Floriculture has become an important commercial activity in the agriculture sector owing to the steady rise in international demand

for floricultural products, and immense potential it holds in generating remunerative self-employment among small and marginal farmers, and earning the foreign exchange. Floriculture can be defined as cultivation/production of flowering and foliage plants, garden-bedding plants, cut flowers and greens under controlled conditions mainly for commercial purposes. According to international trade classification, floriculture products encompasses (a) bulbs, tubers and tuberous roots, (b) other live plants (including trees, shrubs, bushes, roots, cutting and slips), (c) cut- flowers and flower buds, fresh dried, dyed, bleached, impregnated or otherwise prepared, and (d) foliage, branches and other parts (other than flowers and buds) of trees shrubs, bushes and other plants and mosses, lichens and grasses, being goods of a kind suitable for bouquets or ornamental purposes, fresh, dried, dyed, bleached, impregnated or otherwise prepared. Cut flowers are the most important floricultural product in the international floricultural trade. The most traded varieties are Roses, Carnations, Chrysanthemums, Dahlia, Gargera, Gerbera, Gladiolus, Gypsophila, Liastris, Nerine, Orchids, Poinsettia, Archilea, Anthurium, Tulip, and Lilies.

THE PRODUCT
Cut flowers are parts of plants, characteristically including the blooms or inflorescences and some attached plant materials, not including roots and soil. Fresh cut flowers are highly perishable as they maintain only limited life- supporting processes by absorbing water through their stems. Fresh cut flowers are used for decorative purposes such as vase arrangements and bouquets at formal events; designs for weddings and funerals; gifts on occasions, and in times of illness, and at holidays; corsages and boutonnieres; and informal displays to beautify homes and public places. Preserved flowers are fresh cut flowers that have been dehydrated, preserved with a chemical solution and then air- or oven-dried. They may be used in boutonnieres, corsages, wreaths, formal and informal displays, and similar ornamental articles. Preserved flowers, known in the industry as everlasting flowers or everlastings, are not as perishable as fresh cut flowers. Foliages include leaf, stems and parts of plants other than flowers used for decorative purposes in bouquets; in formal and informal displays; for plantscaping and landscaping; ferns and mosses. Other plant materials that are traded include young plant material, which still has to be cultivated in the importing country, before it can be sold to the consumer, in vitro cultures prepared by micropropagation and tissue culture techniques, rooted and unrooted pot plant cuttings, bulbs, tubers, tuberous roots, corms, crowns and rhizomes. Finished plants are plants that are traded in the markets as saleable products and need only to be acclimatized before they can be sold.

PRODUCTION PROCESS Cut Flowers

Commercially, flowers are cultivated in open fields or within a protective structure. The production method primarily depends on the environmental conditions of the area and quality considerations. The greenhouse structure may form a completely controlled environment, or just provide shade or protection from the wind, e.g., an overhead lattice work or a poly- house (an aluminum or steel framework covered with a double layer of polyethylene film). Glass greenhouse is

considered to be the most durable structure; however, greenhouse panes made of fiberglass sheets are also used. A poly-house, is long lasting and uses low cost-high technology plastics. The latter requires significantly less capital investment than the other types of covered structures and accounts for the majority of protected growing areas. Air temperature in the greenhouse is commonly controlled by central steam boilers or individual unit heaters fueled by natural gas or propane and are often combined with horizontal airflow fan systems to circulate air. Common heating systems for the root-zone of the plants are electrical-resistance heating strips or pads and small boiler systems that warm the water as it flows through an array of small tubes under the propagating units. Some greenhouses are equipped with computer systems that regulate environmental factors such as heating, cooling, irrigation, fertilization, carbon dioxide, and ceiling shade blackout for artificial night. Supplemental lighting is often used to control flowering and quality. The propagation of flowering plants can be by means of seed, cuttings (either stem tips or rooted cuttings), bulbs, grafting, or by the process of division. In a covered setting, the propagative material is typically placed in a mixture of organic material in a raised greenhouse bench, a shallow concrete box usually 4 feet wide and raised 24 to 36 inches (dimensions may vary) for drainage. Before planting, the soil is prepared, either by sterilization with steam or the application of chemicals. Growers also use prepackaged soilless media (rice hulls, coir, sand, or composted bark), which have already been pasteurized to kill pathogens, weeds, and seeds. Soil preparation usually takes place between each harvest. Although seeds or cuttings are planted directly into the greenhouse bench, bulbs are generally stored and monitored in cool and dark rooting rooms until they sprout, then transferred to the organic material in the greenhouse. Wire or plastic mesh is often used to support certain flowers (e.g. Roses and Chrysanthemums) as they grow, thereby encouraging a long straight stem. Drip irrigation lines are generally used to reduce spotting of the flower petals, soil splashing onto the foliage, and the spread of disease. Water is sometimes treated by reverse osmosis and injected with fertilizers before being applied to plants. During the production process, approximately 50 percent of all direct labor is used in harvest activities. Flowers are harvested when the proper stem length and inflorescence required for sale in the wholesale market are reached. Generally, the optimal stage of growth for harvesting is when the flower has just opened. Stems with more than one flower are usually harvested with less than one-third of the flowers fully opened. The flower stem is cut at the appropriate length by hand with a sharp knife or pruning shears. Since flower condition does not improve after picking, growers calculate the cutting precisely so that the flower does not past its prime when it reaches the consumer. Many growers harvest by accumulating an armful of flowers as they move along an aisle, whereas others employ picking carts and/or conveyor systems. Some growers have automated systems that can strip leaves, trim stems, and uniformly bunch flowers that may then be transported on specially designed monorails suspended on tracks from the ceiling of the greenhouse. With automated systems, surfaces are padded to minimize damage to the flowers. In the packing warehouse, stems are cut for a second time while submerged in water to allow the water to move up the

stems. They are immediately placed in tepid water (110 degrees) with added floral preservative for at least 2 to 3 hours to allow for a maximum amount of water uptake. They can be left temporarily in a cool (less than 60 degrees) location or stored in a 40 degrees cooler temperature overnight for subsequent grading. Flowers that do not retain water and are not kept at low temperatures losses water and wilt quickly. Grading of cut flowers is done to ensure consistent standards. Stems are generally graded by stem length (18 to 24 inches for most flower types) and are downgraded for short or broken stems, poor flower condition, poor foliage condition, or old flowers. Sorting machines are able to grade flowers by length of stem, however, all other factors are still determined by human decision- making. Pompon Chrysanthemums are graded into 250- to 340-gram bunches containing several stems, while standard Chrysanthemums of equal sizes are graded in groups of 10 or 12. The flower buds are wrapped in cone-shaped plastic sleeves to prevent damage. Carnations are usually separated into piles of 3 grades; each grade is then bunched into units of 25 stems. For Roses, 25 flowers from an individual grade are bunched with the heads on an even plane. Stems are then tied together with string and parchment, or waxed paper is wrapped around the heads for protection. Boxes are often packed using wet packs to allow the flowers to remain in water throughout their transport. Packed boxes are also pre-cooled by units that fill them with 98 percent humid, cool air for added protection. The boxes are then transported by refrigerated truck or by air to the sales units.

INDUSTRY CHARACTERISTICS
The growing and the marketing of cut flowers depend on several key success factors. The production factors and the characteristics of the markets that are required for successfully growing flowers include:

Good physical conditions: high light intensity, abundant water, clean soil (or the use of hydroponics), and good climate; Appropriate seeds and planting material; Capital for investments and working capital; Productive and skilled labour; Expertise Good in growing techniques; and organisational activity; other chemicals;

management and

Pesticides

Energy for heating; Infrastructure; Quality consciousness all along the production and post- harvest chain. Cut flowers have a highly perishable nature and the deterioration starts at the moment of harvesting.

Adequate logistic structure for exporting;

Adequate supply chain infrastructure, including post- harvest treatments and a network of supplying; Knowledge of the destination markets, especially the consumers preferences and their dynamics. Emotion is one of the main attributes of flowers. Fashion trends or crazes are of importance; for instance, the type and colour of flowers. Knowledge of strengths and weaknesses compared to the competitors; Knowledge infrastructure has to be requirements of the destination markets; innovative and responsive to the

Meeting the international trade standards. For propagation inputs (nursery stocks or seeds) acceptance of the Union International pour la Protection des obtentions Vgtales (UPOV) regulations is highly the production country desirable. An adequate phytosanitary control system in is necessary for exporting.

Meeting the quality standards including triple P (planet, people, profit) codes of conducts in order to fulfil the consumers preferences. The supermarkets chains increasingly set the parameters for these standards.

The above factors mainly concern the production and trade environment. The international competitive environment is as important as production knowledge. Most developing countries in the flower business produce for export markets and the domestic market is irrelevant. Due to such trade flows the international trade regulations and standards need to be met.

SUPPLY CHAIN MANAGEMENT IN FLORICULTURE

Traditionally, flowers had been marketed by the grower to a flower wholesaler, a retail florist, or directly to the public by a street vendor or at a farmers market. Wholesalers in this marketing structure consolidate products from various growers and sell to smaller units and to retail outlets. The wholesalers product was often on consignment from the grower. However, in the recent years, the market channels for cut flowers, especially, under commercial floriculture have become increasingly complex, since a large part of the production has shifted from traditional growing regions to new growing regions. The market structure in floriculture trade, which for a long time involved auctioning at flower auctions in the major consuming countries, has been graduallyundergoing change towards direct sales with more and more products being sold directly to supermarkets and specialized wholesalers. Depending on the market focus and the desired image, the product specifications on quantity, diversity and quality assurances schemes are met. The trend currently, is towards supermarkets, garden centers and warehouses wanting to be assured that the products are produced in a sustainable way, thus, referring it to a triple P-concept; a way of producing combining Profit; care for the environment (Planet) referring to conservation of soil, water and air, and the effects of the use of fertilizer, chemicals for pest control, use of energy, and the amount of waste; and a social responsible way (People) referring to concerns on human rights, poverty, and workers rights on wages, health and security.

The supply chain in floriculture thus, currently combine commercial quality (branding) of the product, together with environmental quality (labels / certificates e.g., Eurep-GAP) and social standards (labels / certificates e.g., Fair Flower, Florimark) in the product proposition towards the customers. Additionally, managing the logistics of products to the outlets, from the chain partners, requires registrations, certificates, quality audits, and information supply in the chain.

PRODUCTION AND CONSUMPTION

The world production of floriculture is growing at a rate of 10 percent per year. There are currently, over 50 countries that are active in floriculture production on a large scale. The total area under floriculture in the world, both under protected area and open, is presently estimated to be around 628,972 hectares. In terms of production value, the Netherlands (Euro 3901 million), the United States (Euro 2992 million), Japan (Euro 2987 million), Italy (Euro 1627 million), Germany (Euro 1289 million) and Canada (Euro 1067 million) are the largest producers of cut flowers and plants. However, due to stagnation in production in these traditionally recognized centers, developing countries have emerged as large production centers in the past few decades. This is further supported by low production cost and seasonal advantages in the developing countries, which ensures supply of floriculture products throughout the year. Some of the major developing country producers and exporters of cut flowers and plants are Colombia, South Korea, Kenya, Israel, Ecuador, Poland, Ethiopia, Costa Rica, Thailand, India, China, Zimbabwe, and Mexico. The economies of some of these countries are even dependent on floriculture industry, such as Colombia and Kenya. With China (286,068 ha) and India (161,000 ha) having the majority of the world acreage under cut flowers and plants production, the Asia-Pacific region has the major share (75 percent) of the total world area under floriculture production. Europe has a 10 percent share in the world area under floriculture. The acreage under flower cultivation in Africa is very small (1.5 percent). With around 2200 ha, Kenya is the largest producer of flowers and plants in Africa, followed by South Africa and Zimbabwe both growing over 1000 ha of flowers. Latin America has an 8 percent share in the world area under floriculture, with Mexico having the largest area under flower production (21,129 ha).

PRODUCTION IN SELECT PRODUCING COUNTRIES Europe

In Europe, the production area under floriculture crops in the leading producting countries such as the Netherlands, Germany and Denmark has been gradually declining. Number of growers have also been decreasing in some of the European countries such as the Netherlands, Italy, Spain, Belgium, Sweden and Denmark. However, the average production per company has been increasing, which coupled with a recovery and growth in the cut flower production in some East European countries, such as Poland and Hungary, has been resulting in a stable overall production. Due to increasing competition from the producers of developing countries a number of European flower growers are shifting production bases to developing countries such as Kenya and Ethiopia, which offers lower cost of production and favourable cultivation environment. There has been also shift in production from central and northern Europe to peripheral Europe. Furthermore, to overcome rising competition from developing country producers, European growers are increasingly specializing in certain varieties and product segment. For example, European producers

of Roses (Rosa) are switching to large- budded varieties to compete with smallbudded varieties from the developing countries. Similarly, there has been an increase in supply of mini Gerbera in the European markets developed by European growers with improved cultivation technology.

WORLD AREA UNDER PRODUCTION AND PRODUCTION VALUES OF FLOWERS AND POT PLANTS Area (in ha) Europe Austria Belgium Czech Republic Denmark Finland France Germany Greece Guernsey Hungary Ireland Italy Netherlands Norway Poland Portugal Russia Spain Sweden Switzerland United Kingdom Total Middle East Israel Turkey Total Production Value Area (in ha) Africa Total Asia-Pacific Total North America (mn Euro) Ethiopia 90 6356 Australia 335 459408 Canada 1067 645 504 5400 6891 928 2171 1652 220 544 135 5232 7640 1300 55 440 62 7976 7884 113 4593 240 2200 6140 159 517 6769 56042 2700 1273 3973 Production Value (mn Euro) 240 263 43 349 96 956 1289 172 45 95 19 1627 3901 145 186 457 150 412 128 228 431 11232 205 15 220

Total Central/ Total

20333 Brazil 350 47860

4059 10285 1450

SOURCE: AIPH / Union Fleurs: International Statistics Flowers and Plants 2008

CUT FLOWER PRODUCTION IN SELECT EUROPEAN COUNTRIES Country Germany Spain France Italy The Netherlands UK Poland Hungary Major cut flowers produced (both in open area and under glass) Rosa, Dendranthema, Foliage, Gerbera, Tulipa Dianthus, Rosa, Gladiolus, Dendranthema, Lilium, Iris Rosa, Dianthus, Tulipa, Gladiolus, Dendranthema Rosa, Dianthus, Gerbera, Dendranthema, Gladioli Rosa, Dendranthema, Tulipa, Lilium, Gerberas, Orchid, Freesias Narcissus, Gladiolus, Dendranthema, Alstroemeria, Dianthus, Freesia, Iris, Rosa, Lillies Rosa, Gerbera, Dianthus, Dendranthema, Freesia, Anthurium Dianthus, Gerbera, Rosa

SOURCE: CBI, The Netherlands

Netherlands is the largest EU producer of young plant material (potted flowering plants and foliage), followed by France, Spain and Germany. It holds a strong position in the production of young Rose plant material and Pelargonium cuttings. Tropical flowering plants are also produced in greenhouses in the EU. The biggest production of potted Orchid, Bromelia and Anthurium is located in The Netherlands, Italy and Germany. Italy, Spain and Portugal also grow increasingly larger tropical plants like Mediterranean palms (Phoenix, Chamaedorea, Washingtonia). Young plant materials of tropical varieties (such as Yucca, Dracaena, Beaucarnea, Codiaeum and different palm species) are imported by specialised importers or by the growers themselves.

The United States In the United States, due to increase in imports, production area under floriculture products is significantly decreasing. The flowers are grown in open fields or within protective structure, like glass or fiberglass greenhouses, or constructions that provide shade or protection against wind. Majority of the ornamentals are grown in open field. In 2007, total area under floriculture and nursery crops have declined by 2.5 percent compared to 2006, from 19,894 ha to 19,405 ha. Compared to 2006, in 2007, area under various shade covers decreased by 3.3 percent and open area decreased by 2.0 percent. The covered area accounts for about 35 percent of the total area under floriculture production, of which Greenhouse accounts for 55

percent. The number of cut flower growers is also declining in USA. In 2007, the number of producers decreased by 6 percent, from 6,562 in 2006 to 6,140. The number of large growers (with sales US$100,000 or more) also declined by 4 percent, from 2,979 in 2006 to 2,863 in 2007. The flower industry in the United States is undergoing a period of consolidation and contraction. Most of the farms, currently, are family owned and operated. In the recent years, imports have been exceeding domestic production and to compete with the low cost imports, growers have been shifting to cut flower specialties, which are not imported in significant quantity.

FLORICULTURAL PRODUCTION AREA AND GROWERS IN THE UNITED STATES 2006 Area in ha Glass greenhouses Fibreglass cover Plastic film cover Total greenhouses covered Shade/ temporary cover Total covered area Open field Total area Large growers (sales US$100,000 or more) numbers Average sales per ha (US$000) Average sales per grower (US$000) SOURCE: Agriculture Statistics Board, NASS, USDA 2008 505 622 2712 3838 3255 7094 12,800 19,894 6,562 194 614 2007 469 615 2681 3765 3092 6857 12,548 19,405 6,140 203 667

Canada
In Canada, flowers are cultivated by both commercial growers and hobbyists. Most of the commercial production of flowers in the country is carried out under glass and plastic covers. Commercial greenhouse production is a year- round enterprise with flowers such as Carnation, Rose and Chrysanthemum, but is seasonally oriented with flowers such as Poinsettia and Bermuda lily. Houseplants such as Cyclamen, Cineraria, Pelargonium, and African violet are also produced in commercial greenhouses, but in a lesser volume compared to the cut flowers. The total area under floriculture production has been increasing in Canada. However, total operations have been reducing. The area under cultivation increased by 10 percent over the five years between 2001 to 2006. Total number of operations, both farms and nurseries, declined to 11 percent and 16 percent respectively, between 1981 to 2006. The flower industry in Canada is generally concentrated in Ontario, British Columbia, and Quebec, which together account for about 85 percent of total production.
Table 2.4: FLORICULTURE AND NURSERY FARM AREA IN CANADA

Product Number of Farms Floriculture Nursery Area (ha) Floriculture Nursery

1981

1986

1991

1996

2001

2006

CAGR % 2001-06 - 2.32 % - 3.33 % 1.87 % 1.84 %

2,428

3,180 2,284 396

6,283 3,846 456

4,340 4,844 691

4,024 4,530 845

3,578 3,825 927

11,369 13,575 19,689 21,251 22,776 24,953

SOURCE: Statistics Canada, 2008 (Census of Agriculture)

Latin America
Colombia Colombia accounts for around 2 percent of the total land under floriculture in the world. Colombia has over 7,500 ha under floriculture of which, 7,000 ha is intensively cultivated under greenhouses and the remaining are cultivated under rainfed conditions, mostly foliage and filler ornamentals. Farms are located around two main clusters, the Bogota plateau with 79 percent of the area and Rionegro valley of Antioquia with 18 percent, and the remaining 3 percent in other areas of the country. The farm sizes are fragmented. The small ones with less than 50 acres and the medium sized, 50 to 125 acres, account for 50 percent of the exports. The other 50 percent is exported by very large farms, operating over 125 acres under greenhouses. Three major types of flowers grown in Colombia are: Roses, Carnations (standard and spray) and Chrysanthemums (mums and poms), covering three quarters of the area. The rest are known as specialty cut flowers and fillers mostly used as companions in bouquets. The Colombian flower sector generates around 110,000 jobs directly and 94,000 jobs indirectly. Ecuador Ecuador is an important player in the world floriculture trade. The country has around 3,500 ha under floriculture, of which, 2,500 ha is under rose cultivation. Other flowers grown in Ecuador are Chrysanthemum and Carnation. The sector employs around 60,000 people directly and over 100,000 people indirectly.

Africa
Kenya Kenya is the largest producer of flowers in Africa and one of the largest suppliers of flowers to the world. Floriculture industry in Kenya is the second major foreign exchange earner, after coffee. The industry employs around 100,000 people directly and around 2 million people indirectly. The major flower varieties grown and exported from Kenya are Roses, Carnations, Statice, Cutfoliage, Carthhamus, Solidaster/Solidago, Chrysanthe- mums, Arabicum, Trelizia, Rudbeckia, Gypsophilia, Lilies, Molucella, Erynngium and TubeRoses. The main export season is October to May. Main cut flower growing areas in Kenya include Lake Naivasha, Thika, and Kiambu / Limuru regions. Most of the flower production companies have their own flower farms. These

companies grow, harvest, pack and transport cut flowers to airports for export. The flowers in Kenya are mostly grown in the greenhouses. Ethiopia Floriculture has lately emerged as a flourishing business in Ethiopia. According, to the Ethiopian Floriculture Producers and Exporters Association (EFPEA), floriculture is set to become the largest foreign exchange earner for Ethiopia in the next few years, overtaking coffee. There are over 70 flower farms in Ethiopia of which, 45 percent are owned by local people and remaining 55 percent are owned by foreign investors. The Industry employs over 70,000 people. Ethiopia grows Roses, Carnations, Carthamus and Satice. Zimbabwe The cut flower industry of Zimbabwe is highly export oriented, with almost 100 percent of flowers commercially grown being exported. Zimbabwe has about 900 ha of land under floriculture cultivation with over 27,000 workers engaged with the activity. Roses are the main flowers grown in Zimbabwe followed by Asters and Proteas. The industry is fragmented, with about 300 growers with average size of holding estimated at 4 ha. Plantings are fairly widespread, with the highest concentration in the Highveld and the Eastern Highlands.

Asia
Israel Flowers and ornamental plants account for 8.0 percent of Israels total agricultural production. Israels flower sector is relatively small by international standards, but is highly profitable. The average flower farm is about 1.8 hectares. The farmers expertise, combined with support from and collaboration with research institutions and extension services, contribute to the high quality and wide variety of flowers. Although the number of flower growers has decreased by around 50 percent in recent years (from 5,000 to 2,700), production has risen steadily to around 1.4 billion flowers a year. This is due to technological advances and an intensive system of production. About half of all the flowers are grown in advanced, computerized greenhouses, and some 12 percent is produced under netting. Flower varieties grown in Israel include Roses, Gypsophila, Wax flowers, Solidago, Limonium, Lisianthus (Eustoma), Gerbera, Hypericum, Anemone, and a number of ornamental plants. In the past, traditional varieties (such as Rose, Gerbera and Carnation) accounted for about 80 percent of total flower production. Currently, these varieties account for less than 40 percent of total flower production and have been replaced by acclimatized new varieties of summer flowers from Europe, which are supplied to Europe during its winter season. Japan Japan is one of the largest flower growing countries in the world, cultivating flowers on an area of 17,914 ha. However, the area under flower cultivation has gone down substantially from 18,970 ha since 1995. Around 8,344 ha (47 percent) under flower cultivation is currently, under protected cultivation such us greenhouses and covered structures. Individual farms are very

small averaging less than 0.3 ha with the majority of farmers being engaged part-time. Chrysanthemums are the most important flowers cultivated in Japan, accounting over 35 percent of total production, followed by Carnations, Roses, Gypsophila and Statice. Other types sold in the market include Freesias, Tulips and Alstroemerias. Whilst the production of Carnations is steadily decreasing in the recent years, Roses are increasing in popularity. However, the most significant growth has been in the production of other high value flowers including the Bulb crops, Lilium, Gerbera and Orchids. Flower production in Japan is highly seasonal with the majority of the flowers being harvested from May to October. However, flower production areas vary with the season. During the winter months, greater quantities of flowers are grown in the southern parts of Japan. However, with the increase in the summer temperatures, greater quantities of flowers are grown north of Tokyo. China China has in recent years become one of the largest flower growing and consuming countries in the world. Currently, Chinas annual production capacity is 2.7 billion fresh flowers. The main producing regions are Yunnan and Guangdong. However, Yunnan, is the largest flower production base in China, accounting for around 40 percent of the countrys flower production industry. There are over 390 enterprises engaged in cut flower production including 38 joint ventures with partners in Hong Kong, Taiwan, Japan and the USA. Thailand Thailand is one of the leading producers of tropical floriculture crops. The development of ornamental industry in the country has been initiated by the private sector with little support from the government. Dendrobium orchid, which has been developed solely from introduced species, is the mostcommerciallyimportant floriculture crop of the country. It is a home of diverse ornamental plant genera; such as Aglaonema, Curcuma, Dracaena, Homalomena, Impatient, Ixora and many Orchid genera. The core competency of the industry is rapid propagation as well as breeding a new cultivar. Currently, the country is known to be the world center for breeding Aglaonema, Curcuma and tropical Orchids. The Orchid planting area in Thailand covers about 6,000 acres, mainly in Bangkok and nearby provinces, namely Nakhon Pathom, Samut Sakhon, Ratchaburi, Pathum Thani, Ayutthaya, Suphan Buri, and Chon Buri. The flowering season in Thailand usually takes place during the rainy season, from July to October. There are more than 1,000 species of Orchids in the country. Besides Orchids, over 30 types of flowers are commercially cultivated in the country, which include Roses, Carnations and Chrysanthemums.

CONSUMPTION Europe, USA and Japan are the major consumers of floriculture products. Flower consumption in the United States is relatively low as compared to Western Europe; however, the industry has been consistently growing. The consumption in the developed markets in the Europe and Japan has been showing stagnancy or declining trends, in the recent years. In case of cut flowers, per capita consumption in Japan is the highest, followed by Europe and USA.

Europe
The European Union (EU) consumes over 50 percent of the worlds flowers, and includes many countries, which have a relatively high per capita consumption of cut flowers. Germany is the major consumer, followed by the UK, France and Italy, in the order of importance. The markets in the EU are generally

divided

into

three categories:

Mature markets such as Germany, The Netherlands, France, Belgium, and the Scandinavian countries. These markets are characterised by relatively high levels of per capita expenditure on flowers. The size of these markets tends to be stable and sometimes even declining. Consumers tend to spend a relatively high share of flower expenditure on personal use. They are familiar with flowers and are interested in new and appealing products. Growth markets such as Spain and the UK are generally of considerable size. The UK for instance is already one of the largest consumer markets, and is expected to continue to grow. In some of the growth markets, the per capita spending is still relatively low compared to the mature markets.

Markets in development such as the East-European countries and Greece are the expanding economies. As the purchasing power of consumers in these countries is increasing, they tend to buy more flowers. Nevertheless, flowers are still considered a luxury item and are bought mainly as gifts.

Table 2.5: EU CONSUMPTION OF CUT FLOWERS AND FOLIAGE, 2002-2006 2002 Germany UK France Italy Spain The Netherlands Belgium Sweden Austria Poland Demark Finland Greece Ireland Portugal Hungary Czech Republic Romania Slovakia Slovenia 3,108 2,401 1,960 2,126 815 959 297 299 354 267 215 179 172 118 155 122 118 n.a. 53 47 2004 EUR million 3,022 2,649 1,939 1,805 916 876 358 311 364 225 234 167 183 141 147 129 123 67 46 42 2,988 2,867 1,860 1,652 968 864 401 342 320 304 230 175 176 152 154 140 120 105 50 34 2006*

Total

13,765

13,677

13,902

Information on the other new EU countries is not available SOURCE: CBI, The Netherlands, 2008; * Data for 2006 has been drawn from BBH, VBN, PT and HBAG (Dutch Floricultural Wholesale Board)

The total consumption of floricultural products in the EU remained relatively stable between 2002 and 2006; however, consumptions among different countries varied. Consumption in the leading markets of Germany, France and the Netherlands decreased marginally. The floricultural market in Italy, which was considered as one of the expanding markets has also been showing stagnancy in the recent years. Market saturation is one of the major causes of decreasing consumption in floricultural products in some of the leading markets in the EU, which may be due to slow down in these economies. In 2006, per capita consumption of floricultural products was highest in Switzerland followed by Norway, Denmark, The Netherlands, Sweden, Germany and Austria. Currently, the per capita expenditure in East European countries on flowers and plants amounts to approximately Euro 7 to Euro 8 per person per year.
Table 2.7: PER CAPITA FLOWER CONSUMPTION IN 2006
Per capita consumption Cut flowers Plants Cut flowers & plants Million 78 68 14 23 87 74 50 84 23 24 52 40 86 124 11 22 6 6 15 37 34 85 125 8 60 38 54 21 8 10 5 10 5 5 62 83 11 10 4 59 16 5 38 11 21 143 5 2 44 9 7 46 61 680 128 306 320 390 35 120 230 175 1,860 2,988 176 140 152 1,652 864 310 304 154 105 715 50 34 968 342 574 230 2,867 15,755 6,912 6,426 Population Estimated market value Cut flowers Plants Cut f lowers & plants

Euro Austria Belgium Croatia (2003) Czech Republic Denmark Finland France Germany Greece Hungary Ireland Italy Netherlands Norway Poland Portugal Romania Russia Slovakia Slovenia Spain Sweden Switzerland Ukraine United Kingdom Europe Japan* USA* 40 39 7 12 46 35 30 36 16 14 38 28 54 62 8 14 5 5 10 17 22 38 82 5 47 23 54 21 38 29 7 11 41 39 20 48 7 10 14 12 32 62 3 8 1 1 5 20 12 47 43 3 13 16

Million Euro 304 290 35 110 205 195 1,240 3,984 77 100 56 708 512 310 114 88 21 143 25 40 528 423 301 138 793 10,740 624 680 70 230 435 370 3,100 6,972 253 240 208 2,360 1,376 620 418 242 126 423 75 74 1,496 765 875 368 3,660 26,060 6,912 6,426

*Cut flowers, only SOURCE: BBH, VBN, PT, HBAG (Dutch Floricultural Wholesale Board), Netherlands Population: Stat. Bundesamt 2007: Statistisches Jahrbuch. Berlin.

Flowers in EU are sold mostly in auctions at the Netherlands and also some through direct sales. The Netherlands auctions are generally considered as indicator for the best- sold cut flower species in the EU. Rosa is the most important cut flower traded at the Netherlands auctions, followed by Dendranthema, Tulipa, Lilium and Gerbera.
Table 2.8: CUT FLOWERS SPECIES SOLD AT THE NETHERLANDS AUCTIONS, 2002-2006 EUR million 2002 2003 2004 2005 2006 Avg. annual change 2002-2006 (%) 2.0 -0.6 6.9 -0.1 3.1 2.2 12.5 -3.0 2.9 -3.0 6.7 -1.4 2.3 -3.4 -4.6 -11.2 -0.6 1.1

Rosa Dendranthema (Spray) Tulipa Lilium Gerbera Cymbidium Dendranthema (Ind Grp GE) Freesia Anthurium Alstroemeria Hippeastrum Eustoma russellianum Zantedeschia Gypsophila Hypericum Dianthus Others Total SOURCE: VBN (2007)

700 307 171 168 108 66 35 62 41 44 27 37 31 39 35 45 478 2,394

681 299 186 160 106 66 38 60 43 40 28 34 30 37 31 35 455

706 285 185 158 116 65 39 60 40 38 33 32 32 32 30 32 479

729 293 192 164 121 70 47 57 41 39 35 34 33 33 29 30 454

758 300 223 167 122 72 56 55 46 39 35 35 34 34 29 28 467 2,500

2,330 2,330 2,401

Consumption patterns of buyers living in different member states in the EU vary considerably. However, some key common features of EU consumers are discussed below:

Consumer Market

Personal use: Gifts and special occasions: Gifts: Funerals: Events: Interior Scaping: Architects/ Real Estate Companies: Interior Landscapers:

For home, working place, terrace and garden

Special occasions such as birthdays Funerals and cremations and to place on graves Valentines Day, Mothers Day, Christmas Day Large plants to decorate new or renovated buildings To decorate offices, shopping malls, airports etc.

SOURCE: CBI, The Netherlands, 2008

USA
The US flower market is primarily an impulse market with approximately three quarters of flowers sold as gifts. Floricultural products experienced lower sales except cut flowers, herbaceous perennials, and cut cultivated greens, which together accounted for 27 percent of total grower sales in 2006. However, in 2007, the wholesale value of floricultural crops by large operations increased by 2 percent. The large operations accounts for 96 percent of the total value of floriculture crops. Annuals and perennials accounted for 32 percent of the total floricultural sales in the USA in 2007. With regard to cut flower varieties, Tulips, Gerbera, Daisies, Orchids, and Lilies are the highest selling products. Sales of Roses, Pompon, Mums, Gladioli, and Snapdragons decreased in 2007, largely because of weaker demand.

WHOLESALE TRADE (BY VALUE) BY PLANT CATEGORY OF FLORICULTURAL CROPS, 2007, IN USA

Table 2.9: WHOLESALE TRADE OF FLORICULTURE PRODUCTS IN USA, 2004-2007 Value (000 USD) Products 2004 2005 413,962 107,444 812,358 709,512 1,897,365 2006 411,337 97,608 621,460 527,912 2007 415,659 92,458 660,628 629,581 Cut Flowers 412,431 Cut Cultivated Greens 102,976 Potted Flowering Plants 800,535 Foliage Plants for Indoor or 685,264 Patio Use Bedding and Garden Annuals 1,868,084 Propagative Floriculture Material

1,823,265 1,764,278 383,948 379,165

SOURCE: Agricultural Statistics Board, NASS, USDA 2008

Japan
Japan is one of the largest consumers of cut flowers and potted plants. Both the total consumption of flowers and potted plants, and the average per capita consumption in Japan are high. Around 40-50 percent of the total consumption derives from business entities that handle ceremonial occasions such as weddings and funerals, corporate gifts, floral decorations in hotels, etc. Until recently, individual flower and nursery / garden products consumption has been lower than in Japan than that of other major industrialized countries. However, in the past two decades Japans flower market has changed significantly. Although institutional demand (hotels, national events, flower arrangements, etc.) has decreased due to slowdown in economy, non-commercial demand has been growing. Currently, institutional demand has decreased from about 40 percent to 30 percent. Noncommercial demand for both personal (gifts, casual flowers, Ikebana and home gardening) and regional (housing projects and public areas) use has become an established part of the market. The Japanese cut flower retail market is estimated to be worth US$ 9.3 billion, which is nearly 27 percent of world flower consumption by value. There are over 290 registered flower auction markets in Japan, including around 20 central auction markets. Cut flowers are sold from various locations such as florists, home centres, supermarkets, and convenience stores. However, in recent years there has been an increase in Internet sales to individuals. Around 95 percent of all flower and ornamental

crops are sold through auctions. Japan has a long history of floral arts. Flower arrangement (Ikebana) are a traditional part of Japanese religious and ceremonial occasions. The demand for flowers for everyday use (casual flowers) has also been rising. Flower usage in Japan is generally represented by: business (30 percent), gifts (30 percent), home and religious usage (26 percent). Business use, which includes flowers for weddings, funeral ceremonies and hotel decoration are the main use of flowers in Japan. However, more recently, the demand for cut flowers as personal gifts has grown rapidly. For gifting of occasions include Mothers Day, birthdays and farewells. There is also a growing trend amongst young women to purchase flowers for everyday use. The demand for cut flowers in Japan is seasonal. Demand for cut flowers rises during March, August and September (due to Buddhist ceremonies), in May (when Mothers Day is celebrated), and in December (for Christmas and New Yearcelebrations). These five months account for 55 percent of total annual household expenditure on cut flowers. Flower usage by season and occasions is provided in Annexure 1. The most popular flower in Japan is Chrysanthemums, followed by Carnations, Roses, Gypsophila and Statice. Chrysanthemum is the national flower of Japan and is the most widely cultivated and consumed flower. It is regarded as the Imperial Crest. Chrysanthemums are used for Buddhist observances and commercial applications such as funerals and memorials. Carnations are the major seller both in terms of volume and value. The spray type of both the varieties is most popular with Japanese consumers. Standard Carnations are generally popular for Mothers Day. While the production of more colourful Carnations are increasing, pastel shades such as pink, particularly suits the Japanese taste. Other types of flowers sold on the market include Freesias, Tulips, Lilies and Alstroemerias. Preferences for pastel tones have been changing more towards intense shades such as yellow, bright pink and red. In general, however, colour preferences vary by the season, by region, and by specific flower variety. For example, pink is popular during spring; white, green and yellow during summer; and, orange, red and purple in autumn.

WORLD FLORICULTURE TRADE

The world floriculture trade is characterized by a high degree of concentration by product and sources. Developed countries in Europe, America and Asia account for more than 90 percent of the total world trade in floriculture products. Roses are the main traded product. International trade in floriculture, to a large extent is organized along regional lines. Asia-Pacific countries are the main suppliers to Japan and Hong Kong. African and other European countries are the principal suppliers to Europes main markets, and the supplies to the United States is mainly catered by Colombia and Ecuador. The global exports of floriculture products stood at US$ 17 billion in the year 2007. With an annual average growth rate of 10.3 percent, world exports are expected to reach US$ 25 billion by 2012. Fresh cut flowers and foliage accounted for around 49.1 percent (US$ 8.41 billion), and live plants, bulbs and cuttings accounted for 50.9 percent (US$ 8.58

billion) of total floriculture products exported in 2007. Roses, Chrysanthemums, Carnations and Orchids are the most traded products. Of these, Roses contribute around 70 percent of the total cut flower industry trade. Europe is the largest consumer as well as exporter of floricultural products in the world. Five European countries, viz., the Netherlands, Italy, Belgium, Denmark and Germany, account for over 66 percent of total exports by value of floricultural products in the world. World imports are highly concentrated geographically. Europe by far is the largest importer of floricultural products in the world, followed by America and Asia. Seven European countries viz., Germany, United Kingdom, Netherlands, France, Italy, Belgium,and Switzerland account for more than 46 percent of total imports by value of floricultural products in the world.

EXPORTS Top ten countries, viz., the Netherlands, Colombia, Italy, Belgium, Denmark,Germany, Kenya, USA, Ecuador and Canada, account for over 80 percent of the total export value of the worlds floricultural crops.
EXPORTS OF FLORICULTURE PRODUCTS IN THE WORLD

SHARE OF WORLD EXPORTS OF FLORICULTURE PRODUCTS BY VALUE, BY REGION, 2007

SHARE OF WORLD IMPORTS OF FLORICULTURE PRODUCTS BY VALUE, BY REGION, 2007

Table 3.1: TOP EXPORTING COUNTRIES (2007) OF FLORICULTURE PRODUCTS IN THE WORLD BY VALUE Rank Exporters US$ million Share (%)

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

World Netherlands Colombia Italy Belgium Denmark Germany Kenya USA Ecuador Canada Spain Israel France Zimbabwe Costa Rica India China Poland Thailand Taiwan United Kingdom Ethiopia Portugal Malaysia New Zealand

16998 8561 1120 879 705 634 619 442 420 406 327 300 259 227 201 195 141 132 116 109 109 107 89 73 67 64

100.00 49.66 6.50 5.10 4.09 3.68 3.59 2.56 2.43 2.36 1.90 1.74 1.50 1.32 1.17 1.13 0.82 0.76 0.67 0.64 0.63 0.62 0.51 0.42 0.39 0.37

SOURCE: UN Comtrade 2009

EXPORT SHARE OF VARIOUS FLORICULTURAL PRODUCTS AS PER HS CLASSIFICATION IN 2007

Table 3.2: LEADING EXPORTERS OF CUT FLOWERS AND FOLIAGE IN THE WORLD BY VALUE (2007) (US$ million) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Exporters World Netherlands Colombia Ecuador Kenya Italy United States of America Zimbabwe Belgium Denmark Israel India Germany Thailand Costa Rica Canada Ethiopia China Malaysia Spain Mexico United Kingdom South Africa France Turkey Republic of Korea 2004 6193.7 3054.4 703.4 342.2 231.9 87.4 39.4 16.9 69.6 11.3 145.3 21.0 45.7 58.6 30.0 22.5 1.9 16.6 32.2 80.5 20.3 32.2 21.7 22.9 20.2 36.3 2005 6573.8 3287.7 907.5 370.8 246.4 191.3 141.2 33.8 112.9 104.7 98.3 61.0 89.5 69.8 103.7 73.1 12.1 36.5 43.4 69.7 33.6 45.6 37.0 32.0 27.8 32.7 2006 7979.6 3537.5 969.9 436.8 316.3 196.2 166.1 765.2 134.9 109.1 102.9 125.0 95.1 76.3 109.1 76.8 25.1 55.7 52.2 58.3 62.9 46.4 33.6 33.3 29.9 26.5 2007 8418.1 4200.1 1117.9 404.4 390.3 221.5 208.3 201.1 168.8 135.0 128.3 118.4 102.2 82.5 75.4 72.0 68.8 67.5 57.8 55.1 43.1 42.0 38.3 33.9 32.7 31.9

SOURCE: UN Comtrade 2009

SHARE OF TOP CUT FLOWER & FOLIAGE IMPORTERS IN THE WORLD BY VALUE (2007)

Table 3.4: LEADING IMPORTERS OF CUT FLOWERS AND FOLIAGE IN THE WORLD BY VALUE (2007) (US$ million) Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Importers Germany United Kingdom USA Netherlands France Russian Federation Japan Italy Belgium Switzerland Austria Canada Spain Denmark Sweden Poland Norway Czech Republic Ireland Greece Singapore Finland Romania Portugal Hungary 2004 1123.0 1026.8 1001.0 718.6 560.4 124.4 265.5 220.5 174.0 201.0 110.7 103.7 79.8 101.9 74.8 55.3 46.3 44.6 43.2 33.5 27.2 24.9 8.0 20.3 23.2 2005 1262.1 1011.1 1035.4 757.5 563.4 182.6 278.1 236.3 186.8 196.2 123.0 114.2 97.8 107.8 80.8 74.6 54.8 49.6 48.0 31.9 29.6 26.7 10.3 23.5 27.1 2006 1258.3 1057.5 1117.0 833.0 573.3 275.7 290.1 246.7 207.2 200.9 123.3 125.6 112.1 105.5 98.7 84.1 59.3 52.4 53.1 34.9 33.1 29.2 15.5 22.8 25.2 2007 1276.1 1203.9 1186.2 956.8 582.1 507.5 310.8 268.2 249.4 217.0 164.0 141.3 128.1 122.3 111.3 108.9 74.9 68.6 49.0 40.0 38.1 35.5 30.5 29.8 25.7

SOURCE: UN Comtrade 2009

TRADE CHANNELS IN FLOWER INDUSTRY

INTRODUCTION
Europe, Japan and the USA are the major producers as well as buyers of cut flowers and plants. However, over the last decade and half, these countries and regions have started importing substantial volume of floricultural products from the emerging markets due to non- availability of varieties inconsistency in supply throughout the year, and cost advantage over domestically produced products. As flowers travel from exporters to consumers, they pass through various stages and are handled by various actors. This chapter thus, discusses the main characteristics, similarities and differences of major distribution channels.

THE FLOWER CHAIN

The parties that trade in cut flowers and plants, from the producer to the final consumer, are depicted in the flower chain diagram. The chain provides an insight into the various distribution channels of floricultural products. Flowers and plants are perishable. This characteristic forms an important criterion while considering their distribution. The manner in which they are distributed across different countries is not similar. However, the main channels and processes involved are almost the same.

Producers
Producers mainly sell their cut flowers and plants through auctions and wholesalers. The auction system is used in the Netherlands and Japan. In the western markets, producers sell their products directly to the wholesale traders or through wholesale markets. Some producers also sell their produce directly to the retail traders. This mode avoids intermediaries/ middlemen and also they can produce according to the specific needs of the buyer. However, this method limits producers market access and diversification possibilities. Also they dont enjoy economies of scale. So far direct selling has been more common among plant producers.

Auctions Auctions are sales organizations for producers. The producers try to obtain the highest possible price for their products through these sales organizations. In the Netherlands, these auctions are conducted by sales cooperatives and the producers are members of such cooperatives. The cooperatives aim at realizing the highest possible sales price for the affiliated members and suppliers. The suppliers of flowers also have to be affiliated with the auctioning organizations. Wholesale In countries that do not have auctions, flowers are sold to the wholesale and retail trade through producer markets. The wholesale market has both collecting and distributing function. The collecting function consists of purchasing a wide range of cut flowers and plants. The distributing function consists of the wholesaler catering to the needs of his clients in their demand for flowers.
Forms of Wholesale Wholesalers could be specialized in cut flowers and/or plants alone and may sell only one type of flowers, such as the Rose. Breeder/Wholesaler A breeder/wholesaler may purchase and sell or auction flowers of other producers to widen his own product range. Domestic wholesaler Domestic wholesalers supply only to the domestic wholesale and retail markets. Cash and carry A cash and carry is a cooled sales outlet where both the wholesale and retail traders may purchase cut flowers and plants. Exporter Exporting wholesalers supply a wide range of flowers to foreign florists, wholesalers, and or supermarkets. A further distinction can be made between wholesalers, who sell door-to-door, the so called Flying Dutchmen, and wholesalers who deliver to order.

Commission agent/importer This type of wholesaler specializes in import flowers, bouquets, painted flowers and/or the sale of flowers that were purchased at other auctions. Purchase

The wholesale trade purchases its cut flowers and plants from producers, auctions, foreign exporters and/or commission agents. The degree to which wholesalers purchase imported flowers depend on the domestic supply and on the price.

Sales
Cut flowers and plants of wholesaler/exporter may be intermediate products or end products for the customer. An intermediate product is one that is to be further processed into an end product for the customer. An end product for instance would be a bouquet that a wholesaler has made suitable to be sold directly in a shop. Some wholesalers make these bouquets themselves, while other wholesalers contract the same out to specialized businesses. customers of the wholesaler/exporter are florists, supermarkets and other wholesalers. Marketing channels used by the wholesaler/exporters are: End-use specialist Specializing in certain consumer segments such as bouquets. Vertical level specialist Specializing in deliveries to a specific link in the flower chain, such as supermarkets or florists. Geographic specialist Sales only take place in a specific geographic area, such as the Netherlands or the United Kingdom. Customer-size specialist Exporters concentrate on segments that are such as cash and carry and garden centers. neglected by other exporters, The

Normally, wholesalers are able to cater to retailers within a radius of 1000 km. Customers outside this radius are generally importers/and or wholesalers. The relationship between the customer and the seller is of great importance in the flower trade. Sales in the wholesale trade take place by telephone, fax, Internet or by personal visits. The gross profit margins are in the range of 10-15 percent for commissioned agents and approximately 15 percent for other wholesalers. Deviations in these estimates occur due to transport costs and customers wishes. Trade fairs and promotional events are commonly used by wholesalers for publicity and market penetration. Advertisements and trade names are hardly an issue in this trade.

Logistics
Cut flowers and plants are perishable products. The wholesale trade bears this in mind in its approach, furnishing and facilities. The wholesalers approach is that cut flowers are top priority over plants to be sold on the day they are purchased. The cut flowers are kept fresh by storage in water, cooling of storage rooms and means of transport, efficient and fast delivery and proper packaging.

The wholesaler decides the purchase quantity and types of flowers. These are then stored in refrigerated rooms. Ordered flowers are then collected and packaged according to customers needs and placed in boxes or on water. These are then shipped to the wholesalers own shipment department. From the shipment department they are further delivered to the customers through own or third party transport. The trade in cut flowers and plants is mainly regional due to its unfavourable price/volume ratio. The wholesale trade supplies to customers within a range of 1,500 km radius by trucks. Transport by sea is used only for the export of few plants. Intercontinental deliveries are handled by air. Due to increased intercontinental trade over the last decade, few airlines have started offering door-to-door service or have a branch of their own at important wholesale markets or auctions. There are also a few companies who specialize in the transport of flowers between markets and to airports. The choice of packaging and the means of transport are extremely crucial to wholesalers in order to maintain the freshness of the flowers and plants and also to achieve a favourable price/volume ratio. International supplies can be hindered by lengthy customs formalities, phytosanitory inspections and other unforeseen circumstances. The solution lies in fast custom clearance, inspection, and setting up of pre-shipment inspection centers. Packaging is also crucial in order to preserve the freshness and optimal condition as well as to prevent damage. Apart from this role, packaging also has a promotional and presentational significance for sellers.

Retail Trade
This is the link between the wholesaler and the customer. The consumer can choose from four types of retailers: Florist A florist supplies cut flowers and plants to buyers. They could be exclusive florist or franchise florists. Exclusive florists would generally give excellent service but at high prices, while the franchise florists would position themselves in a low- value segment. Supermarkets Supermarkets are increasingly becoming an important source of retail trade. They sell at competitive prices and offer very little in terms of customized services. The importance of supermarkets in retail trade of flowers has been steadily growing in major European, North American and Japanese markets. This trend is further expected to continue in future as well. Street vendors They sell at very low prices with minimum services. Garden centers Cut flowers and plants are part of a wide range of garden products sold at garden centers. The market shares of each of these types of retailers vary across countries and markets.

Purchase
Retailers normally purchase from several wholesalers. There are exclusive contracts, but they usually relate to specific products rather than an entire range of flowers and plants. The links between producer and retailer vary across nations, with Japan having the most number of links.

Sales
In Europe and Japan, the retail trade uses personal sales. In USA, most sales happen over telephones. Telemarketing is also a major medium of sales in many developed countries.

Consumers
Consumers can be divided into two types: 1. Individual households

2. Institutional markets (include government institutions, hotels and other profit/non-profit businesses)

Use
Cut flowers and plants are bought for ones own use, as a gift or for occasions. The purchase of cut flowers is concentrated around special days such as Easter, Valentines Day, Mothers Day and other religious/non-religious festivals and cultural celebrations. Most of these festivals fall during the winter period, i.e., November to May. But this is not a strict transition. Many countries in Europe like Germany and the Netherlands buy flowers for own use. While this segment was not so well developed in the USA and Japan in the past, since the recent years, there has been an increasing trend of buying flowers for own use even in these two countries. The segments according to the nature of cut flowers are: Basic segment Cut flowers and plants bought in memory of someone, or for a festive event, fall under this segment. The demand in this segment is fairly stable. Florists, street vendors and garden centers are particularly active in this segment. Mass segment Cut flowers and plants supplied by supermarkets and street vendors at competitive prices fall under this segment. This include standard mono-bunches and bouquets. Specialty segment Customized orders are central in this segment. Importance is paid to type of flowers, colours and shape that are crucial in the order. Garden centers and florists operate in this segment. The mass and specialty segments normally belong to the own-use segment. For the consumer, the concept of quality usually means freshness and other subjective aspects such as type of flower, colour, leaf size and price. Quality is not a uniform concept and is applied flexibly. Many times suggestions or advice by retailers also play an important role in consumers choice.

Trade Channels in Europe

Trade channel for cut flowers Products can follow a wide range of different routes before reaching the consumer in Europe. Imported cut flowers and foliage follow one of the following four distribution channels in Europe: 1. Via one of the auctions: In this case, products are received, un-packed and prepared for auctioning by the handling department of the auction.

2. Via an agent to the auctions: The products are received by an agent who prepares the products for auctioning. 3. 4. Via an agent to a wholesaler: The products are received by an agent, who forwards the imported products (with or without preparation) to a wholesaler. Via an importing wholesaler or importer: The products arrive directly from the logistical handler at the importing wholesaler. After unpacking and further preparation, the products are mostly sold to domestic or foreign wholesalers or retailers.

The distribution channels numbered 1 and 2 pass through the auction system, while channels numbered 3 and 4 are referred to as direct trade The importance of the four different routes in the trade channel depends strongly on the product, and the exporting and destination country. In contrast to the import of majority of cut flowers, foliage is mostly imported by specialised agents and wholesalers, and rarely passes through the auction system. Auctions The main auction centers in the Europe are in the Netherlands and Germany. The Netherlands auctions are the largest in the world and perhaps the first of its kind. The auctions in the Netherlands are co- operatives, owned by domestic growers and open to membership for all growers in the European Union (EU), as well as to some growers outside the EU. The main purpose of the auctions is to handle produce from their member growers, who are obliged to submit their whole production to the auction. Floricultural products submitted to the auctions are sold either by means of the auction clock or through the Intermediary Office.

Tele Flower Auction (TFA) TFA is a private auction set up by East African Flowers (EAF), to focus on imports from outside Europe. TFA was one of the first computerised auctions, without the physical transfer of flowers past the auction clock. Supply criteria and commissions are comparable to the traditional auctions. Currently, 160 to 170 buyers purchase flowers on a regular basis via TFAs auction system. Growers located in Kenya, Uganda, Tanzania, Zimbabwe and Zambia channel their products through auctioning at the TFA on the European market. Rosa is the main product traded at TFA, representing approximately 94 percent of total turnover. Other

major products at TFA are Dianthus and Statice. Wholesalers There are two kinds of wholesalers in the Dutch flower chain: local wholesalers and export wholesalers. The principal task of wholesalers is to purchase large volume of flowers and break into smaller volumes and sell them to their clients. Most wholesalers purchase their products at auctions. Large export wholesalers tend to buy from all the important flower auctions, in order to buy the best products at the best prices. Some (importing) wholesalers purchase their products directly from growers to avoid costs associated with the auctioning. Local wholesalers sell their products to domestic retailers, whereas the export wholesalers re- export their products to wholesalers and retailers abroad. The fastest growing wholesale companies are the one supplying to supermarkets.
Table 4.1: CHARACTERISTICS OF MAIN TYPES OF RETAIL CHANNEL IN EUROPE
Discount Supermarket Assortment Purchasing Small Direct from grower / wholesale Centralised Auctions/ promotions Weak Grower, wholesale Limited None Low Full-service Supermarket Small Service provider Decentralised Day trade / auctions Strong Grower, wholesale Limited Much Sharp Garden Centre / DIY-chain Broad Service provider Decentralised Day trade / auctions Strong Grower, wholesale Important Much Sharp Flower Shops Broad Wholesale provider Centralised Day trade Weak Grower, auction, wholesale Very limited Little Average

Logistics Sales Chain management Chain players

Adding value Need for service of Supplier Pricing

SOURCE: LEI (2006)

Table 4.2: COMPARISON OF WHOLESALE MARKETS IN JAPAN AND THE NETHERLANDS Parameters Distribution Shipping parties Shipping packages Transport to the market Reloading during transport Number Scale of largest market Management Management body Handling fee Middle trade system Quality inspection Japan Individuals, groups, unions Cardboard Transport agents The Netherlands Individuals, companies Mainly reusable transit buckets Individual transport

Yes > 277 Ohta Market: 4.5 ha Independent companies Higher than Dutch auctions Not so developed Standards according to place of origin (markets not involved)

No > 7 Aalsmeer: 70 ha Cooperative of growers

Market

Well established Ranking by markets official inspectors

SOURCE: Jetro

Table 4.4 : AVERAGE ANNUAL PRICES OF SELECT FRESH CUT FLOWERS AT NETHERLANDS AUCTIONS: 2005-2007 in Euro cents, per stem
05 06 07 05 06 07

GENERAL Alstroemeria Anthurium (andreanum) Dendranthema Spray - Euro - Euro Sunny - Delianne White - Anastasia - Reagan Sunny Santini Dianthus Standard - Farida Spray - Scarlette Gerbera (big budded) Gerbera (mini) Gladiolus (big budded) Heliconia Hippeastrum Hydrangea Orchids: - Phalaenopsis - Cymbidium (big bud) - Cymbidium (sm bud) - Paphiopedilum Protea Rosa Large budded - Passion - Grand Prix - Akito - Avalanche Small budded - Red Calypso - Chelsea - Pistache - Sunny Sher - Viva! Spray - Diadeem Strelitzia Zantedeschia
SOURCE: VBN (2008)

15 49 21 22 22 21 24 21 18 16 18 10 12 24 14 14 109 83 95 38 330 138 58 108 26 33 46 19 34 11 11 12 10 12 12 24 9 132 49

16 55 24 20 22 24 26 20 18 15

16 55 21 24 22 23 23 22 18 16

BULB FLOWERS Lilium - Asiatic Group - Oriental Group - Longiflorum Group - Longiflorum x Asiatic SUMMER FLOWERS Aster Chamelaucium Eryngium Eustoma russellianum (single) Eustoma russellianum (stuffed) Gypsophila - Million Star - Double Time Helianthus Hypericum - Pinky Flair - Excellent Flair Liatris Limonium sinautum Ornithogalum Paeonia Phlox Ranunculus Solidago Tanacetum Trachelium caeruleum Veronica FOLIAGE Fatsia Dracena Ruscus

30 61 40 32

36 59 38 35

32 57 39 33

20 14 24 30 31 18 24 26 16 15 15 19 14 40 13 14 13 17 19 14

23 16 27 32 32 19 24 27 18 13 16 19 15 41 13 15 13 16 21 14

22 16 29 32 33 17 22 28 16 12 15 20 16 40 16 14 13 19 25 17

14 16 10 13 13 14 26 24 14 13 15 16 115 97 85 78 102 104 46 334 148 52 107 27 38 53 21 38 12 14 12 10 13 13 29 9 128 46 37 329 140 63 90 28 38 47 22 41 12 13 12 11 12 14 34 8 120 46

11 29 8

11 29 8

11 26 9

Government Incentives / Initiatives

The liberalization of industrial and trade policies paved the way for development of export-oriented production of cut flowers. Commercial floriculture is becoming an important segment from the export angle, and is being viewed asa high growth segment. Government of India acknowledges the potential of the floriculture industry and has conferred the industry a 100 percent export oriented status. Various incentives are being offered by the Government of India, which have enabled the setting up of a number of floriculture units for producing and exporting flowers. Most of these units are located near Mumbai, Bangalore and Delhi. These units have obtained technical know- how from Dutch and Israeli consultants. The new seed policy has already made it feasible to import planting material of international varieties. Tax benefits are offered to new export oriented floriculture companies in the formof income-tax holidays. Additionally, there are substantial duty exemptions for imports including cut flowers, flower seeds and tissue- cultured plants. Further, allowing 100 percent Foreign Direct Investment (FDI) in the industry has facilitated joint ventures, ensuring a steady inflow of capital and modern technology. Financial support has been offered for air-freight for export of cut-flowers and tissuecultured plants, and financial support of up to 50 per cent has been offered for establishing cold storage, pre- cooling units, refrigerated vans and green houses. The Agricultural and Processed Food Products Export Development Authority (APEDA), is responsible for export promotion and development of floriculture in India. APEDA provides financial support for establishing cold storage, pre-cooling units, refrigerated vans and green houses, and provides airfreight support to floriculture exports. In addition, APEDA also provides financial support for using improved packaging material. Refinance assistance is available from the National Bank for Agriculture and Rural Development (NABARD) for commercial banks and State Finance Corporations that have financed the floriculture units. The Ministry of Agriculture, Government of India, has also set up 11 model floriculture centre units, two large centres and 20 tissue culture units to support this sector. Six agri- export zones have also been set up for floriculture where large flower farms share common infrastructural facilities, thus bringing into effect the benefits of scale. Walk in-type cold storage at international airports like Delhi, Mumbai Hyderabad, Chennai and Thiruvananthpuram have also been set up for storage of export produce. Auction centres are also being set up at major cities such as Bangalore and Mumbai (yet to be operational), for helping in price discovery and trading. Further, to facilitate trading at the international flower markets, APEDA has set up a Market Facilitation Centre at Aalsmeer, in the Netherlands, the worlds largest flower auction centre. Similar centers are also envisaged in Dubai in the Middle East, and Tokyo in the Far East. Department of Agriculture and Cooperation, Ministry of Agriculture, Government India has a programme for Integrated of

Development

of

Commercial Floriculture with the following objectives:

To improve production and productivity of traditional as well as cut flowers through availability of quality planting material and transfer of technology; To improve human resource capabilities for growing flowers scientifically; To promote production of off- season and quality flowers through protected cultivation; To improve on-farm post harvest handling of flowers. The pattern of assistance under this program include:

Specific

attention

for development of traditional flowers; facilities inputs

Strengthening

of Model Floriculture Centres (MFC) for additional and extension of MFC in other potential States; of

Improvement in productivity and production through higher use and area expansion; Assistance for off-season production of flowers; Emphasis on on-farm post- harvest

management of flowers; cultivation of of flowers; cultivar technology; and

Encouragement Farmer

for greenhouse

participatory demonstration

Dissemination of information through training and media support.

The Technology Mission for Integrated Developmentof Horticulture in NorthEastern States including Sikkim, by the Department of Agriculture and Cooperation, Ministry of Agriculture, Government of India, has the following objectives:

To

convergence and synergy among numerous ongoing governmental programme in the field of horticulture development to achieve horizontal and vertical integration of these programmes; timely and concurrent attention and consumption chain; the existing

establish

To ensure adequate, appropriate, to all the links in the production, post harvest

To maximise economic, ecological and social benefits from investment and infrastructure created for horticulture development;

To promote ecologically sustainable intensification, economically desirable diversification and skilled employments;

To generate value addition, promote the development and dissemination of eco- technologies based on the blending of the traditional wisdom and technology with frontier knowledge such as biotechnology, information technology and space technology; and To provide the missing links in ongoing horticulture development projects.

The Technology Mission comprise of four Mini Missions, viz. Mini Mission-I (MM-I) for research, Mini Mission-II (MMII) for production and productivity, Mini MissionIII (MM- III) for post harvest management, marketing and export, and Mini Mission-IV (MM-IV) for processing and marketing of processed products. The Integrated Development of Horticulture in Tribal/Hilly Areas, by the Department of

Agriculture and Cooperation, Ministry of Agriculture, Government of India, adopts an integrated compact area development approach that will address crop production with forward and backward linkages, such as, availability of genetically improved planting material and seeds of high yielding varieties; supply of inputs; postharvest infrastructure facilities, like, collection centres, storage, transport and marketing. A National Committee on formulating a rehabilitation package for the ailing floriculture industry has also been formed.

Agri Export Zones (AEZ)

Government of India, promotes, assists and facilitates the setting up of Agri Export Zones (AEZ), in association with State Governments for the purpose of providing access to international markets for agricultural produce/ products from the country. The objective is to provide remunerative returns to farming community in a sustained manner and to increase their competitiveness. There are at present six operational Agri Export Zones for floriculture development in India.

Influence of Exogenous Factors Exogenous factors are those that are not inherent to floriculture, but significantly affect the viability and competitiveness, and influence the growth of the industry. W ith technology gaps narrowing, these exogenous factors have become critical in determining the competitiveness of the industry. In this section, the role and influence of exogenous factors such as infrastructure, temperatures, transportation including government policies are discussed briefly. Infrastructure
Floriculture products are highly perishable. The consistency and stability of quality depends on the procurement, cold storage and supply chain infrastructure available from the place of harvest. There is high capital cost involved in setting up of cold storages, discouraging entrepreneurs getting into floriculture business.

Airports
Table 6.11: LIST OF OPERATIONAL AGRI EXPORT ZONES FOR FLORICULTURE DEVELOPMENT Sr. No. 1 2 3 4 5 6 State Tamil Nadu Uttranchal Maharashtra Karnataka Sikkim Tamil Nadu District/Area Dharmapuri Districts of Dehradun, Pantnagar Pune, Nasik, Kolhapur and Sangli Bangalore (Urban), Bangalore (Rural), Kolar, Tumkur, Kodagu and Belgaum East Sikkim Nilgiri District

SOURCE: APEDA

Domestic and international airports at strategic locations are essential for the growth and development of the floriculture industry. One can find large number of floriculture projects around Bangalore, Pune, Delhi and Hyderabad, where airport facilities are

available.

Temperature
Optimum temperature of a location is a very important criterion where there is abundant sunlight and good soilavailable. The optimum temperature for most floriculture products ranges between 15 and 28 degrees centigrade. An analysis based on the maximum temperature and corresponding relative humidity for 12 months for each sector would categorise them under the following three zones: Zone I: A temperature below 28 degrees centigrade is the ideal natural climatic condition and no additional care is required to maintain it. Zone II: Temperate versus relative humidity zone where temperature could be cooled down by low cost cooling system such as wetpad method or fog method. But such methods could be more expensive than regular greenhouses.

Zone III: In this zone the temperature could be reduced to the optimum level only with the help of air conditioners, which is very expensive.

Transportation Transportation cost and time are among the most critical factors for the success offresh flower industry. Freight cost occupies the largest portion of transportation cost in the floriculture trade. Cost of freight is a function of dimensional weight, frequency, continuity of shipments, negotiation between airline and shipper, airplane configuration and distance. Depending on the time of the year (peak seasons), it is estimated that transportation costs can be 10-20 percent higher for some countries. Similarly, a shipment of fresh flowers, from the time of harvest on a farm until they arrive at an export destination, can take from 44 1/2 hours to almost 13 days, significantly affecting the quality of the fresh flowers. For example, assuming that Roses can last up to 14 days in good condition, if handled properly after harvesting, and a modest retail shelf life expectancy of seven days, it is reasonable to state that from the seventh day in transit onwards, the cost of time increases as each additional travel day lowers the quality and consequently the price of the product. Policies Import restrictions for import of specific pesticides / insecticides which may be required to tackle unexpected or non-prevalent diseases and insects may also be considered as another exogenous factor.