(#5) ?? Global Flower Market: beyond the story & analysis

(#5) ?? Global Flower Market: beyond the story & analysis

Hello,

The beginning of Spring comes with some nice holidays including Valentine's Day, International Women's Day/Mother's Day (some countries celebrate it on the 8th of March, while others in May). This is my analysis dedicated to my Mother, Wife, Daughter and all my friends and colleagues.

?? Wishing you a beautiful Spring!

In this article part of The Story Behind The Numbers, I analyzed the global flower market.

The purpose of this newsletter is to connect the story with the numbers, or sometimes the numbers with the actual story. It is, of course, my own view on the topics without any investment recommendation. I hope we can start conversations around the points below.

Here are some questions that I was interested in to find more information:

  1. How big is this market and what players could I find on the supply chain?
  2. What are the perspectives of the market on different regions?

Interesting to begin with: below you can see the most expensive flower ever sold. [16] Juliet Rose - was sold at the Chelsea Flower Show in 2006 for 15.8 Million $.

Source: Finances Online

Before we start...a little bit of history.

Did you know that the first financial bubble was a flower market bubble called "The Tulipmania"? According to Investopedia, "this was one of the most famous asset bubbles and crashes of all time with tulips sold for approximately 10,000 guilders, equal to the value of a mansion on the Amsterdam Grand Canal, the bubble occurring primarily from 1634 to 1637."[10] The peak was for one special tulip - Semper Augustus "worth 3,000 florins, or about £280." [12]

Source: Amsterdam Tulip Museum

Amsterdam Tulip Museaum states that "As the flowers grew in popularity, professional growers began paying higher and higher prices for bulbs. By 1634,?due to?ever-increasing demand, speculators?began entering the market hoping to buy low and sell high." Also, the same source states "Growers of these bulbs gave?them names reflecting status and nobility, such as Semper Augustus and Viceroy?(two of the most famous Tulips in history)."

Source: Amsterdam Tulip Museum

As we can see in the graph below in a very short time, prices went up and then the drop signals the first bubble in history.

Source: Amsterdam Tulip Museum


Coming back to the present day.

According to Future Market Insights "the floriculture market is estimated at 57,5 billion $ in 2023, and is projected to reach 106,1 billion $ by 2033", at a rate of increase of 6,3% from 2023 to 2033. [7]

In this floriculture market we can find the cut flower market, estimated at 39,6 billion $ in 2024. Also, there is an estimated growth to 63,88 billion $ in 2034. [8]

The largest exporter of cut flowers in the world is The Netherlands with a trade value of 5,7 billion $ in 2021.[9] the World Bank points out that the weight of flower exported from The Netherlands is more than 600 million kilograms.

Source: Visual Capitalist

The largest exporter of cut flowers in the world is The Netherlands with a trade value of 5,7 billion $ in 2021. United States is the largest importer with a trade value of 2,13 billion according to the World Bank.[9]

Source: OEC World

A look into The Netherlands, gives us more insight on what flowers are produced. Tulip consist of more than 14800 hectares. There are more than 8000 types of tulips in The Netherlands, with modern cultivation and increased efficiency. [17]

Source: Statista

The areas are used for production of tulip bulbs (which then are further grown in greenhouses) increased with 29,82% in 2022 compared with 2008. This shows, not only the focus on this type of flower, but also increased demand.

Source: Statista

The average price of cut flowers sold in auctions can bring some insight comparing it with the actual final price.

As mentioned by Statista [18] and also seen in the graph, the COVID-19 pandemic had dramatic impact on the flower market, with the average price dropping below 20 eurocents.

Source: Statista

Royal FloraHolland auction house at Aalsmeer, near Amsterdam plays an important role in the flower market. According to their website Royal FloraHolland is the leading international cooperative and marketplace for floriculture in the last 100 years. According to Statista "Royal FloraHolland is one of the largest marketplaces for the floriculture industry in the world, transporting thousands of different plant and flower varieties around the world through its global logistics systems."

Image source: Thursd

According to BBC "Royal FloraHolland still plays a critical role importing and then re-exporting 40% of flowers from all over the world." This dynamic led to 5,4 billion in export value from The Netherlands in 2022.[4]

Each day, there are more than 100.000 transactions with more than 25 million flowers being traded. Each year, more than 23.000 flower varieties are traded.

Check how the Auction Clock of Royal FloraHolland Works in this article: https://thursd.com/articles/floriculture-explained-how-the-clocks-of-royal-floraholland-work

Below, you can see the revenue of the Royal Flora Holland Marketplace, which decreased from 5,6 bln Euro to 5,16 bln Euro in 2022. Also, the company states that the number of products traded decreased by 7% to a total of 10.8 billion, while the average price decreased to 47 cents [15]

Source: Own calculation based on Royal Flora Holland Annual Reports

But, if we compared the product revenue between 2018 to 2022, we can see an increase of 11,11%. In the same time the Operating income increased in 2022 with 14,28% compared with 2021. Operating income includes commissions, transaction fees, packaging, or logistics for the members of Royal Flora Holland.

Source: Own calculation based on Royal Flora Holland Annual Reports

Royal Flora Holland experienced operating loss but also Loss after tax of 4 million Euro. They state on the loss that "The main causes were a 5.7 million euro write-off on the bankrupt Floriworld and 11.4 million euro higher energy costs."[15] Floriworld, closed now, was according to TripAdvisor "an all-new flower and plants experience in Aalsmeer, The Netherlands." [19]

Source: Own calculation based on Royal Flora Holland Annual Reports

For the Mother's Day, which in USA it is celebrate on 5th of May, americans spend more than 35 billion $ in gifts (as of 2023). [20]

The National Retail Federation in USA pointed out some interesting statistics:

  • average spending 274,02 $ per person
  • flowers are the most targeted in the expense budget with more than 74%
  • channels are seen below with higher online sales during COVID-19, and close values to department store sales in 2023.

Source: National retail Federation

There are many flower companies. For instance, Afriflora's farm based in Ethiopia "is the largest rose farm in the world. 3 to 4 million roses are transported to the Netherlands every day." The entire greenhouse complex is 450 hectares, equivalent to 900 football pitches. [25]

One of the biggest flower & gift companies in USA is 1-800-Flowers Inc. One of the operating segments refers to Consumer floral & Gifts that derives revenue from sales of flowers on retail & e-commerce channels as well as royalties from franchises. [23]

A short analysis, can provide some details about the size of this company and potential margins. The total revenue of the company was 2,01 bln. $ in 2023. Revenues from Consumer Floral & Gifts were 46% of the total, reaching 921 million $. This was a decrease from the previous two years, when the sales were above 1 billion $. Even during the pandemic period, the company grew its revenues because of strong e-commerce positioning.

Source: Own calculation based on 1800Flowers Inc. Annual Reports (values in mil. $)


The gross profit margin dropped at the total level from 42% to 38% while the gross profit margin for Consumer Floral & Gifts remain between 39%-40% during 2018-2023. Although, we don't have a split of the revenues and gross margin on actual flower sales (because it includes gift as well), we can just have a general idea of the margins on the flower sales.

Source: Own calculation based on 1800Flowers Inc. Annual Reports

According to the Florist Review, on pricing [24], "florists mark up their fresh products anywhere from 3x to 5x the wholesale cost" and "florists aim for a profit margin of 50 percent to 70 percent of the retail price of every fresh design created".

So, the markup for the fresh flower is around 3x to 5x while the hard goods used (accessories, packaging) have a markup of 2x to 2,5x. Also, the flower designer should be included as a percentage which starts from 20% and going up.

Example (based on the one from Florist Review):

  • Fresh flowers wholesale cost: 10 Euro > so 10 x 3,5 = 35 Euro
  • Hard-good wholesales cost: 5 Euro (packaging, card holder, foam, tape)so 5 x 2,5 = 12,5 Euro
  • Labor fee = 25% of the total > (35 + 12,5) x 25%= 11,87

Total = 59,38 Euro with a cost of sales of 15 and gross profit of 44,38 (74,7%).

Of course, this is just an example and it depends on type of flower, price sensitivity, available offer or even country.

Things to watch:

  • value of exports in 2024 combined with pricing affected by higher inflation
  • evolution of the flower market in other countries
  • average pricing for cut flower in auction in The Netherlands
  • potential new players in the market


Before I go...

Check also this video on how flowers are delivered, and great logistics behind.


And if you want to learn more about the flower market, check also this great resource but also all the references below:

Thanks for reading,

Costin Ciora, PhD.

P.S. As Sunday it's the Oscars Academy Awards night, next week the focus will be on the movie industry. Stay tuned & don't forget to subscribe to get notified.


References & interesting resources:

[1] https://www.visualcapitalist.com/cp/visualizing-the-worlds-flower-bouquet-export-market/

[2] https://www.statista.com/statistics/641905/total-area-used-for-production-of-tulip-bulbs-in-the-netherlands/

[3] https://www.bbc.com/future/bespoke/made-on-earth/the-new-roots-of-the-flower-trade/

[4] https://np-royalfloraholland-production.s3-eu-west-1.amazonaws.com/Documenten/Top-10-import-and-export-countries-EN.pdf

[5] https://www.statista.com/statistics/829549/turnover-of-royal-floraholland/

[6] https://www.royalfloraholland.com/en/about-us/annual-reports

[7] https://www.futuremarketinsights.com/reports/floriculture-market

[8] https://www.futuremarketinsights.com/reports/cut-flower-market

[9]https://wits.worldbank.org/trade/comtrade/en/country/ALL/year/2021/tradeflow/Exports/partner/WLD/product/060310

[10]https://oec.world/en/visualize/tree_map/hs92/export/show/all/20603/2021

[11]https://www.investopedia.com/terms/d/dutch_tulip_bulb_market_bubble.asp

[12] https://www.bbc.com/news/business-51311368

[13] https://www.adamsmith.org/blog/was-the-tulip-bubble-really-a-bubble

[14] https://amsterdamtulipmuseum.com/pages/part-4-tulip-mania

[15] https://www.royalfloraholland.com/en/news-2023/week-13/annual-report-2022-royal-floraholland-invests-sharply-more-in-future-and-limits-loss-through-cost-savings

[16] https://www.floweraura.com/blog/7-most-expensive-flowers-on-planet

[17] https://www.holland.com/global/tourism/get-inspired/this-is-nl/blooming-netherlands.htm

[18] https://www.statista.com/statistics/651265/average-price-of-cut-flowers-sold-in-auctions-in-the-netherlands/

[19] https://www.tripadvisor.co.nz/Attraction_Review-g188588-d21067198-Reviews-FloriWorld-Aalsmeer_North_Holland_Province.html

[20] https://financebuzz.com/mothers-day-statistics

[21] https://eu.usatoday.com/story/graphics/2023/05/12/mothers-day-2023-spending-record-levels/70193453007/

[22] https://nrf.com/media-center/press-releases/consumers-spend-record-357-billion-mothers-day

[23] https://www.1800flowersinc.com

[24] https://floristsreview.com/pricing-for-profit/

[25] https://afriflora.nl/en/about-us/

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