6.1 gives
an overview of the total flow of ornamental products between the regions
in the world. When one looks at the regional level, it is clear that Latin
America is the biggest export region for ornamental products in the world.
Total export is about SFR 950 million, which was about 750-800 million dollars
in 1996. About 60% of the total export of this region goes to North America
(480 million dollars). More than 90% of this export to North America is
cut flowers (figure 3.2). Export countries include Colombia and Ecuador,
primarily for cut flowers, and Costa Rica and Guatemala for potted plants.
The second biggest export region is Europe, with a total export of approx.
SFR 720 million (600 million dollars). Although the Netherlands is considered
to be the biggest exporter of flowers and plants, one can see that its role
at world regional level is not so impressive. This is due to the fact that
most of its export is oriented to the countries within the EU. Most of the
export of the EU still comes from the Netherlands, but this position is
mainly based on the export of bulbs, in which it have a very strong and
unique position (see figure 6.2). Within Europe, the Netherlands exports
about SFR 4.1 billion worth of products, which represents 80% of the total
trade of ornamental products in the EU. The products are mainly flowers
and potted plants within Europe and bulbs interregionally. Africa, in particular,
has very rapidly established a position on the export market. In a period
of ten years, Africa managed to increase its export, especially to Europe,
by more than 300%. Total export is SFR 340 million to Europe. Africa's export
position with respect to other world regions is rather insignificant. Leading
export countries are Zimbabwe and Kenya, which account for more than 80%
of the export. In the fourth place comes the Middle East, which actually
means Israel. Total export was about SFR 257 million in 1996, of which 80%
was cut flowers (mainly roses). Asia plays a rather small role in the international
trade. Most Asian trade is within Asia itself. Only for special products
like orchids (Thailand) and Bonsai products (China/Japan) is there is small
export position, amounting to about SFR 120 million, of which 80% goes to
Europe. 6.2 Import from regions Europe is the biggest import market for
ornamental floricultural products. Total import is about SFR 1.2 billion.
North America is the second largest import market for ornamental floricultural
products. Outside North America, the USA imports about SFR 1 billion worth,
which is about 760 million dollars. The position is just the opposite when
one considers only the trade of cut flowers (figure 6.2). For cut flowers,
the North American market is the biggest import market. Figure 6.1 External
trade *) of ornamental horticultural products 1996 (SFR million) *) Most
important countries and flows. Source: AIPH statistics, 1997 (1 dollar =
SFR 1.23). Figure 6.2 External trade *) of cut flowers 1996 (in SFR millions)
*) Most important countries and flows. Source: AIPH statistics, 1997 (1
dollar= 1.23 sfr, 1995). ------------------------------------------------------------------------
7. International competitiveness 7.1 Introduction In this chapter, the specific
aspects of cut flower and pot plant production centres are examined within
Porter's framework. Porter's analysis is based on the theory of the industrial
economy. Porter came to the conclusion that the competitive strength of
nations is determined by four interrelated factors which shape the national
environment. Because he diagrams these factors as the four points of a diamond,
he calls this structure the diamond of a nation. Nations are most likely
to succeed in industries where the national diamond is the most favourable.
The four determinants of Porter's diamond are: 1. Factor conditions The
nation's position in terms of production factors such as skilled labour
and infrastructure which are necessary to compete in a given industry; 2.
Demand conditions The nature of domestic demand for the industry's product
or service; 3. Related and supporting industries The presence or absence
of internationally competitive suppliers and related industries in the nation;
4. Firm strategy, structure and rivalry The conditions in the nation governing
the creation, organisation and management of companies and the nature of
domestic rivalry. Apart from these four basic determinants, Porter distinguished
two additional factors: 5. Chance Events that have an influence on the competitive
positions of the industry, such as important technological breakthroughs
and discontinuities in input costs caused by oil price shocks, wars, changes
in exchange rates, etc. Consider what is happening now in Asia and its impact
on changing international product flows. A change in the export positions
of these countries is to be expected; 6. The role of the government The
role of the government has an influence on the four determinants of the
diamond and on the competitiveness of a sector. On the basis of Porter's
framework, our institute has analysed a number of competitors. Countries
or regions can derive their competitiveness from a low cost price, a high
level of investment, rapid innovations or their competitive positions and
innovations in the past. Those which derive their strength from rapid innovations
are the most effective competitors. These countries are not dependent on
low cost prices or investments in innovations by other countries, but are
strong enough to make innovations themselves. These innovations are the
result of a good balance between the production factors, the economic variables,
domestic demand and the networks. An active search is made for new opportunities
and the best manner of confronting threatening developments. 7.2 Comparison
of supply centre competitiveness In the cut-flower sector, the Netherlands
is the only country which derives its competitiveness from rapid innovations.
Although the great innovative ability in the Netherlands has been primarily
concentrated on the supply side, a change to more awareness of the demand
side is clearly noticeable. Stronger vertical integration to meet the demands
of consumers and retailers, more effective logistics, higher quality products
and environmentally sound production facilities are all current topics.
Disadvantages for the Dutch sector such as expensive raw materials and labour
and a less favourable climate are compensated for by strong points such
as high productivity, a tightly-knit and efficient distribution network
and a wide, innovative range of products. The country's favourable position
with respect to Europe, its capacity to invest, its good infrastructure
and the comprehensive knowledge and network available to the sector constitute
a good seedbed for innovations. The network in which the sector is incorporated
is not only vertical but is also increasingly developing horizontally. Although
the Dutch sector also competes internationally in the area of costs, it
does not depend on low costs for labour, land, raw materials and capital.
Its strength is based more on its ability to innovate rapidly. This is reflected
in its productivity, quality, range of innovations, high professional skill
and state-of-the-art technology. In markets where cost prices are important,
the Netherlands will experience increasing competition from African countries
such as Kenya, Zambia and South Africa, and from Latin American countries
like Columbia and Ecuador. By continuing to innovate in terms of both technology
and range, the Netherlands can maintain a leading position for cut flowers
and potted plants in Europe. African countries are strong in terms of basic
factors. the climate is favourable and there is and adequate supply of cheap
land, water and labour. On the other hand, there are no innovative stimuli
from knowledge infrastructures, strong networks and domestic markets. Also,
unlike the Netherlands, countries in Africa do not have the capital to develop
knowledge and technology on a large scale themselves. They are greatly dependent
on knowledge provided by suppliers, retailers, and other third parties.
As a result, they are only able to produce products which require limited
technology and knowledge. They can offer a reasonable volume of these products
at a low cost price on the world market. A further growth in competitiveness
is possible if capital becomes available and they are willing to invest.
This development is hampered, however, by political instability, which has
its effects on the innovation process. Moreover, growth in production depends
on the availability of cheap air freight facilities. Vertical integration
is also seen in Africa. Because of good coordination on the suppliers' side,
Africa remains strong in products with high volume and low cost price. The
countries in Latin America derive their strength from a high level of investment.
In many cases, similar to the Netherlands, a great deal is invested in technology.
With the input of a lot of foreign capital, the production area is increasing
rapidly. High-quality factors (such as infrastructure and knowledge infrastructure)
are being strengthened with the aid of investments. Thanks to strong basic
factors and advantages of scale, standard products can be readily supplied
through the international market channels. Latin America has the potential
for rapid growth in the coming years. Sufficient money is available for
investments in knowledge, capital goods and range of products. As a result
of increasing production and additional air transport facilities, sales
to Europe will continue to climb. The cost price level has great influence
on prospects. The high expense of transport must be offset by a low cost
price. Because of the high dollar exchange rate, export to North America
will expand more easily. The European market will only be reachable if the
cost price is kept down and sufficient affordable air freight facilities
are available. Table 7.1 - Comparison of competitiveness Netherlands Latin
America Africa Geography ++++ ++ ++ Climate +++ ++++ ++++ Land and raw materials
++ 1) ++++ ++++ Labour ++ +++ +++ 2) Capital ++++ +++ ++ Infrastructure
++++ ++++ ++ knowledge ++++ +++ 3) ++ 3) Domestic market +++ + + Network
++++ +++ ++ Government ++++ ++ + Economic variables ++++ ++ 4) ++ 4) ++++
= very good/amply available and cheap 1) land expensive +++ = good 2) wages
still low but rising ++ = moderate 3) knowledge comes from other countries
+ =poor/very poor and expensive 4) individualistic growers Source: Hack,
LEI-DLO ------------------------------------------------------------------------
8. Distribution changes 8.1 Introduction Due to changes in worldwide economic
circumstances, the international trade in ornamental products will be changed
in the coming decade. What are the driving forces behind these changes?
In his book, John Kotter demonstrates in simple form what one can regard
as the driving forces behind the changes currently taking place in industry,
changes which are also affecting horticultural agribusiness. First of all,
the rapid technological changes It looks as if we are going through an information
technology revolution. Communications are getting faster, better and cheaper,
and the same goes for transport. A worldwide network links the world day
and night, with high expectations regarding the role of this network in
many different areas. Almost everyone uses a computer. Millions of people
sit at the screen again in the evening to look for information connected
with their work or their hobbies. Because more people are working and there
are increasing opportunities to be active from home, consumers will want
to spend less time on domestic work, which has consequences for the manner
in which products are offered on the market. It is expected that information
technology will play a major role here. There are high expectations regarding
the turnover that can be achieved through the Internet. Secondly, international
economic integration The implementation of the GATT rounds, the establishment
of large free trade zones (EU, US/Mexico, ASEAN), interlinked currencies
and the steadily expanding circuit of worldwide flows of capital ensure
a more balanced economic development. Some economists say that we are back
at the start of a Kondratieff cycle in which we will experience a long period
(until 2020) of economic growth. We increasingly have to deal with customers
who operate on a global scale. Our competitors will increasingly operate
on a global scale too. The assets of large institutional investors (such
as pension funds) are invested all over the world. In some parts of the
world large investors are putting capital in floriculture. Next, saturated
markets Growth in the traditional developed countries is slower because
of the increasing saturation of the markets. This forces companies to orientate
themselves more internationally. At the same time, a far-reaching deregulation
of markets is taking place, as a result of which international flows of
goods can proceed more easily. Lastly, free market mechanisms After the
collapse of the Berlin Wall, Eastern European countries have experienced
an accelerated orientation towards freer market mechanisms. The same applies
to Asia, where a country like China is gradually making steps towards the
introduction of a market mechanism. At the same time, the government is
in retreat in countries where there was already a form of market economy,
so that more market mechanisms are being introduced in production and services.
The items listed above contribute to a further globalization of markets.
The entry of many enterprises to this market therefore leads simultaneously
to more competition. This means more opportunities, but also extra risks.
Having customers for your product is no longer only dependent on the lowest
cost price. Before you know it, a supplier with a lower price will be there.
Retailing on markets will become more complicated. Service, quality and
reliability are essential factors for securing your position on such international
markets. 8.2 Effects on the floriculture sector Production of ornamental
products is rising all over the world. Most of this growth is being realised
in Africa, Asia and Latin America. Production in Latin America will be focused
on the rapidly growing consumer market in the USA, while African production
tries to finds it way in Western Europe's saturated markets and the developing
markets in Eastern Europe. Production in Asia will be for increasing domestic
demands and the high-quality market in Japan. In the flower trade, the Netherlands
traditionally played the most important role. With new players on the world
markets, a new form of competition will take place. It is not quite clear
that international trade will continue as before. Fierce competition on
the consumer market is already leading to a change in the vertical integration
of the floricultural sector. Increasing the scale of production, the formation
of growers cooperatives, as well as mergers both at trade and retail levels,
are clear signs of this development. Experts expect that the distribution
of ornamental products will be shifted from the traditional specialist shops
to retailers and electronic commerce within five to ten years. Most products
are now sold by specialized outlets or shops. In the near future, their
market segment will be about 35%. Another 35% will be sold by retailers
and about 30% will find its way to consumers by means of the latest information
technology. The market for the specialist shop very much resembles the present
market situation. Small-scale shops with very intensive distribution networks.
The retail-shop market demands efficient distribution of standardised quantities
throughout the chain. This will effect all parties currently working at
some point in the chain. Producers have to organise production so as to
supply the necessary quantities according to the required quality standards.
Any parties in the chain which do not contribute to higher added value will
disappear in the long term. The electronic commerce market will be managed
by specialized organisations. Due to the aforementioned changes in economic
circumstances, the ongoing process of internationalisation of production
will be accelerated and the flow of products will be organised by much bigger
trading companies then the ones we have at the moment. The advantages of
larger scale can be found not only in a more efficient purchasing process
but also in terms of logistics and the use of information technology. -----------------------------------------------------------------------
9 - Literature AIPH. Yearbook of the international horticultural statistics,
several volumes, Institut fur Gartenbauokonomie der Universiteit Hannover.
CBI, (1996). Exporting cut flowers and foliage. A survey and marketing guide
on major markets in the European Union, Profound. Comtrade Database. International
Computing Centre Geneva. European union, (1997). Strategy of the EU in case
of the trade of floricultural products, Com(97) 36 def, Brussels. Groot,
J.J.P., (1996). Nederlandse Bloemenimportpositie in Europa. Dutch Floricultural
Wholesale Board. Hack, M, et al., (1993). A view of international competitiveness
in the floriculture industry. Agricultural Economics Research Institute(LEI-DLO).
Hack, M., (1994). Horticulture Worldwide. Agricultural Economics Research
Institute (LEI-DLO). Johnson, Doyle C., (1990). Floriculture and Environmental
Horticulture Products. Statistical review 1960-1988.USDA, September. Kotter,
J.P., (1996). Leading Change. Harvard Business School Press, Boston, Massachusetts,
USA. Pathfast, (1996). International Floriculture Trade Statistics 1996.
Pathfast Publishing. Essex, United Kingdom. Ven, J. van der, (1998). Ontwikkelingen
in de snijbloemen en potplantenmarkt. Agricultural Economics Research Institute
(LEI-DLO). Vliet, C. van, (1998). Politiek en slecht weer drukken uitbreiding
rozenteelt in Afrika. Article "Vakblad voor de bloemisterij". Woerden, S.
van, (1998). Practical at Rutgers University New Brunswick, USA. Agricultural
University Wageningen.
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Green - Seeds Co., Ltd.
81/10B Ho Van Hue Street, Phu Nhuan District, Ward 9, Ho Chi Minh City, Vietnam
Tel: +84 (8) 847 6901 - Fax: +84 (8) 844 1392 - Email: info@green-seeds.com
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