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FLOWER EXPORTS WAITING TO BLOOM
BY RÉHAB EL-BAKRY
To the casual observer, Egypt would seem a perfect candidate to become a major player in the flower export market. The country has year-round sunshine, a tradition of flower growing, and is just a stone’s throw away from Europe, the world’s largest consumer of cut flowers. But despite all these advantages, Egypt’s export flower industry never seems to bloom.
According to Kelly Harrison, co-owner of Egyptian Sun for Agricultural Development (ESAD), a company founded 12 years ago to grow flowers for export, the problem boils down to one thing – Egypt lacks a comprehensive strategy for the development of its cut flower exports. “The biggest problem of the flower industry here is what to produce,” he says. “What are the products that the international market requires and how does one learn how to grow those products given our climatic conditions?”
Weather is a big factor. Egypt’s climate is just a little too warm to grow the flowers that generate the biggest revenues. Long-stemmed roses, lilies and tulips – the flowers most in demand in the international market – require cooler climates to grow. “Here, we have extremely hot weather in the summer, cool weather in the winter and then variations in between,” says Harrison. “So identifying the flowers that we can grow in the winter time very efficiently in the open field is key to placing Egyptian exports on the map.”
The global cut flower market is valued at $9.8 billion. The Netherlands, with 52 percent share of all exports, dominates the market, but in the past decade mountainous equatorial countries such as Kenya, Colombia and Ecuador have carved out a niche. Kenya, whose industry was virtually non-existent prior to 1997, has emerged as a world leader, its cool mountain slopes blanketed with colored fields that account for nearly 40 percent of all flower imports by EU countries.
“It’s not that these countries have a natural history of flower growing, but the fact that their climate is suitable to growing many of the types of flowers that are in heavy demand on the international market with little or minimal effort makes them competitive on the international market,” explains Azzam Shaffi, account manager for Flora Holland, one of the largest flower exchanges in the Netherlands. “Countries with consistent weather are most likely to be able to grow the most types of flowers in the open field. This obviously reduces their cost and makes them most competitive on the international front.”
While certain flowers are only grown in these countries in greenhouses, according to Shaffi, “the majority of growers would be able to grow flowers such as roses, tulips, carnations and even orchids with minimal effort. In Egypt, this is not the case.”
Open field cultivation of flowers in Egypt is restricted by the severe summer weather, which is unsuitable for most commercial varieties. Cut flower exports have grown to around $20 million per year, up from $5 million a decade ago, but it is a small figure when put in perspective. Neighboring Israel exports around $200 million worth of cut flowers a year, while the tiny Gaza Strip alone reported $30 million in cut flower exports despite political obstacles that frequently disrupt trade in these time-sensitive products.
Local flower varieties dominated the Egyptian market until quite recently, says Mahmoud Medhat, manager of a well-established flower shop in Zamalek. “I’ve been working in this shop for almost 42 years and I’ve seen how the market has changed over the years. A long time ago, a bouquet of flowers included [local] roses, which are short-stemmed and don’t live for very long but have a beautiful scent that can fill a room. These were always paired with birds of paradise and gladioli. But in the late 1990s, there was a trend in the market to import other fancy flowers that renewed the public’s interest in flowers as a whole.”
As local demand grew for imported lilies, gerberas, carnations and long-stemmed roses, Egyptian growers began to experiment with growing some of these breeds. While the crops were initially intended for the local market, growers began eyeing the higher profits in export. Yet few producers have succeeded, most failing due to inexperience in the export business and inadequate knowledge of the international market’s demands. “There are some individual successes... but mostly out of personal initiative by individual growers and exporters,” says Harrison.
Less than a dozen Egyptian flower producers account for over 95 percent of the export market. Carnations are the favored export variety, as they are easy to grow in large quantities outdoors with little more than sun shades. Producers who manage to land international contracts inevitably prioritize their overseas clients, dropping a local order if needed to fulfill their export obligation. “The problem was they didn’t have enough experience growing these types of flowers,” says Medhat. “There have been many times when they would fall short of an export order and instead take from our local order to make up for the gap.”
The international export market for cut flowers is brutally competitive, explains Shaffi. “Whenever you sign an export agreement, the first rule is to make sure you don’t default on it because the penalty for defaulting on an order is extremely high, especially if the exporter is not experienced in negotiating these contracts. Not only will the exporter have a [hefty] penalty to pay, but the importer can also make it extremely difficult for them to export again.”
In addition, producers can never be too sure of the value of their shipment, as buyers reserve the right to reject flowers they deem below standard. “You can, for example, sign an agreement to export 10,000 boxes of a certain flower to a buyer with the understanding that once they receive the flowers, they will transfer the money. However, the buyer will often put a clause in the contract that states that he will only pay for those flowers that meet his standards. And he can refuse to pay for those that he deems sub-standard. You, as an exporter with little or no experience, have little or no recourse.”
Navigating the thorny international flower market can be tricky, and inexperienced exporters are at a great disadvantage. “The export market is very complicated – there are importers, growers, exporters, middle men and individual buyers. You need a tremendous number of contacts in order to be able to ensure that you negotiate a good deal and to ensure that you will get your money,” says Shaffi.
A better option, particularly for inexperienced producers or exporters selling small volumes, is to sell flowers on an international flower exchange, where cut flowers arriving in refrigerated shipments from producers all over the world are auctioned daily to international buyers seeking various grades and price levels. “This is a safer way to export, especially if you are not exporting massive quantities of flowers,” says Harrison. “It guarantees that you will receive payment at the end of the sale. But it also means that you never know exactly how much you will receive. You can never predict your profits for any season.”
Flora Holland’s Shaffi concedes that there is a certain level of unpredictability with selling flowers on a bourse, but says there are patterns that producers can use to forecast sales. “There are flowers that you know will always be in demand, such as roses, lilies and carnations,” he says. “The actual prices may differ, but producers can observe which months of the year have the highest prices for these flowers. Then they can plan accordingly.”
The patterns can also help exporters identify their markets. Shaffi says many countries recently shifted their production away from carnations and towards long-stemmed roses, which generate more profit. Egyptian producers picked up on this trend and increased their output of carnations. The variety generates less profit, but producers can make up for this in volume.
Harrison says local flower exporters cannot simply wait for another pattern shift to appear. They need a comprehensive study that identifies the trends in the cut flower market, and relates them to Egypt’s comparative advantages. The study should help to determine which types of flowers to grow and under what conditions. “The problem is that by the time any action is taken, the international market will be more saturated than it already is, at which point penetrating the international market will be even more difficult,” he says. “What’s even more intimidating, is the fact that China is now working to create a niche for itself in the cut flower market and this is certainly going to make things a lot more competitive and a lot more difficult for us.”
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