The main trends for the coming years are an increasing attention to Corporate Social Responsibility (CSR), ICT in the cut flower value chain and further concentration of retailers. Preconditions for a good position on the market are sustainably cultivated and transported flowers. Although there is only limited economic growth in the major markets in North-western Europe, demand in the eastern European markets is expected to grow. The demand for niche products will remain.
Social Market Drivers
CSR becomes mainstream
Supermarkets have created an increasing demand for responsibly produced flowers. As a result, Corporate Social Responsibility (CSR) continues to gain importance. Examples of CSR programmes include MPS (Floriculture quality and environmental sustainability certification programme which focuses on encouraging corporate social responsibility and sustainable production), GlobalGAP (which focuses on good agriculture practices), Fair Trade and other certification programmes, including local initiatives such as KFC-Silver/Gold, EPHEA Code of Practice, Florverde, etc.
Considerations for actions
- For better understanding, learn why all the regulations are necessary and make sure you know how they apply to your company.
Marketing and promotion
Consumers are willing to pay for products that come with a story. This can be related to locally produced items, products grown by smallholders, or products with special characteristics. Story telling connects consumers with a product and often justifies a price premium. Products originating from developing countries can obtain a distinctive position in the market by emphasising their origins.
Considerations for actions
- Know the added value of your product and learn to communicate through packaging or storytelling
Peak days
Flowers are often bought for special occasions such as mother’s day or Valentine’s day. Prices are often high during these peaks, but the range of flowers that match the specific demand during these peak days is limited (e.g. a very high demand for red roses for Valentine’s day). Growers in DC’s should analyse whether they want to focus on these peak days or whether they prefer other market segments.
Considerations for actions
- Understand the dynamics of the European flower market. Be aware of the timing of peak days in the market and try to integrate these in production planning.
Developments in market segments
The majority of European consumers buy flowers at florists and, to a lesser extent, at street and market stalls (specialised). However, in the last decade supermarkets have gradually gained market share, as well as other non-specialised outlets such as gas stations and DIY stores. Despite this trend, florists will remain the most important market segment. It is important for growers to determine which specific type of market segment they supply, i.e. specialised or non-specialised.
Considerations for actions
- Know your market segment and its requirements. Obtain relevant certification and be organised before exporting to EU.
Technology Market Drivers
ICT in the marketing process
The majority of flowers sold on the European market are sold through the Dutch auction. ICT-systems have been recently introduced into the marketing process. This has had a significant impact on trade. Examples include the auction’s distance buying system and other intermediary services that complement and sometimes replace the traditional flower auction clock. This can lead to the disconnection of physical supply logistics from the actual trading place. A purchase is based on a digital product image. Growers therefore need to pay constant attention to consistent quality and reliable information as wholesalers prefer to work with the most reliable suppliers. Unreliable or false information about product quality may lead to a lower ‘quality rating’ by the auction and a loss of sales.
Considerations for actions
- ICT systems are vulnerable to trust issues. Be consistent and as honest as possible when supplying digital information about product quality.
Sea transport
Traditionally, many flowers are transported by air to the European markets. However, there is an increasing interest in shipping flowers over sea in order to reduce costs and greenhouse gas emissions. There are a number of examples of successful sea shipments with flowers by cooled containers. Nevertheless, possibilities for the transportation of flowers in cooled sea containers depend upon factors such as the type and variety of flowers, the ability to supply decent quality and sufficient volumes to fill a container, an efficient cold chain and, of course, the availability of adequate shipping lines.
Considerations for actions
- Shipping flowers by sea transport can provide major cost advantages. But be critical with the type of flower or the variety to be shipped. Not every flower is suitable for this kind of transport.
Improved varieties (for production in DC’s)
The production areas in East Africa are characterised by different cultivation conditions and have a longer distance to the market compared to traditional flower production areas in Europe. This requires, amongst others things, varieties with an improved vase life. As a result, breeders of cut flowers are developing improved varieties specific for East African growing and transport conditions. In addition, there is a tendency for breeders to reserve new varieties for a selected group of ‘exclusive’ growers. These new varieties are offered on the market exclusively by one grower, resulting in high prices. These varieties are then released to other growers at a later stage, resulting in an increase in supply and lower prices. This trend is likely to continue and will lead to breeders increasingly looking for reliable growers to partner with.
Considerations for actions
- Consider growing flowers with improved characteristics to enhance your market position.
- Work on reputation. Provide constant quality at the auction. Contact your buyers frequently so that they know who you are and make sure that you continuously improve your services.
- Work on close relationships with your suppliers (breeders). They sometimes have exclusive agreements on varieties for selected growers.
Tracking and tracing
Supermarkets want to know where products are coming from. A wide range of traceability solutions and tools are available. In the cut flower industry barcodes on packaging are frequently used to integrate information from producer and buyer. Often the article code, selling price and other details imposed by the supermarkets are already printed on labels and barcode by the grower. The trend towards tracking and tracing is partly integrated with an increasing demand for certification schemes. RFID tracing systems can monitor quality indicators such as timely delivery, temperature and place. You may use these and other tracing systems to monitor your products throughout the supply chain. Bad product treatment by other supply chain participants will reflect on your products’ price as a DC exporter.
Considerations for actions
- Tracking and tracing is becoming more dominant. Contact your buyers to see if you can add value by labelling products in advance. Also use the possibilities offered by tracking and tracing to monitor your own product quality.
Tracking and tracing
Supermarkets want to know where products are coming from. A wide range of traceability solutions and tools are available. In the cut flower industry barcodes on packaging are frequently used to integrate information from producer and buyer. Often the article code, selling price and other details imposed by the supermarkets are already printed on labels and barcode by the grower. The trend towards tracking and tracing is partly integrated with an increasing demand for certification schemes. RFID tracing systems can monitor quality indicators such as timely delivery, temperature and place. You may use these and other tracing systems to monitor your products throughout the supply chain. Bad product treatment by other supply chain participants will reflect on your products’ price as a DC exporter.
Considerations for actions
- Tracking and tracing is becoming more dominant. Contact your buyers to see if you can add value by labelling products in advance. Also use the possibilities offered by tracking and tracing to monitor your own product quality.
Economic Market Drivers
Limited market growth
Due to the ongoing slow economic situation in large parts of Europe, overall demand for cut flowers is stable at best. There has been a high degree of competition in many segments and a diversion of supply from Europe to DC’s where production costs are lower. Economic growth in Europe is expected to remain slow for a number of years. It is difficult to obtain new or additional market share in a slow market.
Considerations for actions
- Choose your strategy; focus on low cost flowers or specialise in premium, high end flowers.
Emerging markets inside the EU
Despite limited economic growth in Europe, the Eastern European economies are still growing. As a result, the demand for flowers in these markets is increasing, though the markets are still relatively small in size. In Eastern Europe flowers are mostly bought as a present in the specialised market channel (e.g. Mother’s day, Valentine’s day). The best way to enter the Eastern European markets is through Dutch traders that have experience in supplying florists in these countries.
Considerations for actions
- Invest in a sustainable relationship with your European buyers and look for possibilities to expand exports to emerging European countries
- The best way to enter the Eastern European market is through Dutch traders with experience in supplying florists in these countries.
Chain integration
Producers, traders and retailers of flowers are collaborating more and more. This could relate to information sharing, adopting the same article codes or applying product labels in an early stage, throughout the value chain. Another example of chain integration is the possibility of becoming a contract grower for retail suppliers. Chain integration will enhance possibilities in relation to marketing and promoting your products as a DC exporter.
Retailer concentration
European supermarkets are becoming larger and more concentrated. In addition, the market share of supermarkets in the sales of flowers has increased in the last decade. As a result the buying power of the European retailers has increased. Retailers tend to source more directly from growers in DC’s and this can create dependency. Nevertheless, the specialised market segment of cut flowers in Europe is still relatively diverse, with many florists, smaller outlets and markets.
Niche products
Alongside the increasing scale of retailing in the EU, there is a growing market for niche products. This provides an opportunity for growers to distinguish themselves by supplying the market with specialities. Niche producers will continue to emerge to provide consumers with unique products, particularly in the high-end market segment.
Environmental Market Drivers
Environmental impact
All actors in the flower value chain agree that applying good agricultural practices to protect the impact on the environment is of great importance. The ongoing discussion about chemical residues on flowers is good example of a current topic. In addition, there is also a trend towards the reduction of greenhouse gas emissions (CO2) during production and transport.
Considerations for actions
- Prepare for the future and consider producing your flowers in an environmentally friendly way. Buyers and consumers agree that this will be of increasing importance in the future.
Labelling and certification
Demonstrating that growers comply with standards related to quality, social issues and environmental issues is becoming more and more important. Various European retailers are expanding private certification schemes and various national industry codes have been developed as a result. MPS (Floriculture quality and environmental sustainability certification programme) is a must for growers. Various market segments and buyers have implemented the standards which best meet their needs. In reality, many standards deal with more or less the same issues.
Considerations for actions
- Get certified and communicate your good working practices to buyers.
- If you want to supply supermarkets, check what kind of sustainability criteria they impose.
Political Market Drivers
Preferential access
The old system of preferential access to European markets for developing countries, in which ACP (African, Caribbean and Pacific) countries had duty free, quota free, access to the EU market while negotiating their own separate ‘Economic Partnership Agreements’ (EPAs) with the EU, came to an end in 2007. The European Commission January 2014 deadline for countries that are still to complete this process, has been extended. The 2014 deadline is not feasible for some countries such as Kenya, Botswana and Namibia and,according to a recent report, the deadline for negation has been extended to January 2016. Any change in the import tariffs on the EU market for products from developing countries is a potential risk.
Considerations for actions
- Familiarise yourself with the discussion on preferential access and the potential impact for your country, sector and business.
Phytosanitary controls
The increase in cross border trade has led to strict phytosanitary controls. Imports are checked for hazardous organisms at the European border. It is expected that technological improvements such as DNA sequencing techniques will increase the number of organisms that are checked and detected. Throughout the European market, there are checks to ensure plant health. This includes monitoring organisms that are harmful to plants, genetically modified organisms, pesticide application and organic agriculture. Exporters from DC countries should therefore ensure that their products are free from any harmful organisms.
Considerations for actions
- Keep up to date with European rules and regulations concerning phytosanitairy controls.
Enforcement of breeders’ rights
Breeders rights – that give the breeder or inventor of a new plant variety exclusive control over its propagation and commercial use – are essential to safeguard the development of new commercial varieties. Throughout Europe, there is strong awareness among traders and retailers that European and non-European growers have to comply with these international standards. There is also increasing enforcement of these international agreements.
Considerations for actions
- Make sure that royalties are paid so that flowers will not be confiscated.
