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European flower and plant market 2015 / 2016:

"2013 crisis in horticulture seems to be almost forgotten"

The 2013 crisis in horticulture seems to be almost forgotten. After a good 2014 year in the German target market, which reached 2012 levels, and similar levels expected for 2015, the industry is more optimistic again – with good reason. Consumer sentiment is excellent. Slight shifts in trade flows are visible. Economic and political conflicts are affecting the markets.

A look at global sales shows that the strong global concentration of demand for flowers and ornamental plants from major industrialised nations in Europe, Asia and America, as well as well-known emphases in manufacturing, also remain strong in 2015. The Netherlands’ strong role as a hub for imports and exports to Europe also remains unchallenged even as direct imports in other European countries continue to increase. According to experts, there are increasing direct imports by central purchasing organisations in the German retail sector.

Strong imports of cut flowers to the EU drive growth
According to EUROSTAT, imports of flowers and plants slightly increased in recent years in quantity and value. Cut flowers are mainly responsible for the increases in the import of flowers and plants to the EU. Compared to the previous year, the import of cut flowers to the EU during the first half of 2015 rose by 8% by value, and 15% compared to 2013. All other segments of the plant industry are unremarkable or are decreasing. In 2014, a total of 414,580 tonnes with a value of €1.59 billion were imported by the EU. Across a 10-year comparison, it is evident that import volumes are declining with increasing import values. This means that increasingly higher value products are being traded.

Identifiable past shifts in European contact countries are continuing: Kenya is strengthening its position; in 2014 28% of EU imports came from Kenya alone. Kenya is positioning itself as a supplier of quality products. Ethiopia is also continuing to increase its importance as an exporter to the EU, while imports from Israel, the United States and Costa Rica have tended to decline.

Trade surplus through strong exports from the EU
Similar to imports, exports of flowers and ornamental plants from the EU have tended to increase in the last ten years, although slight decreases in EU exports were registered in 2014 and 2015. In 2014, the quantity decreased slightly by 0.8% in comparison to 2013, and the value decreased by 2.9%. With potted plants in particular, there were revenue declines of 4.5% in value terms in the first half of 2015. In 2014, 682,000 t of flowers and ornamental plants were exported as a whole at a value of €1.91 billion. The monetary value comparison between EU imports and exports clearly shows how different the plant import and export sectors of the EU are. Through the export of potted plants, shrubs and bulbs, etc., there is an overall trade surplus amounting to €326 million (as of 2014). The positive trade surplus has existed since 2002. But the trade balance of the EU for the cut-flowers and cut-foliage sector has been negative for years (2014: minus €500 million). The significance of the different target markets for EU exports in 2015 is similar to the past: In 2014, Russia (21.3%) and Switzerland (20.7%) had the strongest demand by far for flowers and ornamental plants from the EU, followed by the United States (10.2%), Norway (8.8%) and China (4.8%).

Russia remains the most important sales region for EU exports
Since 2013, there has been a noticeable decline in demand for flowers and ornamental plants imported from the EU by Switzerland, but especially Russia. Comparing the 1st half of 2015 with the same six-month period of the previous years, there is a significant decrease of one quarter of the value within a period of only two years. The EU delivered cut flowers to Russia worth about €164.6 million in the first half of 2013, but in 2015 it was only €123.9 million. For potted plants, there was a decrease of €39.5 million to €30.2 million in the same period. This negative trend affects the Netherlands in particular which, as the strongest EU exporter in the last two years, has lost significant market shares in Russia. The value of cut flowers exported to Russia was almost halved for the Netherlands within the last two years from €136.9 million to €66.4 million, as can be seen in a comparison of the first half years. Exports of potted plants are equally affected; in the first half of 2015, exports dropped by 38%.

Other EU countries gain what the Netherlands has lost in importance
The Netherlands’ reduction in exports to Russia in 2015 was offset in part by other export countries. Lithuania, Latvia and Poland, as well as Finland and Italy, to a lesser extent, are worth mentioning in particular. Whether the higher imports of
the Netherlands in the countries of Lithuania, Latvia and Poland are due to increased export activities of these countries to Russia or to higher personal consumption cannot be established decisively.

Lithuania, Latvia and Poland have at least doubled their exports to Russia in the cut-flowers product group since 2013. In the first half of 2015, Lithuania delivered cut flowers worth €34.8 million instead of the €17.4 million delivered in the first half of 2013. Latvia and Poland show similar growth rates. Finland was able to increase its low export volume during the same period from €0.02 million to €0.9 million. The countries mentioned previously also showed increases in exports of potted plants, although not to the same degree as cut flowers. The number of suppliers has increased. According to EUROSTAT 2015, Denmark and the Czech Republic for the first time delivered significant supplies of potted plants to Russia.

Nevertheless, in 2015 the community of EU countries no longer reached the original export values to Russia because Russia increasingly received its imports from non-EU countries. In 2014, Russia announced trade contacts with Africa. It is not safe to say to what extent these were realised and how they may have affected the decline in imports of flowers and ornamentals from the EU. Given the evidence currently available, it remains pure speculation. Currently, all signs point to a continuation of the development, i.e. continued waning of the significance of the Netherlands as well as the EU as exporters to Russia because the weakness of the rouble and the political tensions are not changing.

Changes in the EU's domestic market, especially in the German target market
The declining exports to Russia inevitably lead to modified flows of goods, in Germany as well. In addition, Germany is strengthening its self-sufficiency in plants. According to an AMI cultivation survey on the production and economic trends in ornamental horticulture (PWZ - Produktions- und Wirtschaftstendenzen im Zierpflanzenbau) in the autumn of 2014, amongst other things, more bedding and balcony products made in Germany were expected for 2015. This suspected expansion in the area of cultivation is also confirmed by import statistics for Germany. Assuming stable exports, and a stable consumption of flowers and ornamental plants in Germany (€108 per person per year), a significant decline can be seen compared to the previous year for German imports of potted plants. 19% less were imported in the first half of 2015 when compared to the same period last year. That means a loss of €74 million.

Netherlands and Denmark feel the effects of increased self-sufficiency in Germany
The import decline in Germany essentially affects the Netherlands; in the reference period because a drop of 18%, approx. €60 million in merchandise value can be seen. The development is not unknown to the Netherlands; FloraHolland has also reported on it. Denmark also had to endure high losses of 24%, but at a lower level, in the first half of 2015. Their potted plant exports to Germany decreased from €32 million to €25 million.

Movement in the markets for Dutch products
With losses in the Russian business and losses in exports to Germany, you have to wonder where the Netherlands sells its goods. According to EUROSTAT figures, Netherlands’ exports rose until 2014. But in the first half of 2015, they declined in comparison with the 2014 and 2013 reference periods.

In summer 2015, the Association of Wholesaler in Flower Production (VGB - Verenigung van Groothandelaren in Blomenwerkerijproduktion) reported that exports by the Netherlands to the United Kingdom (plus 18%) as well as France, Italy, Belgium and Spain grew, and would almost compensate for the export declines for Germany and Russia. According to experts, the significant export growth meant that the target markets of Britain and France are now responsible for 60% of the exports from the Netherlands.

In addition, Poland has become a stable target market for the Netherlands. Consumption in Poland, and the Baltic States as well could also increase with increasing prosperity in these countries. Scandinavia also continues to be interesting. The significant increases in sales to Britain among others was also due to the weak euro.

The Spanish market has recovered quickly after overcoming irritations brought on by the VAT increase, from which the Netherlands has also benefited.

Poland focuses on Russia
Poland is expanding its export activities, particularly in potted plant sales. Sales in the first half of 2015 increased by 34% compared with the previous year. Trade relations with Russia in particular are responsible for the increase. Exports have almost doubled to about €3 million. The export value for cut flowers has also grown (plus 8%). Russia, together with Slovakia, is crucial again here. Exports to Russia during the reference period increased by 75% (plus €2.1 million). At the same time, Polish exports to Germany were scaled back in value (minus €1.8 million).
Is a new transfer hub for EU exports to the East developing in Poland and the Baltic States?

Consumer climate in Germany is beneficial
The general mood of consumers – which is conducive for sales of flowers and plants – has also been excellent in 2015. Germans have appeared unfazed during the first half of the year by international crises and the events surrounding Greece. The domestic conditions for income, work and inflation are reassuring and lead to the fact that the official statistics for the first quarter of 2015 show the highest real wage increases (plus 2.5%) since the beginning of the survey in 2008.

Consumer desire is undiminished. Retail sales in the first five months of 2015 increased in real terms by 2.4% compared to the same period last year. It is not clear whether the mood of consumers will continue to remain at a record level.

At the end of September 2015, the GfK registered the first doubts among citizens about whether the economic development would be sustained despite the influx of refugees and economically faltering emerging markets such as China. Despite the shock, consumer sentiment was still high, and no trend reversal was evident. In its 2015 autumn forecast, the Federal Government foresees stable growth in the German economy – in 2016 as well – despite a weaker world economy and high numbers of refugees. Economic growth should be stable at 1.8%.

Sources:
EUROSTAT, AMI, BGI, GfK, VBG, TASPO, Gabot, and expert interviews

Written by Dr. Marianne Altmann, CO CONCEPT, on behalf of Messe Essen for the IPM ESSEN 2016

For more information:
www.ipm-essen.de

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