Flourishing flowers, promising plants: Internationalisation strategy
Dutch floriculture plays a leading role in the world. Dutch companies should focus on exporting propagation materials, technology (building, climate control, biological control), knowledge and services. The market potential is enormous, especially in Asia.
Changing situation in global floriculture
Currently, almost 80% of global flower and potted plant production is sold in the same country as where it is produced, leaving 20% for trading internationally. Who will benefit from international market growth?
With a share of 43%, the Netherlands has a substantial share in global cut flower exports. However, this share is on the decrease. In 2005, the share was 50%. Rabobank expects the Dutch share to further decline, towards 35%, in 2027. This has several reasons:
● The Asian market is growing relatively quickly, but is mainly supplied by local flowers.
● Kenya and Ethiopia are setting up direct air freight lines to their export destinations.
● Sea freight is still not significant, but the volumes are rising quickly.
Rabobank is expecting a strong growth in the consumption value in Asia. That presents a great opportunity for the whole industry. The recently signed trade agreement between the EU and Japan will expand the possibilities of exporting to Japan. Growth of expenditure in China also provides opportunities there. But who is able to fulfill this market growth?
Production per continent, technology and knowledge worldwide
In the past, internationalisation was about the export of flowers, plants, and propagation materials (seeds, bulbs, cuttings, tubers). Technical exports (greenhouses, climate control, logistics, machinery, biological control, fertiliser) are of a more recent date. Recently, education and counselling have become important too. Agronomic advice bureaus and knowledge providers have increasingly become active abroad as part of their business.
Rabobank is expecting a small growth in the export of Dutch ready-to-use products to destinations outside Europe. Because we are expecting slow growth in European countries, the Dutch share in international production and trade is also going to decrease. This does not imply that the absolute volume of production is shrinking.
Figure 1: Export of end products, means of production, means or knowledge/services
There are many opportunities for Dutch companies in the growth of global floriculture:
a. Companies could start production in countries with rising consumption. They could start satellite companies abroad. Finding adequate middle management, bridging the cultural and political boundaries, and finding craftsmanship are the biggest barriers for this development.
b. Secondly, the Dutch could benefit by expanding exports of propagation materials and technology. Dutch companies have a good reputation all over the world.
c. Finally, providers of knowledge and services may find suitable business in new production areas.
The Netherlands: engine and accelerator?
Like mentioned before, the Dutch share in international flower trade has declined. Nevertheless, the Netherlands are still an engine and accelerator of innovation in international floriculture— ‘engine’ due to the cluster of breeding, propagation, and growing companies, ‘accelerator’ because of the presence of Royal Flora Holland (RFH) and wholesale companies. RFH has a special position in this as the world’s largest marketplace. But the role of marketplaces needs to change. According to Rabobank, the future role of RFH strongly depends on supply chain organisation on the one hand and on their ability to adopt new technologies on the other. The members of the auction need to embrace new technologies, like blockchain and big data for payment or marketing purposes. In addition, there are also opportunities in logistics. The transport of flowers and plants by train could potentially develop in the period ahead.
RFH used to have five main functions in the supply chain: collection, standardisation, pricing, distribution, and payment. In the future, we expect RFH to have different roles in three main supply chains:
a. Specialised retail (florists): in this supply chain, the auction will fulfil the five main functions we mentioned earlier.
b. Big box retail (supermarkets, discounters, home decorators): in the supply of flowers and plants to big box retailers, these retailers will organise collection, distribution, and payment without involvement of the auction. Perhaps RFH will keep its role in standardisation and in pricing.
c. Online retail: the online retail (B2C) channel is growing fast. RFH could be part of this supply chain when it comes to standardisation and being a supplier of technology. However, competition will be intense on collection, pricing, and distribution—there are a lot of new kids on the block.
This is the third article in a series of articles on floriculture. This article is largely based on a recently published Dutch-language report on the Dutch floriculture “De Nederlandse sierteelt: Volop kansen: Strategie bepalen voor ketenpositie”.
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Where to go from here
Lambert van HorenAnalyst - Fresh Produce Read more