A recent study by AIPH investigated factors influencing the global production of plants and flowers in the future. They found that the demand for floricultural products was a determining factor. And the demand is expected to grow strongly the coming decades. Where exactly does this future demand come from?
By Arie-Frans Middelburg
AIPH’s International Vision Project (IVP) is all about trying to answer questions about the future of the global floricultural industry. A fundamental idea of this vision is that the production of plants and flowers is driven by demand. The study showed that there are three groups that are large and rich enough to have an impact on the global economy the coming years. Together, these groups will account for half of the global consumption growth of €30 trillion up until 2030. And consumers from these groups will also buy more floricultural products.
China’s rich middle class
So, which are those three groups? The first one is China’s working middle class. It’s a group that currently consists of 1 billion people with 521 million living in urban areas. The number of working people living in cities is expected to grow by 20%, but the real growth lies in the fact that each person of this working middle class is going to spend more. The €2 trillion spent by this group in 2015 is expected to be €8.3 trillion by 2030. A figure that will represent 12% of the global consumption. It means that 6% of the expected global population of 8.5 billion in 2030 will be responsible for 28% of the global consumption growth up until 2030.
The most important driver for this growth is the rapidly increasing number of rich people in China’s middle class. The rich part of the middle class is particularly relevant for the sale of floricultural products. Today, 4% of the Chinese middle class belongs to the rich part of this group. By 2030, that will be 54%. It should be noted though, that price elasticity will still be the most important factor in the plant and flower trade. In other words: what is the maximum price that consumers are willing to pay for imports? According to the IVP, it’s unlikely that the top 5 of flowers currently sold in China will be replaced by imports. Nevertheless, a market for niche flowers is emerging, in step with the increasing number of rich people in the middle class.
Working North Americans
The second group concerned North America’s working population. It consists of American and Canadian people in the 15-59 age group. This large group of consumers is currently growing both in number and in consumer spending per capita. By 2030, it will include generation X (born between 1970 and 1985), the millennials (born between 1985 and 2000) and the digital natives (born after the year 2000). One of those generations, the millennials, might end up not doing as well as the previous generation, because they were hit hard by the recession of 2008. North America’s working population is expected to grow from 180 million people in 2015 to 191 million in 2030. 91% of the people in this group live in the USA. The USA will also account for 94% of this group’s growth.
Although North America’s working population’s share in the global consumption is expected to go down, it will still be significant. The current share of 21.2% will have decreased to 16.5% by 2030.
Elderly people in developed countries
The third large consumer group regards people over 60 in developed countries in Western Europe, North America and North-East Asia (excluding China). They’re also going to play an important role in the global consumption growth up until 2030. This group will grow by more than 30%, from 164 to 222 million people. The growth will be mostly concentrated in North America and Western Europe. The group will account for 51% of the total consumption growth in cities in developed countries up until 2030, which equals €3.7 trillion. That’s 19% of the total global consumption growth.
Compared to other groups, elderly people’s spending is relatively high in developed countries. AIPH highlighted a few characteristics of this group in the IVP. They said for example that many elderly people will be struggling to make ends meet in the future. However, they continued, it’s still a consumer group that shouldn’t be ignored by the floricultural industry. Old people will be living independently in their own house for longer and spend more money on their gardens, for example.
The huge increase in consumer spending up to 2030 offers opportunities for the ornamental horticulture sector. But there are some challenges, too. How can the floricultural industry ensure it doesn’t miss out? Consumer behaviour changes. Macro factors influence consumers’ lifestyles and affect their behaviour as consumers. The IVP listed urbanisation as a very important development for the coming years. And urbanisation is rapidly increasing. A large part of the consumption growth will take place in the cities.
On the other hand, the IVP also observed the trend of people wanting to connect more with nature. All in all, the floricultural industry must keep an eye on several different segments. The government is one of them. Governments are paying more attention to the development of green space in cities. A second segment are the consumers themselves, who are starting to recognise that greening their own space has a positive effect on their health and well-being. This is also true for the private sector; once they see the economic benefits of greenery, they’ll integrate plants and flowers in their business model.