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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.

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		1994

Source: 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	1262

Source: 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)

Year	North Africa		West Africa		Central/East and South Africa		Total value
Year	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:

Western Europe;
North America;
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.

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:

Factor conditions

Demand conditions

Related and supporting industries

Firm strategy, structure and rivalry

Chance

The role of the government

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.

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.

© WCHR

wchr.agrsci.unibo.it/wc1/degroot.html Created 28 May 1998 Maintained by E. Muzzi, M. Ventura, D. Verzoni lcorelli@agrsci.unibo.i

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