Flower sales on European market 80% below average, Kenya and Ethiopia very badly affected

Given the international nature and the very high degree of integration of the global flower supply chain, the high perishability of the products, and the very complex just-in-time logistics, the global flower industry has been hit hard by the escalating COVID-19 crisis since mid-March (see Statement from Union Fleurs, 24 March). An unprecedented and massive “domino effect” is now in effect at all levels, affecting all European countries and the main flower supplying countries in East Africa (Kenya, Ethiopia) and South America (Colombia, Ecuador). This is a direct result of the complete collapse in demand and consumption in most EU Member States, the United States and the rest of the world following the large-scale closure of all non-EU stores – an essential part of containment measures – and the subsequent abandonment of sales and distribution channels.

On the European market, the ramifications are immense at all levels, for EU producers, wholesalers, importers and exporters, and affect the ornamental sector as a whole – cut flowers, indoor and outdoor ornamental plants and all related products. Sales in the European market are currently estimated to be 80% below average. Demand was temporarily kept at acceptable levels during week 12 with Mother’s Day in the UK on March 22, but this is now over and market prospects for future spring celebrations linked to flowers (Easter, Mother’s Day, May 1) are more than uncertain. Production costs cannot be covered and planning for future production cycles is suspended. This crisis could not have occurred at a worse time of year – spring (March to May) is the period when most of the turnover is made within the sector (50–70% of annual turnover). Mass destruction of production and stock is now inevitable in the EU and beyond. Supply chain businesses (production, wholesale, trade, distribution channels and retail stores) face bankruptcy, including those that are financially healthy, and related jobs are at stake. The ornamental sector as a whole provides around 760,000 full-time equivalent jobs in Europe, and the annual turnover of the sector is estimated at €48 billion.

The shock wave is particularly intense for the market-leading Dutch ornamental industry. Daily losses in auctions are said to be over 75% since March 13, and prices for cut flowers, potted plants and bedding plants remain under strong pressure. The situation has led Royal FloraHolland to intervene: for the first time in the Dutch auction system’s 100-year history it is regulating the market and limiting the offer through a quota system (maximum daily volume per product group and producer, based on total supply volume in 2019 – direct sales and clock sales combined).

Emergency support is currently being requested from EU national governments to support companies in production, wholesale and international trade and help them survive this very difficult time. The Dutch Government is actively involved, and last week announced a €20 billion package of financial measures to help Dutch flower companies deal with huge liquidity problems. In addition, an emergency fund for the ornamental sector as a whole is currently under discussion with the Dutch Government. The situation of the ornamental sector was discussed at the video meetings of all EU agriculture ministers on 25 and 27 March, and a special request was made by the Netherlands, supported by other countries from the EU and by various industrial organisations such as Union Fleurs, to provide extraordinary short-term financial support to the ornamental sector. As the sector does not fall under the existing framework of support measures for the EU’s common agricultural policy, no guarantee of support or timetable for such extraordinary measures has yet been given, but the European Commissioner for Agriculture and Rural Development, Janusz Wojciechowski, is attending closely to the situation in the sector.

The main flower supplying countries in East Africa and Latin America are directly affected by this unprecedented crisis and are faced with a massive impact on production, exports, corporate financial liquidity and the workforce. The Kenya Flower Council reports that all Kenyan farms have significantly reduced their export volumes to less than 70%, with a considerable number of these farms completely suspending exports and destroying production. The pressure on businesses and the associated workforce is immense, as the Kenyan flower industry directly employs about 150,000 people, mainly women, and creates jobs for more than a million people overall, which has an impact on more than 4 million lives. The Kenya Flower Council has requested the Government of Kenya to provide a package of financial and fiscal emergency support measures to support the industry and help mitigate the impact on Kenyan flower businesses and associated workers.

A report by the Kenya Horticultural Inter-professional Association states that in the last month alone, flower farms have lost more than 70% of their turnover due to the loss of market share in Europe. This has been caused by the closure of retailers and the collapse of auction prices. Vegetable and fruit markets remain sluggish. Exporters are shipping 25–30% of their produce and dumping the rest locally.

Most farmers have sent seasonal workers home, while permanent workers have been given up to 30 days paid leave. 350,000 jobs are at risk. Currently, over 150,000 seasonal workers have been sent home and 80,000 permanent workers are on paid annual leave pending final decisions. The value of the 150,000 workers is a total of KSh 2.4 billion per month (at KSh 16,000 per worker). The country is on the verge of seeing an increase in poverty, insecurity, hunger, inability of families to meet their basic needs, and emigration to urban centres and internationally due to unemployment.

The Ethiopian Horticultural Exporting Producers Association (EHPEA) reports that the Ethiopian flower industry is on the brink of disaster, with nearly $11 million in losses suffered in the past two weeks due to the global drop in demand and closure of international passenger air cargo. A total of 150,000 employees are on the verge of losing their jobs. The Ethiopian flower industry is highly dependent on the Dutch clock system, and 90% of its rose exports are shipped via the Netherlands. The Ethiopian flower industry is pleading for support from the Ethiopian government.