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SAP 2.80/WP.139
The world cut flower industry is in a state of flux. Underneath slow growth of world sales sometimes drastic changes are taking place. New markets (Russia) emerge and disappear almost overnight. New exporting countries (Ecuador, Kenya) emerge only to find that other countries (India, China, the Republic of Korea) are pushing hard to become the next generation of successful emerging exporters.
Competition is fierce, continuously testing the adaptive capacity of the actors involved. For other reasons, too, this industry has a tradition of attracting particularly alert market participants: the product is highly perishable; price fluctuations, including intra-day price fluctuations can be considerable.
Flexibility is thus important, but innovation, productivity and quality are also at a premium. Innovative producers can reap considerable rewards. New varieties fetch prices which can be up to seven times higher than those of "bulk" products. Productivity increases are essential for survival. Flower prices have been stagnant for years (and have been declining in real terms). "Northern" growers who want to continue to make a profit must invest in labour-saving techniques. All growers need to invest in techniques that allow a better control over the production climate, that enhance quality, and reduce pollution and waste. This is bound to lead to more concentration on the production side as small growers can ill-afford these investments in increasingly sophisticated, computer-controlled growing techniques that enable them to deliver an attractive product of consistent quality.
Only high-quality flowers are traded internationally. Growers must ensure that their produce is free from disease and that it is carefully treated once harvested. In addition, supermarkets -- a growing force in retailing -- want time-to-market to be as short as possible so that they can guarantee a minimum number of days of vase life. Production conditions are a new dimension of quality. Consumers are increasingly concerned about the high level of toxic substances found in cut flowers, and about the poor treatment certain workers are said to receive in exporting countries. This has led to initiatives by traders and growers alike to provide consumers with a guarantee that the flowers they buy are "clean". The MPS-A and the Flower Label are cases in point.
Thanks to international pressure, pollution per hectare is likely to be reduced, as the industry becomes more aware of the damage pesticides and other chemicals can do to the environment and to workers. The use of biological pesticides and, more generally, environmentally and socially sound production practices could well become a competitive advantage in the eyes of critical "northern" consumers.
All in all, competition in the world flower industry looks likely to become more international and more intense. Rapid innovation is a promising avenue for high-cost growers. But market niches are few by nature. Productivity growth is another avenue. But this will most likely lead to more capital-intensive methods of production and to further concentration.