Floribusiness ‘We must learn how to deal with the market’

‘We must learn how to deal with the market’

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Kneppers Rozen has been active in Kenya since 2003. The Maridadi Flowers farm in Naivasha is run by Jack Kneppers. Brother Richard is based in Rijnsburg, where he receives and distributes their African roses. The Kenyan rose sector has been doing badly for a long time, but the Kneppers brothers aren’t complaining. Richard: “The biggest challenge isn’t the weather, but the market; we must learn how to deal with it.”

By Arie-Frans Middelburg

It’s a quiet Thursday at number 50, Laan van Verhof in Rijnsburg, the Dutch home base of Kneppers Rozen. There’s no activity in the cold store or in the processing hall. Only a few of the chairs in the office are occupied. “It’s been rainy in Naivasha and besides, we’re exactly in between two cuts”, explains Richard Kneppers. He heads the family business together with his brother Jack. The past couple of months haven’t been the most prosperous in the history of rose cultivation, they agree.

How is Kneppers Rozen doing?

“Not too bad. Considering the current market, we’re doing well. But the market is bad. It feels like we’re watching on from the sidelines at the moment. At the end of 2017, beginning of 2018, unrest in Ethiopia led to an irregular production and supply. Customers could no longer rely on import roses. Things went back to normal for a little while, until Kenya was hit by a long period of heavy rainfalls, resulting in lower production and bad quality. Due to these developments, large-scale retailers started to disregard African import roses. They didn’t abandon them altogether, but they no longer had any special promotions. The retailers’ behaviour has a direct impact on rose growers everywhere, because the numbers are so huge. If they stop buying, there’s an immediate excess in the free market.”

What about 2019?

“This year, the weather’s been very good in all the large production areas. I can’t recall having such high average temperatures for such a long period in Naivasha ever before. It’s been very warm in Colombia, Ecuador and Ethiopia too. As a result, global production has increased by 30% according to Royal FloraHolland. So, even though retailers have started to buy more roses again, the free market is still oversupplied.”

Do retailers perhaps want a change from roses?

“That’s what some people say. It is true that the bunch of roses at the discounter is under pressure. But look at tulips. Two or three years ago, Aldi and Lidl were buying 10-15% fewer tulips, while this season, sales went up again. So, it could be temporarily. One of the two things that does form a threat for rose is the fact that nowadays, prices seem to be based on last year’s excel sheets. If a certain period was expensive last year, you can be sure that the same period a year later will be bad. Because growers are asking prices that are too high, and traders are too passive. Without special promotions, it all ends up in the free market. It’s been great to see more people from outside the sector joining our industry. They come with good ideas, even if they aren’t always realistic.”

What about the second threat?

“It used to be that traders bought a cold store full of flowers and then tried to sell them. If they had trouble selling them, they’d make special offers. They would basically do anything they could to try and empty their cold store. Nowadays, that stock function is no longer with the trade, but with the growers. Growers see how much they can sell through the web shop and the next morning, they bring the leftovers to the auction. They don’t put anything on special offer, which distorts the market. This is something we have to solve together. Growers need to play a more active role in the market. That’s exactly what we are planning to do. I’m afraid I can’t give any further details yet but believe me: the biggest challenge isn’t the weather. It’s the market; we must learn how to deal with it.”

Is this the worst time ever for the Kenyan rose sector?

“No, not the worst ever. We’ve had bad times before. But this time, it goes on for longer than ever before. You won’t hear me say that global production is too large, though. I find that a bit too easy. How likely is it that all production areas get good weather at the same time? That’s been unique this year. Supply is too high, but I don’t think the acreage is too large. When it started to rain in Kenya a few weeks ago, prices immediately recovered a bit as the production decreased.”

Do you think the situation is going to improve again?

“Yes, I don’t think this is permanent. I often compare it to the tulip cycle. When clock prices are high, everyone brings their produce to the clock. A few years later, when clock prices go down, we switch to direct trade. The first requirement is that we learn how to deal with the retail sector. Look at the prices that growers asked for direct deals last year. They made no sense at all. What’s the retailer’s response? He’ll look for other products instead. And that’s another reason why rose as a product isn’t doing great at the moment. Retailers won’t pay 17 cents, if they’ve always paid 14 cents. It’s a wake-up call for the market. I’m not worried about the future of roses. But I wouldn’t encourage everyone to start growing huge numbers, either.”

What measures are you taking to ensure you remain profitable?

“We try to keep costs under control. But that’s nothing new. Throwing a few flowers away is quite easily done in Kenya. Because most of the costs aren’t made until you start putting your roses in boxes. A few weeks ago, business was bad, and we ended up throwing away a third of our production.”

Maridadi Flowers ships all their flowers to Rijnsburg. Will you keep doing that?

“I find it very difficult to combine sales to the Netherlands with direct sales in other countries. Direct sales comes with other requirements, it’s different. It isn’t easy to organise everything in a way that suits all. Take the Russian traders, for example. They come to Kenya with a lot of money. But the next three months, you might not see or hear from them again. I don’t like that. For the time being, the Netherlands will be our home base.”

And will Kenya remain your production country?

“Yes, we’re going to expand the coming years. We still have a strip of land. We did go over to Ethiopia a couple of times to explore opportunities there and we made some calculations, but we didn’t see any benefits. It is said that producing roses in Ethiopia is 10% cheaper, but I don’t think the country has too many advantages. Their seasons are more similar to those in Europe. Which means that the production is high in summer and low in winter. When it comes to market alignment, you’re better off in Kenya.”

Are you happy with the auction?

“There’s always room for improvement. They should do something with their big data. In concrete terms, the auction holds a lot of data and they’re not using it. I’m thinking of distribution, supply etc. And digital developments really need to speed up. We’re talking about Floriday and that’s what we’ve been doing for three years now. It would be great if we could stop talking and finally do something.”

We go against the stream, we don’t simply follow everyone else

Kneppers Rozen is a family business founded in the 1930s. Richard and Jack Kneppers are third generation. The Kenyan production site started in 2003. They currently have 46 ha of roses in Naivasha and want to expand to a total of around 60 ha at the end of 2020. Jack runs the nursery, while Richard is in charge in Rijnsburg. Richard travels to Kenya six to eight times a year. During those visits, he always throws some ideas around about the cultivation. And Jack, in turn, never hesitates to share his opinion about the sales activities. Richard: “We like to keep each other on our toes.”

All roses are shipped to the Netherlands. 40% is sold through the auction clocks of Rijnsburg and Naaldwijk. The other 60% is for direct sales, same-day orders, mostly for franchisers in supermarkets. They don’t have much contract trade. Richard wouldn’t mind a little more direct trade. But he does feel the clock is still a good instrument, which allows growers to serve a wide range of customers. Does the clock work well? “Yes, it does reflect the current market situation. It’s no longer the price setter it used to be, but the clock still gives a fairly good impression of what’s happening in the market.”

How does Kneppers differentiate itself? “We’re a bit more stable than other growers. In terms of production, quality and distribution. We manage our cultivation in a different way. We go against the stream, we don’t simply follow everyone else. We know more or less what our colleagues do, and we adjust our plans in response to their activities.”

 

 

 

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