Floral research about the Chinese cut flower industry will be released by PMA in August 2018, but we wanted to share some of the highlights with you now. Here are some excerpts from our research:
China's economy grew by 6.9% in 2017, a slightly higher rate than 2016.This growth reflects the restructuring of China's economic development patterns away from a fast-growth environment and toward an economy focused on domestic consumption, high-value exports, private capital ventures, and service industries.
The fresh cut flower industry in China is less than 5% of the floral industry. Floral is a $21.4 billion (RMB 139b) category that includes trees for landscaping, potted plants, food and medicinal flowers and plants, turf/sod, and flowers and plants grown for propagation materials. The cut flower segment grew from practically nothing in the early 1980s to producing 18.4 billion stems in 2016. Rose, lily, carnation and chrysanthemum are among the cut flowers most widely cultivated in China.
Yunnan province is China's key flower producing region. It accounts for more than half of the country's annual output of fresh cut flowers. Other major cut flower producing provinces are:
- Hubei: carnation, rose, Gypsophila, Gladiolus, calla lily, Gerbera, 6 lily, Dendrobium
- Guangdong: rose, lily, chrysanthemum, Curcuma, pygmy water lily
- Liaoning: carnation, chrysanthemum, Gerbera, calla lily, Gladiolus, lily, marigold, rose
- Jiangsu: lily, tulip, rose, Gerbera
By global standards, Yunnan does not measure up to some other flower production areas, due to the cloud cover, relatively high latitude and occasional winter cold snaps (with temperatures sometimes dropping below freezing). It is the best growing location for flowers from a Chinese perspective but from a world perspective, the climate is not as good as places like Vietnam, Malaysia, Ecuador, Colombia, Ethiopia, Kenya or Tanzania. China has trouble competing with the stem length and head size of roses from Kenya, Ecuador or Colombia. Climate, production fragmentation, breaks in the cold chain, labor shortages, and small size and low level of sophistication of farmers mean that Yunnan has historically not achieved very high levels of quality.
Wholesale flower markets continue to play a very important role in the cut flower trade in China, especially for imported flowers. They:
- Split large purchases into small volumes that are manageable
- Consolidate scattered supply from small-scale importers and domestic household growers
- Maintain good contacts with florists and small-scale e-commerce sellers
- Have a good understanding of customer needs
- Have better cold chain logistics and storage, especially in lower tier cities.
China's exports of cut flowers are still more than double its imports, but imports could catch up in coming years. After a declining trend between 2008 and 2012, China's imports of fresh cut flowers rose from $16.5 million in 2012 to $54.9 million in 2017. Exports, on the other hand, are experiencing a flat to declining trend over the past several years. Rising domestic demand is cited as the reason behind the drop-in exports. Most of China's exports are to its neighbors in East and Southeast Asia. Unlike in countries that are heavily dependent on flower exports and invested heavily in export infrastructure, flowers — and especially flower exports — are almost an afterthought in China's broader agricultural plans. Higher costs, labor shortages, and a suboptimal climate hinder the competitiveness of Chinese exports outside of Asia and Oceana.
In contrast to the West and some neighboring Asian countries, it is very rare to see a floral display at a Chinese supermarket. Produce managers are wary of the high shrink of flowers, especially in the context of low demand for daily flower use among Chinese consumers. Retailers believe there is a lack of expertise necessary to deal with flowers. E-commerce holds the greatest potential for growing the industry, but is also currently the area that faces the most challenges:
- When Chinese consumers buy something online, they want the product they receive to look exactly like the photo. This is a challenge for e-commerce companies buying many different types of flowers from many different suppliers.
- Breaks in the cold chain, lack of capacity and general rough handling of packages can lead to quality problems during transportation and delivery.
- Many consumers would still prefer to touch, smell and see the flowers in person.
Even a decade ago, consumption of fresh cut flowers in China was dominated by government and business use. Government consumption, in the form of floral arrangements at lavish official banquets and meetings, was as much as one-third of China's fresh cut flower market. However, since Chinese President Xi Jinping launched an anti-profligacy campaign in 2012, government consumption has tumbled to perhaps 10% of the total, and there is strong political pressure to use domestically grown flowers. This coincided with the rise in personal consumption. The steady climb in personal consumption in recent years has been fueled by steady economic growth, a growing middle class, and the entrance into the labor force of younger generations that are more likely to embrace gifting flowers for holidays as well as buying themselves flowers for daily use.
For additional details on the Chinese fresh cut flower industry, keep an eye out for the release of PMA's full research report in August 2018.