PRODUCTION AND MARKETS - The future of ornamentals - THE INTERNATIONAL VISION PROJECT (IVP) - International Association of ...
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PRODUCTION
AND MARKETS
The future of ornamentals
THE INTERNATIONAL
VISION PROJECT (IVP)
Methodology, framework and main findings
on the developments of global demand
and production of ornamentals.
www.aiph.org
IVP REPORT | PRODUCTION AND MARKETS JULY 2019
CONTENTS
1 About 04
2 Implications of changing demand for ornamentals 06
3 Mature domestic producers 11
China 13
United States 25
4 Mature exporting producers 33
Colombia: export production 34
Ecuador: export production 36
Kenya: export production 38
5 Emerging domestic producers 41
Brazil 42
Mexico 43
Asia 44
Thailand 46
Malaysia 47
Philippines 48
Vietnam 51
Indonesia 51
© AIPH 2019
2 www.aiph.org www.aiph.org 3
IVP REPORT | PRODUCTION AND MARKETS JULY 2019
S
ince then, things have changed. We support and promote the plants in creating vibrant urban areas in
The world seemed to start work of our members – the grower which people and businesses can thrive.
1 | ABOUT
spinning faster. We moved from organisations around the world Our environment, human wellbeing,
the countryside into the city. We flew who together form our proud AIPH social cohesion and economies are
to places we never knew existed. community. Through the expertise and all improved by intelligently designed
We went to the Moon. We started energy they give to horticulture, they green space.
THE INTERNATIONAL ASSOCIATION
dreaming bigger but sleeping less. We embody everything that we stand for.
invented the web, the smartphone Finally, AIPH is responsible for
and social networks. Slowly, sadly, we Globally we act as the central source the world’s finest horticultural
OF HORTICULTURAL PRODUCERS (AIPH) detached ourselves from the natural
world. Our intimate bond with nature,
of industry information. Our statistical
yearbook gives an unrivalled view of
expositions. Upholding the very
highest standards, we ensure that
so pivotal to our health and wellbeing, industry trends and developments, approved exhibitions benefit growers
THE WORLD’S CHAMPION FOR THE POWER OF PLANTS was weakened. We found ourselves valued by our community and all who and visitors alike by inspiring greater
living unnatural lives. take interest in our rapidly moving appreciation of ornamental plants.
sector. We bring members together Drawing on experience acquired over
In 1948, amid strained relationships following the end That is why AIPH lives and breathes
today: to rekindle and maintain an
both physically and digitally, and
encourage the sharing of new ideas
generations, we provide organisers
with expert guidance to create world
of the Second World War, a group of representatives enduring relationship with plants.
Serving the diverse needs of growers
and techniques so that horticulture
never stands still.
class spectacles that live long in the
memory. Our great hope is for a world
from the national grower associations of Western
in a globalised world. Pushing the where the essential value of plants is
boundaries of science and sharing We advocate fair and robust plant recognised and reflected in every step
breeders’ rights, encouraging innovation
Europe came together in Zurich. They were united
cutting edge research. To make clear forward for humanity. AIPH is, and will
the value of plants in the urban setting, and rewarding quality so that growers always be, the world’s champion for
too can reap the benefits of their work.
by an ambition to mend relations between European
and to advance the essential role they the power of plants. Our relationship
play in sustaining our planet. To help all We promote the most sustainable, with nature was pivotal in our past. It is
of us rediscover an affinity with our ethical and advanced practices fundamental to our future.
horticulturists, to rebuild burnt bridges. That vision surroundings as old as humanity. in ornamental plant production,
celebrating the most progressive
inspired them to form the Association Internationale Our mission is clearer than ever: to
reignite and uphold an appreciation of
growers and sharing pioneering new
approaches. This strengthens the
WE AIM TO PUT FLOWER, PLANT AND
LANDSCAPING SERVICES ON A GLOBAL
des Producteurs de l’Horticulture (AIPH), laying the plants that we believe is a basic human
instinct. As an organisation we strive for
ornamental horticulture industry and
is an affirmation of our determination
AGENDA, WITH A VISION TO:
foundations for an international community that
• Stimulate increased demand for ornamental trees,
a world in which humanity, technology to build a more balanced future from
plants and flowers worldwide.
and nature exist in healthy and stable the ground up.
• Protect and promote the interests of the industry.
exists to this day. equilibrium. By achieving this we will
build a balanced and prosperous future We lead global thinking on the • Be an international hub for industry information
and knowledge exchange.
for all, sustaining the planet for this successful integration of nature into
• Lead best practice in ornamentals production.
generation and the next. the built environment. Our Green City
initiative promotes the essential role of
4 www.aiph.org www.aiph.org 5
IVP REPORT | PRODUCTION AND MARKETS JULY 2019
2 | IMPLICATIONS T
his research has established ministries to city councils and model as a framework (see page 10).
that change in demand and even local neighbourhood action
production is inevitable. In committees. As an example: areas Each of the four categories in this
the next decades a variety of macro with green space are seeing lower model has a different stake in the global
OF CHANGING factors will cause consumers to live crime rates, increased property ornamentals market, but they
different lives than the generations values, and lower demands on generally can be divided in two:
before them and they will develop health services. a net importer or a net exporter.
DEMAND FOR
different behaviour leading to different
b) Consumers themselves will The importers will see a value chain
purchasing decisions which are likely
recognise the economic and health with economic benefits concentrated
to impact the market for ornamental
and well being benefits of greening in retail, wholesale and services,
horticulture. That change in demand
ORNAMENTALS
their own living space. Examples are; whereas the exporters see a value
raises the question of whether the
improved life quality, lower levels chain around growers and farm inputs.
ornamentals industry should reconsider
of illness, anxiety and mental stress, The obvious exceptions are the mature
the way it positions itself.
and better performance of children domestic producers who, by tradition,
It is widely accepted, and taken as at school. have grown to be home to the entire
We have studied the following factors on the supply side, however fact, that the world is urbanising at an value chain. In this part of the research,
not all countries have data consistently available increasing pace, and that we humans c) A broad range of the private we have only covered a select
have an innate tendency to connect sector is expected to recognise number of producers.
• Climate & natural resources; water, land, energy with nature (called biophilia). the economic benefits of green
space and integrate flowers and The researchers have taken data from
• Availability of farm inputs; consumables, fertilisers, chemicals etc. The irony of these two factors is that plants into their business models. secondary sources and a series of
they result in a paradox that may hold As an example, the recovery rate interviews with local players in the
• Access to finance; attitude of banks and lenders to finance growth the greatest opportunity for growth of patients in a green surrounding respective countries. In general, we
present a set of factors that influence
• Government regulations & policy; taxes, subsidies, labour of the ornamentals industry. inside a hospital is shorter because
of the connection to nature. the ability of a country to maintain
• Trade barriers; taxes and phytosanitary regulations While the world, as a whole, will see or develop the production volume,
a tremendous increase in consumer When assessing options to capture combined with the rationale of their
• Labour; availability of skilled and unskilled workers and labour cost spending, it is the challenge for the that demand, it is obvious that the trading partners on the demand-side.
• Supply chain and logistics; interconnectedness of the production areas ornamentals industry to capture its industry will face opportunities and As an example; while demand of a
fair share of this growth in the constraints on the supply side trading par tner may boom, a large
with local and global hubs. following segments: and production base. number of constraints potentially
• Natural events; sensitivity and resilience to natural disasters and climate change inhibit the producers from
a) Governments, stimulated by the The main question is if the production capturing their share.
• Positioning and differentiation: ability to grow unique crops or varieties general public, will develop an side of the current value chain is
increased demand for urban green resilient enough to deal with the
to serve specific markets, or only compete in the mainstream.
space which will affect government changes ahead. For this assessment
policies on all levels from national we have taken the country selection
6 www.aiph.org www.aiph.org 7
IVP REPORT | PRODUCTION AND MARKETS JULY 2019
T
o illustrate this point, here are 1. Expenditures rise to meet income member of the Boomer, Gen X, or Gen
two examples of implications: (C. Northcote Parkinson) Y generations, quality of life is a “higher
order” need that is important to them.
2. People afford what they want
WATER & (Lowell Catlett).
For example, although the economic
RESOURCES downturn has increased anxiety on the
The ornamentals industry’s (growers, part of Baby Boomers about to retire,
The scarcity of natural resources is driving service providers, and retailers alike) they are nevertheless proactive in seeking
many industries towards alternative, job is to make sure they are providing innovative solutions to dealing with age.
more sustainable production systems. 2 in such a way that they capture their They view their new stage of life as one
The ornamentals industry is in some cases, fair share of 1.Thus, the green industry, of activity and fulfilment rather than idleness.
applauded as an example of sustainability, positioning itself in a way that its products
and in others criticised for use of chemicals, and services are considered as necessities Gen X is the most “time-starved”
intensive water use, or lengthy supply (not mere luxuries) will be better placed generation, often juggling career and
chains. As in any industry, it eventually to deal with the changes in buyer motives family obligations, but they maintain a
comes down to the responsibility taken by and will be more likely to keep flowers strong commitment to work-life balance
individual players who are either pushed by and plants on the shopping list, even in their lives. Gen Y are just beginning their
regulations, or an intrinsic drive. In all cases during economic downturns.The value adult lives with their first homes, first jobs,
it is clear that in a more transparent world, proposition for the green industry in the and most importantly, first independent
consumers, retailers and governments will future must focus on the unique ways incomes.They are trying to find the right
develop a stronger demand for sustainably in which quality of life is improved for balance between spending for necessities
produced ornamentals. Some producing consumers. Much research has validated and spending for entertainment.This
countries will be able to keep up by the emotional and environmental generation is concerned not just with
introducing more efficient production benefits of flowers, plants, and trees. In function and utility but also with style.
systems, while others lag behind due to a nutshell, green industry products and
All of these generational attitudes come
lack of availability of resources, or lack services improve emotional health, boost
down to one thing – enhancing the
of investment capacity. wellbeing, enhance hospital recovery
quality of their lives through emotional
rates, employee innovation and ideas,
well-being, ecosystems benefits, and
POSITIONING strengthen feelings and expression of
economic paybacks. Research shows that
compassion, decrease worry and anxiety,
In past decades a large number of there’s no better way to do this than
build stronger communities, mitigate
academics have researched the benefits through the daily use and enjoyment of
environmental externalities, and improve
of green on humans. One of the key flowers, plants, and trees. All the green
the economic value of homes– to name
researchers and a strong advocate of industry has to do now is convince
just a few of the benefits.
the benefits of green is Prof Dr Charles consumers of this in a manner that they
Hall of Texas A&M University. In an The ornamentals industry cannot over- view their products and services as
article he presents two lesser known but emphasize the importance of this quality necessities instead of luxuries.This will,
insightful, economic principles to consider of life message, particularly in focusing of course, make the industry even more
8 www.aiph.org when assessing the opportunities ahead its differentiation strategies in the future. recession resistant in the future.. www.aiph.org 9
for the ornamentals industry: That’s because of whether one is a
IVP REPORT | PRODUCTION AND MARKETS JULY 2019
CANADA
ECUADOR
USA
EUROPE
Rest of the world
3 | MATURE
JAPAN
COLOMBIA KENYA CHINA
Mature Mature
exporting
producer
domestic
producer DOMESTIC PRODUCERS
B
ased on the identified target and consumer demand. In other words, their society’s cultures. They are
VIETNAM
groups and the markets they can they are highly self-sufficient and satisfy all found in the current world cores
INDIA
be found in, we will take a closer the majority of their demand with and are the largest consumption
look at the dynamics in some of the their own production. In most cases, markets now and will remain so
MEXICO most prominent markets. This takes external trade is an exception, either by 2030. It is in these markets that,
ETHIOPIA BRAZIL us back to the earlier classification of to complement demand with specific during the forecast period, the biggest
the ornamentals supply and demand products or seasonal demand peaks absolute demand and absolute
Emerging Emerging markets we used as guidance where external trade flows are needed. demand growth is expected.
Production
exporting domestic for analysis (see diagram on
Mature domestic producers are
producer producer opposite page).
markets like North East Asia (China
The mature domestic producers are and Japan), North America and Europe
countries which are among the largest which have a strong production base
Rest of the world in terms of ornamentals production and ornamentals are at the heart of
Consumption
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IVP REPORT | PRODUCTION AND MARKETS JULY 2019
CHINA
DOMESTIC only 15,127 are medium to large The farmgate value increased from
sized farms; the remainder being small around €8 billion in 2006 to nearly
PRODUCTION
holdings. All are feeding into one of €20 billion in 2016. In the same period
Over the past ten years, China has the 3,286 regional wholesale markets. the production area grew at a slightly
seen a sharp increase in demand Production and trade is not privately lower pace doubling to 1,300,000
for ornamental crops. Production is organised as it is in other markets. hectares in 2016.
fragmented over a large number of China also has a total of 1,881,153
flower growers – 85,406 of which farmer growers who are small
holders that sell direct locally1.
Figure 2: Total Farm Gate Value of Ornamentals in China (bn Euros)
20
25
16.5 17.5
20
11.8
9.1
BILLION EURO
15 7.6
10
5
0
2006 2008 2010 2012 2014 2026
Source: Chinese Ministry of Agriculture Statistic Bureau
12 www.aiph.org Credit: Serjio74 / Shutterstock.com www.aiph.org 13
IVP REPORT | PRODUCTION AND MARKETS JULY 2019
2 Chinese Ministry of Although the value of imported TRADITIONAL ONLINE RETAILERS CHINA’S SALES than through traditional channels, in 3 AllChinaTech, 2016
Agriculture Statistic
ornamentals also grew, the impact is from one respondent that purchases comparison to traditional channels,
Bureau, 2016 FLORISTS Data provided by Alipay, the number
CHANNELS FOR 4 Tianyi Li
relatively low. In 2016, China reported of €500 and more are very common. consumers overall are spending more
an import value of nearly €200 million. In total, 121 traditional floral retailers one provider of online payments ORNAMENTALS money on fresh products online.
5 Statista
However, when analysed, the lion (florists) were interviewed. Two in China, gives an impression of the THE EVENT Flowers and plants are still mainly
Furthermore, when comparing the 6 NABSO Kunming,
2010
share of that consists of flower bulbs categories of questions were asked. online shopping behaviour of Chinese
INDUSTRY bought through traditional sales
results across city tiers, consumers in
7 KPMG, 2015
(sourced from the Netherlands, New One category related to consumer consumers3. In 2015, the Alipay users tier 1 cities are more likely to purchase
channels such as florists, super
Zealand, and Chile) and other starting behaviour, and the other focused on of Shanghai had the highest online Marriage is a major life event, fresh products through online channels 8 HKTDC Research,
and hypermarkets, gas stations,
material, like young plants from the how florists see the future for their spending on goods with an average especially in China where the compared to tier 2 cities9. Recently 2016
nurseries, agri-product markets6
USA and Japan. The share own businesses. annual spend of €15,000. Zhejiang had dynamics are unique. Historically, many new entrants have tried to 9 AC Nielsen, 2015
and flower markets. However, as
of imported fresh cut flowers is an average of €13,000 per person. the Chinese have spent big on jump into the online market of fresh
already outlined, online sales is 10 Nielsen
only 10% and originates from the In terms of consumer behaviour, the Such high rates make it relevant to weddings and currently the average produce, and many failed. This can
soaring and flower retailers such
Netherlands, Ecuador and Thailand. reported motivation use is gradually take a close look at the behaviour wedding costs a couple around largely be ascribed to the lack of
as RoseOnly and PandoraFlora are
changing from the stereotype of gift of buyers towards ornamentals and €9,0004 and is often co-sponsored standardisation, the high logistical
In light of huge domestic trade figures, capturing that growth. There are also
giving to a mixture of motivations. the underlying supply chain. The large by parents of both sides. Despite requirements and the perishability of
the export value of cut flowers from a large number of flower sellers on
Among these, own consumption is consolidated platforms were reluctant the fact that marriage rates are in fresh produce. According to HKTDC
China can be almost ignored at just Taobao, the largest consumer sales
gaining popularity among the young to co-operate in our research, but we decline, the rising middle class finds Research, the average cost for fresh
€8 million in 2016. However, China platform7. Furthermore, in recent
upper-middle class. This trend can be found some 20 online retailers active a wedding the perfect occasion to produce sold online in China is twice
does have stable growth of around 8% years, e-retailers have experienced
observed clearly in tier 1 cities like on Taobao that were open to being display their wealth and personal the average cost for other products
in the export trade of pot plants and an increasing demand for online
Shanghai. Less developed cities lag interviewed. We learnt the following: style. To get an understanding of the due to high storage and transport
foliage greens which stood at €350 fresh agricultural food products such
behind. Customers for florists are online orders are generally fulfilled by market value for ornamentals, we costs. Despite the challenges that
million in 2016. This is principally the as vegetables, fruits, meat and dairy
mainly between the age of 20 and traditional florists close to the delivery interviewed 12 wedding organisations retailers face, the market share of
result of regional trade in South products8.
40. For the young customers, simple point; these products are sourced in provinces with the highest number fresh produce sold online is expected
East Asia2. arrangements with light-coloured from local wholesalers, who in turn of marriages5. Respondents usually to increase by 60% by 2030 and reach
Although fresh food products bought
flowers are preferred as gifts. buy the flowers mainly from Yunnan cooperate with local retailers or even online currently contribute less than a total value of €29.6 billion10.
ORNAMENTALS Kunmings’ Dounan Flower Market. independent floral designers and 1% to total retail sales, e-commerce
Sales around events can be ten times
DEMAND IN wholesalers. The amount spent on operators perceive agricultural
The overall demand for fresh
higher than sales at other times. There are some retailers that produce consumer products is growing rapidly
CHINA The event with the highest flower flowers, but due to the fact that they
wedding arrangements by couples products as a highly attractive market.
and these perishable food products
is much higher in Beijing than the Since there is an increasing demand
sales is Valentine’s Day, as long as are located in Yunnan Province, we offer an opportunity and a challenge
Due to the weight and potential average for China. In the capital for fresh products offered online, this
the date does not conflict with suspect they are forward integrated in one. Ornamentals can potentially
global impact of the middle class in respondents mention a specific might point to opportunities for the
the Spring Festival. growers with an online shop. One piggy-back the new network and
China, we want to gain insight into the demand for impor ted flowers online sale of fresh flowers and plants.
value of ornamentals this group could of the most popular online retailers modalities, but in terms of value it is
In the second category of questions like large roses. The population of
represent. To arrive at such a forecast, on this platform is Rose Only. Their Research by Nielsen in 2015 provided likely that the perishable food stuffs
pertaining to their own business, respondents is too small to provide a
popularity cannot only be ascribed more insight into the consumers will have priority over ornamentals.
florists revealed that they are gradually representative status and outlook on
we will need insights on present to the high-quality product they sell; that are interested in purchasing On top of this will be the challenge of
expanding their businesses and trying the value of this segment. However,
behaviour. We could not find any they have strong marketing with fresh food products online. The maintaining a controlled atmosphere
various new channels or platforms the insights gained illustrate a picture
consistent information on consumer celebrity endorsements and offer findings showed that young urban for ornamentals and protection from
for selling and advertising. Retailers showing that higher spending is
behaviour for ornamentals demand unique packaging. Their flowers and consumers of the upper-middle class the hazards of a supply chain alongside
are diversifying by offering flower concentrated in large cities and the
in China. To fill this information gap, arrangements are perceived as luxury were the most interested in buying food products (e.g. ethylene damage
workshops, event design and even current generation is spending heavily
we conducted a series of qualitative gifts, and consumers are willing to fresh products through online retail from fruit). Are there any cultural
developing cross-channel concepts by on pre-wedding photo shoots which
interviews among flower retailers pay (extremely) high premiums. channels. Unlike the older generations, aspects here? Do Chinese want to
adding a coffee shop or restaurant to are used to announce the wedding.
in three channels. In September Regarding the questions pertaining young consumers prefer shopping and beautify their homes with flowers, do
their shop. Also, e-commerce is gaining These shoots are often done in
2016 a total of 153 interviews were to the financial information on buying comparing prices online rather than in they have space for this? Is it a given
more attention. WeChat is popular for sets decorated with flowers. The
conducted, mainly via telephone. behaviour, nearly all respondents traditional stores. The average age of that they would follow the west down
advertising and keeping contact respondent’s bandwidth of average
refused to provide information. A these shoppers for fresh produce was this route or could other products
Respondents were randomly selected with regular customers. spending varies between €800 and
few gave vague answers and pointed 33, they were mostly highly educated fill this gap without the necessary
across the major urban areas covered €1500. The highest average spend
Respondents think that problems like to the fact that the purchasing (a bachelor degree or higher) and had marketing etc?
in this research. The interviews were was €10,000 as reported by one
poor logistics, low quality and consumer power differs per region, income a household income with an average
open conversations, covering a series respondent in Beijing.
distrust for online platforms will limit level and seasons. We could identify of €19,000. Although consumers buy
of topics and have been conducted a bandwidth of €13 to €27 for the
further growth of online flower sales. fresh products less frequently online
by native speakers. average spend and learned
14 www.aiph.org Credit: Serjio74 / Shutterstock.com www.aiph.org 15IVP REPORT | PRODUCTION AND MARKETS JULY 2019
PRIMARY of food to meet rising demand from CHINA’S SUPPLY terms the hub•and•spoke model. well connected. However, the image
Chinese consumers. Looking into
PRODUCTION CHAIN AND In the coming decades, this will does not show capacity, and that
the future, China’s ability to provide have significant implications on is where the challenges will be for
CHALLENGES TO staple cereal foods, (rice and wheat) LOGISTICS infrastructure investment needed not only ornamentals. Despite the
FEED A GROWING from domestic sources is promising.
The urbanisation of China will follow
to interconnect these markets. The national policy arrangements and
POPULATION The question is whether China can
concentrated growth patterns
image below shows the current the execution, demand for logistics
effectively avoid the further decline back bones which may give the capacity seems to outgrow the
with the rise of a number of large
An overwhelming majority of the of available arable land. The demand impression that the cities where projected capacity in the various
urban areas following the core and
available arable land is used for for land for non-agricultural use growth is expected are generally modalities.
periphery structure, or in logistic
producing food in China. The room is strong, for example for road
for China to reduce land used for construction and urban expansion.
non-food crop production, in order The other is whether the Chinese
to produce more food crops is government can effectively boost R&D
minimal. Volume increase can only be investment, thus improving crop yields
achieved through yield improvement. and productivity per hectare. Figue 4: National Transport and Logistics Corridors
Meat consumption is expected to
increase strongly as income further The rising per capita demand for
increases. However, China’s capacity fresh produce is growing steadily.
to produce more animal products is We show this to illustrate a proxy
stretched. More meat and dairy output for ornamentals and illustrate a
will require more feed while China’s competition for domestic natural
ability to substantially increase its raw resources to grow produce and
feed output is very limited. China has ornamentals, as well as competition North Part of Northwest Transport Corridor
managed to produce a large amount for logistics capacity.
Transport Corridor
Figure 3: Per Capita Fresh Food Consumption in China (Kg) East Coastal Line
41
28 25
26 27
23 18
21 16 17 Transport Corridor Transport Corridor
16
Longhai-Lanzhou-Xinjiang Line Yangtze River
11 12 55
10 36 43
32 39 39
25
DAIRY 46
32 38 41 40 41 42
FISH
Transport Corridor
Shanghai-Kunming Line
MEAT West Transport Corridor
Huhhot-Kunming Line
FRESH
FRUIT
117 119 123 123 123 124 131
VEGETABLES
2000 2005 2010 2013 2014 2015 2030F
East West Transport Corridor
Source: China Statistical bureau and own calculation 11
Transport Corridor
South North Transport Corridor Xijiang River and the Pearl River
16 www.aiph.org www.aiph.org 17IVP REPORT | PRODUCTION AND MARKETS JULY 2019
Figure 5: Value Chain bottlenecks and optmisation
GROWING CONSUMER DEMAND
PRIMARY PRODUCTION TRADER/AGENT PROCESSING WHOLESALE RETAIL CONSUMER
NEED FOR VALUE CHAIN OPTIMISATION
PRODUCTION VALUE CHAIN DEMAND
• Small scale and dispersed • Inflexible value chain (long) • Growing purchasing power
• Seasonality • Inefficiences (small transport leads to more demand for
• Inefficient production systems unit volumes) high quality ornamentals
• Freshness
• Large post harvest loss
• Growing consumer
awareness on quality
In ornamentals, this raises the Moreover, China’s demand hotspots is not always feasible, but could be an and traders to feed that demand. The
question of whether the current for ornamentals are not within easy opportunity for specific propositions presented findings on China’s current
supply chain and its players are reach of current production centres. such as a hybrid garden centre and challenges suggest that the economics
equipped to deal with increasing We only have production data at a nursery operations. China’s industry of a comparison between domestic
pressure. They will have to face provincial level, but these indicate that players and various government grown flowers, possibly could be less
tremendous volume growth in not there are opportunities for improving bodies are working hard to develop advantageous than foreign grown
only product flow, but increasingly logistics, in particular transit time, solutions and policies to grow imports shipped directly to the
in information flows due to the shift and improvement of the cold chain. domestic production for the growing demand centres.
towards online platforms that tend to Reduction of waste could be a key domestic demand. Meanwhile,
rely on traditional players for order to satisfying rising demand whilst the Chinese market offers ample
fulfilment. The value chain will need preserving input resources. Localising opportunities for foreign growers
to optimise. production closer to future demand
18 www.aiph.org www.aiph.org 19IVP REPORT | PRODUCTION AND MARKETS JULY 2019
WORKING AGE BY POPULATION BY 2030 (MILLIONS) Figure 7: China Ornamentals Farmgate Value Forecast Scenarios (Bn Euro)
Figure 7: China Ornamental Farmgate Value Forecast Scenarios in Billion Euro
Figure 6: Top 10 Cities by Absolute Working Population 2030 Figure 7: China Ornamental Farmgate Value Forecast Scenarios in Billion Euro
70
70
60
60
50
50
40
40
30
30
20 20
20
10
10
0
BEIJING
TIANJIN
15.1 0 year
year
2006
2006
2008
2008
2010
2010
2012
2012
2014
2014
2016
2016
2018
2018
2020
2020
2022
2022
2024
2024
2026
2026
2028
2028
Figure 8: China Ornamental Retail Value Forecast Scenarios in Bn Euro
Figure 8: China Ornamentals Retail Value Forecast Scenarios (Bn Euro)
Figure 8: China Ornamental Retail Value Forecast Scenarios in Bn Euro
€ 180
€
€ 180
160
16.1 €
€ 160
140
22.8 6.6
SHANGHAI
20.4
€
€ 140
€
120
€ 120
100
€
€ 100
80
CHENGDU WUHAN €
€ 80
60
€
€ 60
40
CHONGQING
12.3 €
€ 40
20
€
€ 20
9.8 € 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
GUANGZHOU
2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030
DONGGUAN
SHENZHEN
FOSHAN Simple linear extrapolation
Simple linear extrapolation
7.2
8.9 Scenario on overall retail sales across all categories
Scenario on past
Forecast on overall retail salesproduction
ornamentals across all categories
growth
Forecast
Scenario on
on past ornamentals
weighted production
variables growth
of production and demand
Scenario on weighted variables of production and demand
12 Selling prices received
ECONOMICS ORNAMENTALS 2 A growth scenario based on To summarise the forecast; we are the direction for China’s ornamentals 13 Extrapolated figure
by domestic producers of China MOA and
sure of the demand growth in China; industry is clear: by 2030 we expect
for their output. The FORECAST CHINA compound annual growth of the
MOC reported
prices included in the
Nearly 80 percent of the Chinese industry which is at nearly 22%. the macro and socio-economic factors China to be a super power, if not the farm gate values.
PPI are from the first economy pivots around three Previous research often showed Based on the same dataset as are heavily researched and frequently leading country in the ornamentals Extrapolation is based
commercial transaction. economic cores: Beijing, the Yangtze a linear growth for the forecast in scenario 1. updated by global and national market with a conservative estimate on World Bank long
term crude economic
River Delta (Shanghai) and the Pearl period. We developed a model which institutions. Although developments of a retail value in the range of €100
3 A scenario fully based on the growth, and we have
River Delta (Guangzhou and Hong allows for a variety of variables and in the past show a steady direction billion13. Most of that demand will be adjusted for shifts in
Kong). However, if we look at where average consumer spending of growth, the ornamentals industry met with domestic grown product.
attributed weights. This is summarised socio demographic
the growth of the working class is increase over the past 20 year remains vulnerable to many external composition and income
in four scenarios:
to be expected, the smaller cities period which is at 12.98% variables. Factors out of the industry’s development. The figure
excludes the service
around the cores of these deltas stand 1 A simple linear extrapolation control like natural resources, climatic
4 A scenario based on a combination segments and the public
out. Three inland cities also attract based on data of the past farm conditions, government policies, spending on city parks
of the above plus a weighted
attention with their growth of the gate value across all ornamentals consumer behaviour, etc are at play
average of both the variables that
target group: Chengdu, Chongqing, growers between 2006 and 2016. around the development of this sector.
affect production (such as20
farm
and Wuhan, mainly caused by large Data was obtained via the China
inputs and the producer The forecast we have made not include
numbers of migrant workers. Flower Association databases of the
price index)12. these variables. So, provided that not
Chinese Ministry of Agriculture
too many disruptive events occur,
www.aiph.org 21IVP REPORT | PRODUCTION AND MARKETS JULY 2019
JULY 2019
Figure 9: 2016 Basket Value and Unit Price of top 5 Cut Flowers at wholesale level
€ 2.50
GERBERA
CARNATIONS
€ 2.00 CHRYSANTHEMUM
ILILUM
ROSES
€ 1.50
€ 1.00
€ 0.50
€
China MOA Taipei Flower Auction Royal FloraHolland USA Wholesale prices
Source:
Source: ChinaChina MOA
MOA (CHINA (CHINA
Ministry Ministry
of Agriculture), of Agriculture,
International Statistics – FlowersAIPH Statistics-Flowers
and Plants and Fleurs)
2017 Yearbook (AIPH & Union Plants Year Book 2017)
The question remains where the The supply and demand gap is Summarised:14: 14 Large variety
of sources and
supply will come from? Without theoretically two-fold as China could
• The four largest urban areas cover research calculations
doubt, China will continue to develop further develop into an exporter of
domestic production to be optimally ornamentals. This is an ambition of 45 cities with a population of larger
self-sufficient. This will leave a gap respondents, however other inhibitors than 1 million.
between supply and demand due like plant breeder’s rights, trade
• The total population in these four
to seasonality, climatic and resource agreements, phytosanitary regulations
Metro Clusters is 471 million people
constraints or simply the economics or logistic interconnectedness are
(34% of total China) this is projected
of production. Most of these variables important pre-requisites to enable
to grow to 573 million in 2030 (39%
cannot be reliably predicted, so we a strong export position. This is not
of total China).
have taken production economics as a developing quickly so we do not
benchmark to assess where supply is expect to see a significant increase in • Their combined total consumer
likely to come from. We have taken the export volume in this forecast period. spending in flowers and plants is €16
average 5-year unit values at wholesale billion in 2017 (40% of total China)
level of each of the top 5 cut flowers SUMMARY which is expected to grow to €57.5
in a combined basket. This shows a ORNAMENTALS billion in 2030.
significant difference and illustrates the
barriers for global competition with
IN CHINA’S • Additionally, the local governments
China’s domestic production. URBAN CORES of these four areas spends €4.6
billion per year on city parks and
In light of the highly competitive We established that growth is urban greening, for maintenance
advantage on price that local Chinese concentrated in the urban working age as well as new installations and
growers have nowadays, addressing group and selected the four largest replacement. In 2030 we project this
the mainstream demand of China metropolitan clusters for a case study to be €9.8 billion per year.
with imported ornamentals will be in each area. This is summarised in
difficult. Based on the Producer Price metro sheets. We use those metro
Index, Chinese growers are likely to sheets to present the status quo and
retain that advantage throughout the forecast on a consistent fashion for
forecast period. For the higher-value Metro Clusters or specific cities around
and niche products there will be more the world.
opportunity for other countries to
export to China.
22 www.aiph.org www.aiph.org 23IVP REPORT | PRODUCTION AND MARKETS JULY 2019
UNITED STATES
DOMESTIC value consists of landscaping, lawn 15 The figure is
calculated and
care, chemicals, fertilisers, irrigation
PRODUCTION annually updated
T
equipment and services, accounting by Texas A&M, Dr.
he contribution to the GDP of for just over €21 billion in 2016. C.R. Hall
the entire constellation of the 16 US Department
The difference between the USDA
ornamentals value chain in the of Agricultural
Census data and these figures is Services National
USA added up to an economic value
partially explained by import flows Agricultural
of €164.7 billion in 2016. This includes
which accounted for €1,68 billion Statistics Service
the influx of capital goods, consumables
in 2016. The majority of domestic 17 USDA Census 2016
and services which other industries and
production consists of pot plants. Cut
sectors are tapping into all along the
flowers mainly comprise tulips and
ornamentals value chain15.
Lilium, and the remainder is imported
The farm gate value of all ornamentals at an annual value of €1,7 billion.
grown in the United States is reported
The outlook for the development
at €4.94 billion for the calendar year
of domestic production till 2030 is
2014 in what was the last census of
conservatively estimated at just over
horticultural specialties conducted by
€6 billion in farm gate value. The
the USDA-NASS16. The census showed
growth rate is based on a set of
an average annual growth of 3.44%
demand driven economic factors,
since the previous census in 200917.
complemented with a producer
US industry association, AmericanHort price correction.
quotes the more widely used figure of
€28 billion in 2016 for the value of the
ornamentals and gardening market.
Of this, plants account for €5 billion
6 Sourced from sec-
and cut flowers for €2 billion. The
ondary data sources
from UN Habitat, majority of the total aggregated
OECD, World Bank
24 www.aiph.org www.aiph.org 25IVP REPORT | PRODUCTION AND MARKETS JULY 2019
$196
BILLION GREEN
INDUSTRY COMPLEX
$59
BILLION
END CONSUMER
$92
BILLION
STRUCTURAL
CONSUMPTION RETAILING INSTITUTIONAL SERVICE FIRMS EXPORTS ASPECTS
SERVICES Garden centres, grower-retailers
florists, supermarket floral depts
School; churches, hotels; resorts
hospitals, restaurants, interior
Bouquet manufacturers,
wholesale florists, Landscape
Market area to market area,
between states, Canada, Europe
Mature stage, fragmented
/bipolar, consolidating,
Financial, distribution, discount mass merchants, landscapes, golf course, contractors, maintenance firms, shakeout, low ROI,
marketing, trade assn, home improvement centres, corporate landscapes arborists, re-wholesalers
media/pubs.
overleveraged, shrink,
farmer markets, hardware stores, public areas (ROWs) landscape architects supply variations,
mail order & internet community parks
hypercompetitve,
innovation
treadmill
-3%
DIRECT
+14% +10%INDIRECT TRADE
MARKETING MARKETING
REGULATORY PRODUCTION NURSERY & BREEDERS IMPORTS ISSUES
Trade agreements, Ag colleges; GREENHOUSE PROPAGATORS Colombia, the Netherlands, Distribution, water, housing,
trade barriers &
research farms FIRMS BROKERS Ecuador, Canada, Guatamala, labour, demographics,
import restrictions Australia, Israel, England, biophilia
APHIS/plant protection Costa Rica, Hawaii, Philippines,
quarantine Japan, China, Africa
patents, royalties & copyrights
environmental protection
regulations
pesticide and chemical
regulations
Peat & bark Oil, fuel & Wrappings,
Structures, tools, Paper products:
Plant protection (catalogues; signs; products other petroleum containers,
equip & machinery products products
packaging) labels, Irrigation
EXTRACTIVE &
MANUFACTURING METAL CHEMICAL PLASTICS FERTILISER PAPER
WORKING PLANTS MANUFACTURING PLANTS MILLS
MINING OIL WELLS FISHERIES FORESTRY
26 www.aiph.org www.aiph.org 27IVP REPORT | PRODUCTION AND MARKETS JULY 2019
Figure 11: USA domestic production forecast
€ 7.0
€ 6.5
€ 6.0
€ 5.5 Ottawa
€ 5.0 Toronto Montreal
Detroit
Chicago Boston
€ 4.5
San Fransisco
Newark
€ 4.0 Baltimore New York
Los Angeles
2014 2016 2018 2020 2022 2024 2026 2028 2030
Philadelphia
Simple linear extrapolation Washington DC
San Diego Arlington
Scenario on overall retail sales across all categories
Forecast on past ornamentals production growth
Scenario on weighted variables of production and demand
INHIBITORS penalties for employers and workers). shortages. It is estimated that the United approximate datasets is to provide GDP, on less than 2% of the land area19. other is calculated at €28,84 by Royal 18 in terms of
population and
We have seen numerous cases of growers States alone currently lacks 300,000
OF GROWTH some guidance to players and policy This metropolitan area is characterised Flora Holland and only pertains to
GDP
who cannot expand their operations due to 350,000 truck drivers. An extreme makers. by a higher level of education (22,6% cut-flowers and pot plants.
19 American Institute
The United States is seeing, year on to the lack of workers even though example can be found in the state of have a bachelor’s degree or higher),
for Economic
they have the money to invest. Oregon where the entire backbone In this research we have made an effort higher median incomes (8,4% higher)20 When we place that second figure
year, increasing consumer spending and Research
of logistic road linkages has been lost to provide more detail on consumer and is generally younger with a median of cut-flowers and pot plants in the
higher demand volume in ornamentals, 20 US Bureau for
Government policies do not currently due to the bankruptcy of the Portland and public spending on ornamentals.The age of 34.2 years compared to the context of the specific demographic
yet the two major inhibitors for further Labour Statistics
provide a solution to this. We found an Port. This has exponentially worsened forecast is based on proxies from available national median of 37.9 years21. The and economic situation and outlook
growth are not seen at the demand side, 21 US Census Bureau
example of two states; Alabama and the already substantial challenges for macro datasets combined with industry region can be considered an economy of the area, the calculations reveal
but are government policy and industry
Arizona which have recently tightened Oregon growers. The state of Oregon is specific factors for ornamentals.To limit the in itself with its own characteristics new insights that can be relevant to
constraints: labour shortages and
their legislation on restricting foreign a relatively large producer of cut flowers divergency in the forecast we are applying for supply and demand dynamics. Such players addressing this, or comparable
logistic challenges is what keeps North
workers by making it illegal for anyone to and foliage of which 80% were sold into this on a city level and to specific target urbanised areas have different socio metropolitan areas. The per capita
American growers awake at present.
support illegal immigrants. A small gesture other states. Their competitive position groups rather than the country as a whole. demographic compositions than the spending in the Bos-Wash Area is at
like giving a bottle of water to an un-
WORKFORCE IN is now highly uncertain due to the This changes the common perceptions of country they sit in. This directly affects €49,00, more than double that of
allowed immigrant can result in a severe double challenge of a lack of drivers market and segment values. For instance, the national average. The following
HORTICULTURE penalty for the provider of that gesture. in the commonly accepted per capita per
the consumer behaviour and their
factors are at play:
and a lack of logistic linkages, resulting spending on ornamentals. The key
The penalties for an employer hiring in an upward cost spiral. spending we found a richer understanding
The USA is facing major challenges to findings are categorised as follows:
align the work force with the demand
an illegal worker are high. Research has and significant higher spending. MAJOR LIFE
developments. Industry Association
shown that this policy change has taken ORNAMENTALS In North America, the densely populated
GENERAL PER EVENTS;
away 10% of the workforce of Alabama
AmericanHort indicated that 72% of
of which most workers relocated to the
DEMAND areas with the greatest contributions to CAPITA SPENDING WEDDINGS AND
the entire agriculture and livestock
adjacent state of Florida.This Alabama FORECAST national GDP are the focal points for
The per capita spending figure is
FUNERALS
workforce (including horticulture) is this stage of the research:
policy has not only negatively impacted calculated by the total consumption
foreign documented. It is estimated that The afore-mentioned dynamics for the We have studied two major life
the GDP and competitive position of value divided by the total population.
over 50% of that foreign workforce is ornamentals industry are based on We have conducted three case studies events in which flowers are culturally
the state, but it also strengthened their It is an aggregated indication on the
creatively documented, meaning that ongoing research studies conducted by into the above areas. At this stage embedded and a service market of
competitors in Florida and slightly annual consumer value per person,
the individual workers are not allowed academics, government institutions and we highlight the largest18 urban area mainly traditional florists has grown
increased Florida’s GDP. across all age groups, income classes,
to either live, work or both in the private industry bodies. In general, there in North America; the North•East to serve; weddings and funerals For
Unites States. Labour shortages are the is a wide consensus on these figures, Corridor, also known as the Bos•Wash gender, background, and area. We found
current main concern among growers.
LOGISTICS AND megalopolis. This urban area stretches two reported per capita spending
instance; New York has a wedding rate
despite the fact that large datasets of 1,36 that is nearly double that of
The shortage is caused by stricter ROAD TRANSPORT on ornamentals are hard to find, from Boston, MA south to Washington values: One is €83 and is provided by the average national rate (0.71) and
federal immigration policies and stricter limited in scope and often inconsistent. DC. It is home to 48.7 million the US department of Commerce, the surrounding cities (0.9). It is likely
Logistics are an issue in itself and an which includes cut-flowers, plants and
enforcement on illegal workers (heavier The common objective of these inhabitants (15% of the USA) and is that the wedding market in New York
indirect consequence of work force garden (products and services), the
responsible for 18% of the national is an attractive destination market
28 www.aiph.org www.aiph.org 29IVP REPORT | PRODUCTION AND MARKETS JULY 2019
Figure 12: Market value ornamentals for the top 3 urban clusters in the USA €27.07
€17.87
22 City of New York for couples, which is reflected in the estimated at €184.7 million in 2030 and households with annual incomes
23 Ibis World research high number of wedding planners in a conservative scenario. This figure over $75,000.
€11.53
24 Elite Publishing and wedding venues. excludes the cost of installing and
25 US census data maintaining the cemetery sites. The same report observes an €10.03
The average budget for weddings in New emergence of new gardeners which
26 Crains New York €7.68
“grave situation” York is €73,00022 nearly three times as The two researched major life events is the age category of 18 to 34 years.
27 GIE Media Lawn high as the national average which is combined result in an additional per This trend may in part be driven by the €6.49
and Garden budgeted at €26,00023.To calculate the capita spending of €25.85 in 2016 and quest for health-conscious life styles.
wedding market value for ornamentals are estimated at €35.26 in 2030. This
in this area conservatively, we use the is an additional spending, since the The average spending per household
national average budget for flowers and main component is based on service on this category gradually increases as 2017
decoration of €1,97524. With a total of rather than product-cost. As such this the homeowner ages. The 60-plus age
438,390 weddings per year in this area, service segment is not included in category tends to spend up to €375,
the current market value for flowers and the common industry figures, which while the working age spend averages 2030
plants is well over €865 million. In the are based on a sum of the product’s €319. The national average household
course of the forecast period till 2030, domestic farm-gate value plus total spend on gardening is €337 in 2016
FLOWERS & PLANTS GARDEN & OUTDOOR SPACE PUBLIC GREEN URBAN GREEN
the development of this figure will not be import value which is then increased and forecasted to grow to €438 in
linear. Factors in play are, for instance, an with standardized margins for players 2030. In the target area we have
increasing number of unmarried couples, further downstream along the value calculated a total market value for this to €10.2 billion. This comes down to such a city approach is a representative most from this demand growth 28 Trust for Public
an ageing population, slowing population chain. Moreover, this market is served category of €2.6 billion. a per capita spending of €121 in 2016 case for other densely populated which will be over 54% by 2030. Land, City Park
and €165 in 2030, equal to double the metropolitan areas in North America. Facts 2017
growth, etc.The conservative forecast for by the so-called event industry which is
The growth in the forecast period will • Also, Canada is positioned well to
2030 would be that the wedding rate not consistently included (or excluded) highest present day value of €8329. 29 US department
likely be non-linear to other economic We have calculated the economics take advantage of this, to increase
will grow more in line with the national from the prevailing data. of commerce
indicators due to trending factors like
average and that the annual number of CONCLUSIONS FOR of demand for ornamentals for the their current export value of €250
health consciousness (home-grown)
weddings grows linear to the population GARDENING AND and an ageing population with avid THE URBANISED
three largest urban clusters in the million in mainly pot plants.
USA. Divided over three categories,
growth.These two factors taken into GARDEN CARE gardeners with time and money to NORTH-EAST of which public spending is by far • The number of working-age
account, show a total of 476,297
weddings in 2030 with a total market
MARKET spend. The estimated value of this OF THE UNITED the greatest. The Mid West cluster is people in North America is not
segment amounts to €4.05 billion growing as fast as either of the
value for ornamentals of €1.178 billion. At first sight the garden market in this in 2030, or €65.44 per capita in
STATES home to 4 cities in the top 10 of the
other two groups of consumers
highest public spending per capita on
densely populated area would seem the target area. urban green spaces. They spend an but they represent a growing value.
Funerals are an inevitable consequence of • The demand growth till 2030
small, as space is rare and expensive. average of €240 per capita per year. Cost consciousness and rising
life and an industry in itself.The mortality will be driven by an increase in
rate of the ageing population in the USA
However, around the metropolitan PUBLIC SPENDING purchasing power (36%) rather It is also home to the city with the inequality need to be factored into
cores, the peripheries and semi-
will increase from 63 to 89 per thousand ON URBAN GREEN than population growth (9.66%) lowest spend; Detroit at €19 companies’ strategy for capturing
peripheries provide a wealth of the purchasing power of these
in 203025. In the target area this implies
green space to compensate the SPACE • Specific consumer groups show
per capita.
consumers. The unique needs of
an annual number of just over 300,000
funeral ceremonies, increasing to 550,000
lack in the high-rise down-town,
The urban greening revolution is on steep increases such as the 60-plus CONCLUSION these consumers are creating
and less affluent urban areas. opportunities.
ceremonies in 2030.The average cost its way worldwide to shape the cities age group and the working class.
UNITED STATES
of funerals will increase non-linear to The available data for this segment show of tomorrow, but established cities are Looking ahead, if their fortunes
• The per capita spending in the
other demographic indicators due to a doing their best to keep up the pace by • The market is mature, but huge and
that the market value in the product studied area is higher than the improve through wage growth that
decreasing number of undertakers and ensuring that their populations all have with growth in specific segments
group of landscaping, chemicals (crop national averages presented in is higher than expected or through
scarce space at cemetery sites and easy and close access to public parks. which brings opportunities for new
care and fertilisers) and lawn services other research. This is likely due to lower debt, it will be interesting to see
more personalised ceremonies such Design, build and maintenance costs propositions.
(maintenance) is extremely concentrated the demographics and economics if their cost-conscious choices endure.
as eco-burials26. in just 6 nation-wide companies taking are typically covered in city budget
of an area specific demand profile, • During the forecast period the
30% of the market value27. plans and reliable data are available. • Even in North America, inhibitors
consumer behaviour, a service ornamentals market for flowers,
Despite the new economic We have collected the total and per for growth are on the horizon.
industry catering to major life plants and gardening is expected to
opportunities this ageing population A survey by NGMRC also reveals that capita spending of the major core The challenges growers are facing
events, and relatively high public grow 54% by 2030 in the USA
provides, we have calculated the the highest spending was among Baby cities in the target area and from there on logistics and labour cannot be
spending on urban green space.
forecast period with a linear cost Boomers, who traditionally are avid extrapolated to the total Bos-Wash solved overnight and are likely to
• For exporters to the USA,
increase to provide a conservative gardeners. Other characteristics of area. The current market value of public Further research to enrich and validate bring some scarcity and raise retail
opportunities arise particularly for
outlook. This means that the market consumer profiles stand out, such as spending in urban green spaces is these projections is needed, but there is prices as a consequence.
cut flowers from Colombia and
value for ornamentals in the target married households, college graduates €5.9 billion28 and projected to grow definitely a trend and it seems likely that Ecuador who are expected to benefit
30 www.aiph.org area is €73.8 million in 2016 and www.aiph.org 31You can also read
