Flower growers in Africa are increasingly selling direct to buyers, cutting out the middlemen at the Netherlands’ centuries-old auction house co-op — the world’s biggest for flowers — Reuters reports.
The country grew rich selling tulip bulbs in the 17th century during the Dutch Golden Age and it is the second largest agricultural exporter after the U.S.
For decades the FloraHolland cooperative was a hub from which planeloads of flowers from around the world were distributed from vast, air-conditioned warehouses in Aalsmeer, near Amsterdam airport.
The company says it distributes almost half of all flowers sold worldwide. In 2015 it reported sales of $5.13 billion US, mostly by matching growers and buyers at its early-morning daily auctions. But flower sales directly from growers to buyers have overtaken those sold through FloraHolland’s auctions, said FloraHolland CEO Lucas Vos in a Reuters interview.
Direct sales from co-op members who bypassed the auctions rose by 3.8 percent to $2.59 billion US in 2015. Auction sales stood at $2.37 billion, down 1 percent.
Energy and labor costs are the main reasons that the roses are grown
in Africa these days, said Arie van den Berg, a second generation Dutch rose grower
who has shifted the bulk of his production to Kenya and China, NewYorkTimes reports.
His company, Van den Berg Roses, still grows valuable and exotic flowers in the Netherlands, but cheaper roses are mostly grown in Africa and sold directly to big retailers such as the German discount chain Lidl or British supermarket giant Tesco,
which prefer fixed contracts to the daily fluctuation of the auction clock.
Such changes are challenging the status of the Netherlands as the center of the
flower trade. The flower industry is more than 5 percent of the Netherlands’ gross domestic product.
“You can’t make your living in the physical boundaries of the Netherlands,” said Eric van Heck, a professor at the Rotterdam School of Management.
Kenya and Ethiopia top sub-Saharan Africa flower exports, earning $699 million and $610 million, respectively in 2014, New Times reports.
Rwanda has set a target of $104 million annually from floriculture and horticulture by 2018, up from current $10 million.
This is achievable given the increasing number of investors in Rwandan floriculture, said Tony Nsanganira, minister of agriculture.
Japan is trying to expand floriculture in sub-Saharan Africa by experimenting with technology using specific flowers from Japan in Rwanda, especially those with high prices on the international market. This contributes to foreign exchange earnings, NewTimes reported.
Kenya has established a dedicated terminal at Jomo Kenyatta International Airport to support its flower business, DailyMaverick reported. Kenya’s cut-flower exports increased 12-fold to 137,000 tonnes between 1988 and 2014, and it now supplies a third of the E.U.’s imports. It’s the world’s third-largest flower exporter, with 500,000 Kenyans earning a living or supported by the sector.
Ethiopian floriculture started with one hectare of open field summer flowers in 1995, and today it ranks among the top five global suppliers, second only to Kenya among African producers and exporters. The sector is responsible for 75,000 direct jobs, most done by women.
Tsegaye Abebe, the farmer who planted the first land dedicated for flower exports, went on to found the Ethiopian Horticulture Producer Exporters Association. That first load of Ethiopian flowers “filled just 19 tonnes of the 36 tonne capacity of that Boeing 757,” he told Daily Maverick. “Then we filled it, increased aircraft numbers, and later moved over to a 75 tonne capacity MD11. Today we use two 777s daily, with three at peak, to Europe. In all it’s about 300 tonnes average a day over the course of the year.”
FloraHolland CEO Vos remains confident.
“Most producers grow one type of flower, and if you’re a consumer, you want a bouquet,” he told Reuters. “There will always be a need for a hub.”
FloraHolland is making changes to an auction system that dates back more than 100 years, with plans to invest up to 90 million euros ($101.57 million US) in the next five years and develop a 24-hour online dealing platform.
It will be like “a Tinder or AirBNB” for flowers, Vos said.