Floribusiness Colombia feels the pressure on flower prices

Colombia feels the pressure on flower prices

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Colombia, the second largest flower exporter in the world, is getting back on track after many years of conflict. However, the flower prices are under pressure. Augusto Solano, president of Asocolflores, wants to try and change the situation through an increased focus on demand. “A big promotional campaign, a collective effort of the entire flower sector, should lead to results.”

Paul Smits

Roses and bouquets are Colombia’s most important floriculture products. The prices of those products are currently under great pressure. On behalf of flower trade organisation Asocolflores, Augusto Solano says he can’t complain, but he does feel an increased focus on demand is needed.

President of Asocolflores Augusto Solano (r) and the Dutch Prime Minister Mark Rutte.

Solano: “There’s still a lot to be gained with consumers when it comes to flower sales. Think of promotional activities aimed at increasing consumption. As a product, flowers compete with chocolate, perfume and wine. Consumer spending on flowers is too low, even in a country like the Netherlands. The main challenge is getting consumers to buy flowers more often than just for special occasions. Buying flowers should become a habit. A big promotional campaign, a collective effort of the entire flower sector, should lead to results.”

Millennials

According to Solano, low consumer spending on flowers is a cultural phenomenon and particularly problematic in the USA. “The USA is very important for us. That’s where most of our exports go to and we are their largest supplier.” The president of Asocolflores points out a specific consumer group with a lot to be gained: the Millennials. “How can we reach this generation? They are the buyers of the future. They’ve grown up with e-commerce and sustainability and they’ve got a different taste.”

As the second flower exporter in the world, Colombia is often compared to Ecuador, their neighbour and third biggest flower country. Solano feels that the fact that Colombia has its own currency – the peso – is a great advantage compared to the more southern Andean country, which has a dollar economy.

“If you’ve got your own currency, there are ways to compensate for economic developments. You can move along with the ups and downs. Companies can use things like derivatives and hedging to deal with currency risks. Flower traders know how to manage fluctuating exchange rates.”

In a strength-weakness analysis of Colombia, transport options and labour come up as well. As for the first aspect, things are easier in Colombia than in Ecuador.

Solano: “We’ve got two airfreight hubs: Bogotá is the largest, Medellin is the second option. Most of all South-American cargo flights go through Bogotá, they handle more cargo than other big countries in the region, like Mexico or Brazil. There are many flights, passenger as well as cargo, to interesting distribution areas in the Far East: Japan, China, Australia. As for sea transport, we can ship products across the Pacific Ocean, as well as the Atlantic Ocean. Having said that, sea transport does have its limitations of course.”

Strict labour laws

Solano is more concerned about labour. Even if the working week is longer in Colombia (48 hours) than in Ecuador (40 hours), he feels the laws are too strict and he also points out it’s hard to find staff. “Especially young people. There are some stories about the flower sector, which are simply not true. About bad practices involving illegal immigrants, for example. I’d like to ask foreigners in particular, to come by and see for themselves what it’s like.” With this, Solano is referring to certain NGOs which, according to him, have been sharing unjustified complaints.

In addition to the issues already mentioned, such as labour, imbalance between demand and supply, transport options and the exchange rates, Asocolflores focuses on further improvements for the sector. Solano: “Think for example of a more efficient market for currency options. Procedures for plant health could also be faster. And the high energy costs and slow handling at airports are things to look at, too.”

A major complaint of the Colombian flower sector is the current rose price combined with an oversupply. This is especially true for the USA, the most important market for Colombian flowers. When Russia was hit by a crisis, a lot of the Colombian trade to this country was moved to the USA. Jaroma Roses, led by Jaime Rodriguez, experienced the consequences of this change.

Rodriguez: “There are too many roses. And that isn’t just true for Ecuador, but also for other competitors, such as the Netherlands and Africa. Ecuador has an even large acreage of roses than Colombia at the moment, but our productivity is higher. We’re trying to diversify our sales, for example by selling to the United Arab Emirates, Australia and Asia, but with such low prices, that’s not enough.”

Getting up early

The Ecuadorians always speak very proudly of the high quality of their roses. Rodriguez downplays this somewhat. According to him, the quality of Ecuadorian roses isn’t that much higher than that of Colombian roses. In any case, the difference is smaller than before.

The president of Jaroma Roses confirms what Solano said earlier, about the attractiveness of flower farms as a workplace. “Young people no longer want to work at a nursery. It means getting up early and living in a rural location. Young people prefer factory work in the big cities.”

That brings Rodriguez to another area where Colombia can improve: the automation of production. “If you can no longer find the necessary staff, you need to get machines that can do the work. We tried one from the Netherlands in the past, but that wasn’t quite the right size. That’s because our roses are different, they’re bigger. If we were to buy another machine, it would have to be a better fit.”

Rodriguez thinks that companies will be more concentrated in the future. Colombian farms are already larger than most nurseries in Ecuador. “I expect that there are going to be around five large groups that will own 60% of the sector. The large players will be taking over many nurseries and they’ll be focused on growing large volumes.”

The vision he has for his own company is different, though. He wants to differentiate Jaroma from the big players. “Through high quality and new varieties. We visit breeding companies each year to stay on top of the new trends.”

Low prices

Rodolfo Danies of rose company El Milagro confirms they are also affected by the low prices. “We supply to Europe and Russia. Prices are determined by the buyers on those markets and they’re really low at the moment. I’m sure that this is due to overproduction, in Ecuador for example. Although, in principle, the two countries serve different customers.”

Danies means that Colombia is more focused on volume, mostly supplying to retailers, and Ecuador, with its smaller nurseries, is more focused on quality. “But”, Danies continues: “Buyers should look at the name of the company they buy from, not just at the country of origin. El Milagro produces a superior quality of roses, grown with great attention to detail, such as large buds and shiny leaves. We want to differentiate ourselves through high quality and good customer service.”

If the price won’t become more favourable, El Milagro will try to do something about their costs. “We hope that the government will do something. Things like labour, transport and fertilisers are all very expensive. Those are things that can be changed, for example by lowering taxes, introducing subsidies or easing the rules.”

2,000 ha of hydrangea

El Milagro and Jaroma are both rose growers, based near Bogotá. FlorAndina, on the other hand, produces hydrangea close to Medellín. Sales manager Andres Escobar: “We were the first nursery here with this product. But we were joined by many others, especially during the past couple of years. Three years ago, there was around 700 ha of hydrangea in this area, nowadays it’s 2,000 ha. As a result, prices have dropped by 20%. We’re trying to differentiate ourselves through quality. And, unlike many of the other companies, we do everything: from cultivation to sales.”

Escobar also mentions the concentration of companies in Colombia. “Large players from the USA, as well as from Colombia, are taking over many farms. Sometimes just because they want to broaden their portfolio. It’s a development that we’re keeping a close eye on.”

Another challenge that Escobar mentions, is transport. “Especially during peak periods, such as Valentine’s, airfreight space is limited and the rates are high. The past couple of weeks, we ended up shipping 40 percent of our produce by boat.” With regards to the general price drop for flowers in Colombia, he says: “I hope that buyers will look at quality, as well as the sustainability and social conditions in the production company.”

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