Introduction

The following report is based upon the information provided by the stake holders of cut flower
industry on a three day field visit to Nuwaeliya and Kandy areas between 1st June 2012 to 3rd
June 2012. Objective of the three day field visit was to enable the participants to

Enhance the knowledge of industry analysis, apply relevant tools and models in this
regards and develop their own integrated model or approach

Enhance the knowledge of postgraduate students on prevailing trends in Floriculture

industry in Sri Lanka and to learn possibilities to develop this industry.

Review the outstanding issues and shortcomings in the Industry and Marketing Practices
in Sri Lankan business organizations with a view to applying the Value Chain as a frame
of reference in advancing management practices or in analyzing core challenges in
strategic management practices.

Suggest strategic approaches and make policy recommendations to promote the

Floriculture Industry in Sri Lanka.

Floriculture industry in Sri Lanka

..Main
categories included in the floriculture sector are
1. Cut Flowers
2. Cut foliage
3. Cut decorative leaves
4. Potted Plants
5. Bedded plants
6. Seeds

Sri Lankan floriculture industry has three types of growers and producers
1. Large scale growers for export and local market
2. Medium scale growers for local market
3. Small scale growers for local market
Present Situation of Cut Flower Production in Sri Lanka
Western, North Western and Central Provinces in Sri Lanka are the major areas where cut
flowers are grown commercially. Cut flowers grown in the country can be divided into two main
categories based on their temperature requirements i.e. Temperate Cut Flowers and Tropical Cut
Flowers.
Temperate Cut Flowers: Temperate cut flowers include carnation, rose, statice, gypsophyla,
alstroemeria, chrysanthemum, lilies and irises. Among them, carnations and roses are grown in
the highlands of the Central Province of Sri Lanka. Carnations are produced entirely from
imported planting materials and are graded according to internationally accepted specifications
for export and local market. The other species are commercially grown mainly for the local
American and Mediterranean carnation cultivars are quite famous in the world market. Pink,
white, red, yellow and salmon colours are much popular. Novelties such as striped and frosted
types are also becoming increasingly popular. American cultivars grown are silvery pink, karina,
barbara, red barron, elsy, royalette, bagatalle, bianca and adelfie. Mediterranean cultivars grown
are nora barlo, shainah, lena, castellaro, scania, tanga, roma, pallas and charmeur. Carnations are
grown in poly tunnels, covering more than 10 hectares, under fully protected environments.
Roses are second to carnations and production is limited to about 40,000 blossoms per annum.
This is mainly due to the highly expert conditions required for cultivation and production.
Approximately 2-3 hectares of area have so far been used for cultivation of roses. Roses for the
export market are grown under controlled environments in poly tunnels. Popular colours are
highly variable. They are generally required in a mix and an acceptable mix would consist of red50%, Pink-30%, yellow-10% and others 10%. Roses are quite popular in the local market also.
Most of them are supplied by small scale growers.

Tropical Cut Flowers: Anthuriums and Orchids are the most popular tropical cut flowers which
are being grown commercially for exports as well as for the local market. Anthuriums can be
grown at elevations up to 1500 metres above sea level, with texture and the flossiness
remarkably enhanced with increase in elevation. Annual production of anthuriums is around 3
million flowers, the majority of which are sold at the local market. The exports of Anthuriums at
present are not very significant. A land area of approximately 10 hectares is under Anthurium
cultivation at present and the industry is expanding steadily at village level. Almost all
plantations are either under poly tunnels or structures with shade netting. However, locally
available materials are also used under certain conditions to provide required shade levels. The
standard trade types in the world market are the "Avo" lines i.e. Avo Nette, Avo Ingrid, Avo
Anneke. The improved standard types e.g. Germa, Cuba, Fuego, Favoriet etc. are also popular.
The Royal Botanic Gardens, Peradeniya, being the pioneer institution for the development of cut
flower industry in Sri Lanka has produced a few promising Anthurium varieties with export
potential. Some of these varieties are being closely studied and mass propagation has just been
started. A few of the slected varieties are: RBG - Green Tip, RBG - Soft Sheen, RBG - kandy
queen, RBG - Gardens Pride, RBG - Royal Flag, RBG - Lak Isuru, RBG - Wild Beauty, RBG Krishnas Red.
Tropical Orchids can be grown under warm humid conditions up to 500 metres above sea level.
Climatic conditions in the Western Province are quite favourable for cultivation of Dendrobiums,
Vandas and Phalaenopsis types which are quite popular in the local and foreign markets.
Approximately 3-4 hectares of land are under Orchid cultivation at present and the industry is
gradually developing to cater to export markets. Almost all cultivations are under shade netting
and the majority of growers have developed mist irrigation techniques. Madam Pompadour
(Pink and White), and Rena Vapahoo (Pink and White) hybrids are some of the popular hybrid
Dendrobiums in the market. Hybrids of Arachnis, Oncidiums, Phalaenopsis and Dendrobiums
are being exported in smaller quantities and the income earned is not very significant.
Gerberas are becoming popular among growers due to the availability of a wide range of long
lasting cultivars produced by many modern breeding methods and tissue culture. These cultivars
can be broadly categorised into three classes, namely Singles (such as Fleur and Apple
Blossom), Doubles (such as Marleen and Hildegard), and Black Centres (such as Fabio and

Rosseta). Pink, salmon, orange, red and yellow are the popular colours in the market. Trials
have already been started under controlled environments by private entrepreneurs to grow
gerberas for the export market. About 2 hectares of land is so far being used for gerberas.
During our visit we mainly focused our study on temperate cut flowers
.....

Strategic Groups in the industry

1. Users of advance technology like pre cooling, freezer trucks for transport etc. with high
initial capital investment targeting export market as well as local market
2. Green house growers with drip irrigation systems medium scale investment targeting
local market ( these type of growers in Nuwaraeliya area have formed a society called
Reflect flora with the assistance of Small Enterprise Development Division (SEDD))
3. Domestic growers
PESTEL Analysis
1.
2.
3.
4.
5.
6.

Political
Economical
Social
Technological
Environmental
Legal

4.3. Value Chain Analysis

Value Chain for Cut Flower Industry
Value chain for cut flower industry could be broadly identified as follows.
Government support in terms of tax exceptions, Legal framework, loan facilities, building foreign
networks, branding etc.
Training of Human resource related to cut flower industry, technical advices from SIDB
Cut flower R & D support
Inbound logistics

Operations

Outbound logistics

Sales and
Marketing

1. Procurement of
lands and
building of sheds.
2. Supply of mother
cut foliage.
3. Supply of
pesticide and
fertilizer.
4. Farm tool
suppliers.
5. Building green

1.
2.
3.
4.
5.
6.
7.
8.

Site selection
Production system
Soil preparation
Field planting
Irrigation
Weed Control
Insect and pest control
Control of other

infectious diseases
9. Control of nutritional
and physiological
problems.

houses

1.
2.
3.
4.
5.
6.
7.

Harvesting
Grading
Bunching
Sleeving
Packing
Pre cooling
Transportation

1. Advertizing and
promotion
2. CRM
3. Managing
marketing
channels
4. Marketing
research
5. Use of internet in
marketing
6. Auctions

During our field visit following value chain actors were identified as major role players in the
value delivery process of cut flower industry.
1. Input suppliers
2. Growers

3. Transporters ( Local and International )

4. Supporting organizations
a. Department of Agriculture
b. Department of National Botanical Gardens
c. Department of Forest
d. Department of Wild Life Conservation
e. Department of Commerce
f. Sri Lanka Customs
g. Export development board
h.

Ministry of Economic development

i. Public and Private banks

5. Exporters, Buyers, and Collectors
There were no established local input suppliers for floriculture industry in Nuwaraeliya area and
Small Enterprise Development Division (SEDD) is the input supplier for small scale growers and
medium scale growers especially in supplying planting materials for these two groups. However
large scale growers import these inputs directly from abroad. We visited two large scale growers
Macksons Ltd. at Thalawakele and Hayleys plant nursery at Boralanda. These growers use
advance technology in their production process and most of the value adding activities identified
in the cut flower value chain above are applied by these firms. Because of this they have the
quality and quantity advantage over small and medium scale growers when it comes to the
exporting of cut flowers. Some of the value adding activities like pre cooling, transportation
through freezer trucks, and advance irrigation systems like drip irrigation systems which are
adopted by large scale growers are not used by other two types growers. Temperate cut flower

industry is heavily dependent on cool chain activities as these varieties are sensitive to the
temperature very much. This is creating a big gap in quality of products and hence the products
of small and medium scale growers are low in quality. According to the growers cost of land and
high cost of initial investment for construction of green houses and other works has become an
entry barrier as well as expansion barrier for existing small scale growers. It was revealed during
the interviews with the growers that even though large scale growers have quality and quantity
advantage in the international cut flower market they are lacking the price advantage and
opportunity in the local market is higher than international market in some seasons of the year
and hence small and medium growers are facing a heavy competition.
SEDD has played a pivotal role in establishing temperate cut flower grower association in
Nuwaeliya district aiming to give financial and technical assistance for small and medium scale
growers. This association currently with seventy one members take the advantage of joint
purchasing of planting material and other related materials but they have not adopted a joint
marketing campaign to gain the advantage. The other major barrier is the international legal
restrictions on propagation of some varieties of planting materials.
Value added products
It was revealed during the discussion with the growers that only one grower is suppling plant
parts and dried flowers for fibre tech Ltd which is producing dried flower related value added
products suitable for exporting.
Profitability analysis for some selected cultivars
Following cost benefit analysis was carried out with help of statistics presented by Dr. Shelomi
A. Krinshnarajah research officer at Royal botanical gardens. It will be useful to analyse these
data to check the feasibility of investment in this sector.
Roses

acre land

Initial investment

5000 plants
-

Rs.1,000,000.00

Recurrent investment Rs. 125,000.00

Yield of flowers

Year1-

Yearr2 - 40,000 FL

Year3 - 60,000 FL

Year4 75,000 FL

Year5 75,000 Fl

Income -

10,000 FL

Rs. 20.00 per flower

Cash flow analysis for roses cultivation

Year
Cash out

0
1000000.00

1
125000.00

4
125000.0
0

5
125000.00

Flow
Cash in

2
3
125000.0 125000.0
0
0

200000.00

800000.00

1200000.00

1500000.00

1500000.00

flow
Total cash

(1000000.00

75000.00

675000.00

1075000.00

1375000.00

1375000.00

flow
)
Payback period = 2 years and 3 months
NPV at 15% WACC = Rs. 1,752,223
Gerbera

No. of plants -

2000

Grown in a 100x 27 ft poly tunnel

Initial investment

Rs. 1,000,000.00

Recurrent expenses

Rs. 60,000.00

Yield -

250 flowers / m2 / Yr, leading to 62,500 flowers / Yr.

Income

Rs. 15.00 per flower, flowers can be harvested for 02 Yrs.

Cash flow analysis for Gerbera

Year
0
Cash out Flow
1000000.00
Cash in flow
0
Total cash flow
(1000000.00)
Payback period = 14 months

1
60000.00
937500.00
877500.00

2
60000.00
937500.00
877500.00

NPV at 15% WACC = Rs. 426559.55

Cut flower R & D support

R&D support given by Peradeniya Royal botanical Gardens and Haggala gardens is limited due
lack of research personnel. Parapet wall mentality of government officers hindered the possibility
of formation government sector and private sector alliance for mutual benefits. Researchers in
these organizations are claiming that development of our own cultivars is difficult due to several
reasons. One is the lack of research personnel and the other is the time taken to develop a cut
flower variety is very high. The third reason they highlight is that even if we develop our own
varieties it difficult to brand it in the international market with fierce competition. Local input
supply for temperate cut flower industry has not yet been established well in the upcountry areas
whereas tropical cut flower input suppliers are better established in the low country areas
according to research officer Dr. Shelomi A. Krinshnarajah.

Sales and Marketing of Cut Flowers

Several distribution channels could be identified in present marketing system of cut flowers.
Some large scale growers have their own retail outlets in main cities. There are some collectors
in main cities who order flowers from small, medium, and large scale growers depending on their
demand. This type of marketing system favours the large scale growers as they are having
quality and quantity advantage. These collectors then distribute the flower to retailers. Third
category of marketing system was also identified in this industry. Here the retailers directly

contact the growers and buy the flowers. In addition to these marketing systems large scale
growers directly find buyers abroad and sell the cut flowers.
According to the small scale growers unavailability of a proper collection centre in the
Nuwaraeliya area is a major problem faced by them. Some kind of a trade centre or collection
centre will enable them to find a buyer for their product with ease. Discussions with the grower
association indicated that they were not aware of some of the internet based marketing activities
are possible with a small cost. The Sri Lanka Export Development Board also provides
information to cyber traders who can join the EDB Internet by paying Rs. 850. The Internet is
the most important source of information. It gives addresses of organizations, trade journals,
exhibitions, buyers and their requirements.
Small and medium scale growers use the railway transport and large scale growers use their own
freezer trucks for this purpose. Air cargo space limitation has become critical issue in exporting
business.

Services of Supporting Organizations

More than nine Government and private organizations currently involved in supporting the cut
flower industry. During the discussions had with value chain actors sub optimizations of their
efforts were identified. It was revealed that duplication supporting activities has led to waste of
funds and ineffective programmes. There are several organizations like Banks, SEDD, and
department of agriculture providing financial support for growers. Efforts of these organizations
are not integrated. Similarly there are several organizations involved in R&D activities of the
industry. These organizations also do not have any integrated approach.

Summary of issues identified in Value chain Analysis

Value chain actor
Growers

Main issues identified in the VCA

Difficulty for small and medium growers to achieve necessary
quantity and quality required for export

Lack of common marketing efforts by grower associations to get

the joint marketing advantage

High price fluctuation during seasons

Barriers faced by growers in obtaining quarantine certificates,

other private quality labeling systems(GLOBALGAP, MPS, FFP),
and EU product quality standards etc

Input suppliers

In case of temperate cut flowers only local planting material

supplier was the SEDD and they provide planting materials for
small growers and large scale growers import directly. So
unavailability of local planting material suppliers has become

Supporting

organizations

bottle neck in the industry.

Lack of coordination among supporting organizations leading to
waste of resources by duplication and conflicting interventions.

Lack of research facilities to develop new export varieties.

Parapet wall mentality of government supporting organizations to

form partnerships with private sector for national interest.
Specially in case of research activities private sector partnership,
to eliminate the limitation of funds, would be feasible in
developing export varieties.

Lack of research personnel to undertake R&D activities of

Government research institutions.

Packing
Standards like

EU product Quality Standards

Sanitary and Phytosanitary regulations under WTO

Quarantine Standards stipulated by the importing countries

Private quality labelling systems (GLOBALGAP, MPS, FFP)

Market info
In marketing Sri Lankan flowers and foliage traders can follow the example of tea. In the beginning, tea
was marketed as Ceylon Tea for more than 150 years. Now tea sells under different brands.
Till Sri Lanka becomes a popular source of flowers it is advisable for all flower producers to get together
and brand flowers under a Sri Lankan label. Kenya is now in the process of developing a Kenyan label.
(The writer could be reached at nevillef@slt.net)

Key Players in each Group

1.
2.
3.
4.

Their market share

Their profitability
Level of of competition in each group
Five forces analysis
a. Current rivalry in the business and their strengths and weaknesses
(foreign and local)
b. Substitutes Is it synthetic flowers and toys
c. Powers of buyers - foreign buyers are strong and backward integration
threats are there.
d. Supplier Power Mother cut foliage suppliers and labour. Forward
integration threat is less
e. Entry barriers - ? is it initial investment which is comparatively high.

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Key Success factors (KSF)
1.
2.
3.
4.

Location
Trade Relationships
Technologies and standards
Government support

Questions to be asked from Dr.D.S.A. Wijesundara

Inbound logistics related questions
1. Price of land total cost per acre to cultivate various flower crops.
2. Technical aspects of Constructing green houses and cost involved
3.

Flower crops suitable for growing under open air conditions and crops
suitable for greenhouse conditions.

4. Ethylene sensitivity of various flower crops and how to improve the vase life
of flowers.(air containing 100 ppb ethylene (0.00001%) may damage
flowers; research finding by John M. Pole and A. Schnelle)
5. Long lived flowers and short lived flowers and their market demand.

6. Seasonality of various flower crops and ways diversify to get the advantage
of seasonality.
7. Preparation of planting materials and how quality of planting material effect
to the harvest quality.
8. Technical aspects of breeding new cut foliage from a mother cut foliage.
Operations related questions
1. Common diseases and treatments
2. Pesticides and their cost
3. Fertilizers used for various flower crops and their costs.
4. Temperature conditions required for growing various flower crops
5. Site selection
6. Technical aspects of Soil preparation
7. Technical aspect of Field planting
8. Irrigation systems used in cut flower industry
9. Weed control methods and cost involved

Outbound Logistics related questions

1. Important technical aspects of post harvest process flow like harvesting,
grading, bunching, Sleeving, packing, pre cooling, and transportation.
2. Transportation industry related to cut flowers and its strengths and
weaknesses.
Sale and marketing related issues
1. Past sale figures of Cut flower and Sri Lankas position in international market
2. Present marketing channels
3. Can we use web sites like BloomNet.com, 1-800cutflower.com for our online
marketing activities?
4. Present level of promotional activities and improvements required

Government support
1. Tax incentives and any other investment incentives in the sector
2. Financial assistance
3. Technical assistance through training and entrepreneurial development
activities.
4. Present level of R & D support
5. Foreign network building
6. Subsidized airline freight cost etc.
Cluster Concept group of small scale growers can team up to take the
advantage of joint marketing and joint purchasing. The team can fight with large
scale grower with improved product quality and quantity. (to be highlighted in the
report)

Constraints in Cut Flower Production Development

The following are the major constraints being faced by the majority of growers:
a) Inadequacy and high cost of air cargo: Air Lanka, the national carrier has always given
priority to perishable cargo. However, the available capacity is not sufficient.
b) Lack of facilities for research and development: So far only the Royal Botanic Garden,
Peradeniya has been involved in providing assistance by and large to the middle and village
level growers, but this is negligible when compared to the ever increasing demands of the
industry.
c) Lack of trained personnel: The floriculture industry requires trained personnel at each level of
production. Education programmes from schools up to University level and training institutes to
conduct courses on high-tech practical skills in floriculture are essential for the development of
the industry.
d) Big initial investment on farms: Duty free facilities for import of vital items not produced in Sri
Lanka such as shade nets, uv stabilised polythene, irrigation and fertilising systems etc. would
help to promote the industry.
e) Lack of improved systems of marketing: Lack of proper or organised systems for marketing
and inadequacy of current international market information on prices, trends, volumes and data
on competitive countries etc, severely affect the development of the industry.
f) The uneconomical size of floriculture industry: Difficulty in acquiring suitable land and lack of
infrastructure facilities also adversely affect the industry.

g) Lack of information on pesticides: Current information on pesticides and their acceptance in

various countries is essential.
h) Phytosanitary clearance: Phytosanitary inspection just prior to shipment are inconvenient and
expensive, besides leaving no time to rectify any problems.
7. Conclusions
Floriculture has a great potential in Sri Lanka even though the existing market share is less than
0.2% of the world market at present. Interest in the cut flower industry is encouraging and many
investors, both local and foreign, have started their nurseries to cater to the expanding market.
A comparison of the world trend and the production figures of Sri Lanka clearly show that we are
not in line with the world trend. However, this situation will soon change with the new policy
changes taking place in the country. The Ministry of Agriculture and Lands, Export Development
Board and various Floricultural Associations of the country have got together to discuss various
issues in this regard and progress so far is very encouraging. Steps should, however, be taken
to encourage floriculture research to cater to the special needs of the existing industry and to
facilitate long term research programmes to explore the rich flora of the country to develop
novelties to satisfy the growing market.
The Government should take immediate steps to alleviate constraints mentioned above and to
create an Institute or a Centre for Floriculture Research and Development. This could be a
semi-governmental Centre or an Institute partially supported from the growers annual income.