IPM ESSEN 2012 - Developments and Trends in the Flower and Plant Markets

The European flower market is lingering on a high level. The demand in the consumption-intensive countries is stabilising. In the EU countries with a low demand volume and also outside the EU, new markets are growing slowly but constantly.

The most important flower and plant markets in Europe are Germany as the frontrunner with a market volume amounting to  € 8.5 billion, followed by the British market with € 4.5 billion, France with € 3.3 billion and Italy with € 2.2 billion.

A different ranking is shown in relation to the per-capita consumption: Here, Denmark and Norway are at the top with € 156, followed by Germany with € 104, Austria with € 96 and the Netherlands with € 90 per capita.Outside Europe, the USA is the number one in the world with a market volume of € 23 billion and a per-capita consumption of € 74.

The developments in the flower and plant sales are very different in the individual EU countries:

• The Northern European countries are exhibiting stability.
• Due to the economic crisis, the consumption volumes are falling in the severely affected countries, e.g. in Greece, Spain and Portugal.
• In the Eastern European member states, the markets are developing positively once again with a rising demand.

In this respect, the product fields are exhibiting opposite developments. The cut flower consumption is tending to fall in many countries, even irrespective of the economic situation, while the potted plant sales are exhibiting a tendency towards slight increases. This trend may be explained by altered consumer behaviour.

Positive Signals are Emanating from the Potted Plant Market

With continuous rates of increase in the past, the potted plant market is proving to be far more stable than the cut flower market.

However, the intra-European trade in house plants in the first half of 2011 had not yet reached the same level as in the previous year (approx. - 10 %).A different picture is reflected in the Dutch export statistics. From January to August 2011, the potted plant exports rose to € 1.45 billion and thus by 3 % compared with the same period in the previous year. Half of the rise was achieved in the internal market countries. Here, the British market was supplied to an increasing extent once again (+ 14 %), as was Scandinavia with + 20 %, while the supplies to Italy, for example, decreased (- 7 %). The other half of the Dutch export growth is accounted for by third states such as the Russian market (+ 20 %).

This means that the Netherlands are continuing to consolidate their market position as a potted plant exporter.Expert opinions are confirming the positive development on the Russian market. These developments are said to have already existed in the past years. Because of the economic and political situation, the experts are not expecting a stable condition but instead a fluctuating situation.

For the first half of 2011, the Dutch auctions are reporting a decline in the supply quantities of green plants. All in all, the prices of green plants rose by 2 cents per pot and reached an average value of € 1.56.

After years of growth, the supply quantity for phalaenopsis has dropped by 20 % for the first time. This is also having a positive influence on the prices.

The Market for Cut Flowers is Proving to be Non-Uniform

In the first half of 2011, the import activities in the individual EU countries proved to be very different. According to EUROSTAT, the cut flower imports to the Czech Republic, Slovakia and Lithuania have increased substantially in comparison with the same period in the previous year, in contrast with Ireland, Greece and Portugal with extreme falls in the import volume.

This is also confirmed by the Dutch export statistics: Decreases in the Dutch exports to EU countries were shown in the first eight months of 2011 in comparison with 2010 (i.e. Portugal  - 26 %, Ireland  - 12 %, Greece  - 7 % and Spain - 6 %) and slight losses to stagnation to Germany - 2.1 % and Italy + 0.4 %.

In the Southern European countries, it is primarily economic reasons (presumably liquidity problems of the trade and targeted cost savings of the institutional sources of demand and of the consumers) which are leading to a decline in the Dutch export values of cut flowers.

In contrast with this, the Dutch export values to Eastern European EU countries grew until August 2011 in comparison with the same period in the previous year: Slovakia + 48 %, Lithuania + 42 % and Latvia + 27 %. The export value to Russia also rose substantially (+ 32 %).

The Northern European cut flower market is proving to be stable or to be growing further. In the first eight months of 2011, the Dutch export value to Scandinavia rose by + 27 % in comparison with the same period in the previous year.

All in all, the cut flower market is developing further, above all in the Eastern European countries, and the demand is rising, even if with a lower demand volume than on the Northern European market. The  setback suffered in 2009/2010 due to the economic crisis seems to have been overcome.For example, Lithuania raised its imports by 70 % in the first half of 2011 (January to July) compared with the same period in 2009, Slovakia by 40 % and the Czech Republic by 25 %.

The expenditure on consumption for personal requirements is also rising along with the prosperity in these countries. According to a more recent study, the expenditure on consumption for personal requirements in Poland in the first half of 2011 rose by 5 % (compared with 2009) to 31 %. In comparison with this, the purchases for personal requirements in Germany constitute over half of the total expenditure. For Poland, an economic growth rate of 3.9 % was predicted for 2011.

All in all, the cut flower prices have dropped somewhat in the first half of 2011. The value-related turnover of the Dutch auctions decreased by 0.9 % with an increased supply quantity. The average price was 4.1 % below the level in the previous year. Because of the poor general market situation, it was not possible to continue the positive price rises from 2005 to 2007 (i.e. 3 cents per stem on average) as a result of changes in the ranges.

The Flower and Plant Markets in Germany

Great Increases in Demand Are Not to be Expected

The expenditure on flowers and ornamental plants in 2010 fell  insignificantly by 0.6 % (compared with the previous year) to € 8.512 billion. That corresponds to a per-capita consumption of € 104 and to the same consumption level as in 2004. This was mainly caused by the extreme decreases in the fourth quarter. Frost, ice and snow prevented the consumers from visiting the specialist business. More flowers and ornamental plants were sold in the purchasing sources which had to be visited, for example, for food supplies in spite of snow.This experience is confirming the longstanding assumptions that a structural decline in the specialised trade has a negative effect on the overall demand and that a strong specialised trade everywhere is the cause of the high flower and ornamental plant consumption in Germany.

For 2011, experts are once again expecting a "normal" expenditure level, i.e. 0.5 - 1 % above the market volume in 2009. However, it will not be possible to reach the peak values in the consumption in 2008 amounting to € 109 per capita.The demand behaviour is influenced to a lesser degree by economic crises than by the weather conditions.Only low trading in flowers and plants was established during the summer months of 2011. Everybody was intent on not buying any surplus goods although the prices of numerous products were comparatively low. Because of the warm months of April and May, the supply of indigenous autumn plants was on the market earlier than usual. Nevertheless, the prices were at a low level, particularly for chrysanthemums and, in this respect in turn, particularly for the so-called "big ball" varieties.Annual evaluations will show to what extent the subdued demand in the long winter and in the rainy summer can be compensated for by good autumn and winter seasons.

Within the demanded ranges, there have been shifts for years with a decline in the cut flowers in favour of the demand for potted plants. The proportion of cut flowers in the expenditure on consumption fell by 5 % from 2000 to 2009 and the proportion for potted plants rose by 7 % in the same period. The bunch of flowers is being increasingly supplanted by (flowering) potted plants - not only for personal requirements but also in the gift sector.

This competition situation became particularly evident in the spring of 2011. Here, the bedding and balcony plants started early due to the warm, nice weather and this led to decreases in the demand for cut flowers.The first half of 2011 was unusual and not particularly good for the cut flower trade in Germany. January and February were good months; the figures for March and April turned out to be poor. May triggered mixed feelings because of a strong demand on the occasion of the Mother's Day season and a poor final week in which, as at the beginning of June, hardly any serious demand could be registered. Although the supply quantity was low, the price level was at rock bottom. Therefore, hardly any turnover could be recorded in this period.

The experts estimate that the very low prices caused German importers to considerably restrict direct imports of roses and wild fern from third states since they could purchase the goods at lower prices at the Dutch and German auctions.

In the case of a few products (including cut greenery, wild fern and salal), the market lost its equilibrium since the supply quantity was much too high for the low demand. The demand for these goods did not pick up in spite of the low prices.The Market Structure is Remaining Relatively Stable with a High Specialised Trade ProportionThe structures on the retail trade level are relatively stable: The specialised trade continues to slowly surrender market shares to the large distribution forms. The fourth quarter of 2010 in which above-average increases were recorded in the retail trade was an exception due to the weather.The market share losses of the specialised trade are more extreme in the potted plant sector than in the case of cut flowers. As far as the expenditure on consumption is concerned, the specialised trade accounts for  approx. 50 % of potted plants and approx. 70 % of cut flowers.

The German Foreign Trade is Still Being Determined by Dutch SuppliesThe Netherlands continue to be the main supply country for the German market and were able to raise their exports to Germany in 2010 by 4.7 % to € 1.599 billion.

German Potted Plant Imports from the Netherlands Reached the Same Level as in the Previous YearIn the first half of 2011, the German imports of house plants are also still approx. 15 % below the figures in the previous year. The imports from the main supply countries dropped: Denmark (import proportion: 9 %), Italy (import proportion: 8 %) and the Netherlands (import proportion: 78 %).According to the information in the Dutch export statistics, the potted plant exports to Germany (house plants as well as bedding and balcony plants) once again reached the same level as in the previous year (i.e. approx. € 500 million) by August 2011.

In the Case of Cut Flower Imports, the Supply Relations are Beginning to MoveIn the first half of 2011, the German import values have not yet reached the same level as in the previous year (- 10 %). The direct imports from Africa and South America are stable. However, shifts are being shown in the individual supply countries: In the first half of 2011, the imports from the main supply country (Kenya) were extended by 10 % in relation to the comparable period in 2009.

The same picture is shown for imports from Ecuador. Supplies from Zambia have increased by 20 % but on an even lower level than Kenya or Ecuador. Statistically, imports from Colombia have decreased by 20 %; it cannot be estimated to what extent re-exports are playing a role in this respect.Experts are speaking of an upward tendency in relation to direct supply relations between large German purchasers and cut flower farms, for example, in Kenya. An extension to these direct supply relations will have great effects on the German wholesale and retail trade structure. Then, procurement problems of the German specialised retail trade will be seen in particular.

Conclusion

The market estimation shows that, in the countries with a high flower and plant consumption, the short-term change in the market situation and in the demand is extremely weather-dependent. In these countries, long-term changes tend to be caused by changes in the preference structure of the consumers.In the Eastern European and Southern European countries, the demand is coupled to the economic course to a greater extent.The economic crisis has not shaken the European flower and plant markets to an essential degree. However, there is a need for great efforts in order to achieve market growth which will, at least, follow the inflation.

Source: IPM ESSEN 2012 - Developments and Trends in the Flower and Plant Markets

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