Flower producers see great potential for growth in China as they seek fertile ground for fresh sales
Kenya’s giant flower sector is hoping to grab a bigger share of China’s lucrative market in a strategic effort to diversify its export market and boost earnings.
With competition increasing worldwide, the East African country seeks new markets, and China is seen as a potential destination for its roses.
Demand for cut flowers from Kenya, the world’s fourth-largest producer after the Netherlands, Colombia and Ecuador, is slowly gaining traction in China due to the flowers’ quality and reliable production.
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The quality of the flowers is checked at the Red Lands Roses farm in Nairobi, Kenya. Photos by Lucie Morangi / China Daily |
Since flowers are considered a luxury product mainly used in celebrations such as anniversaries and state events, the volume entering China is low. The Horticultural Crops Directorate, the agency that regulates the sector in Kenya, says growth has been stymied, despite increasing demand, by challenges including high tariffs.
The hurdles have not stopped traders, however. “We entered the Chinese market because of its high appetite for Kenyan premium flowers,” says Rita Wairimu, the sales executive in charge of the Chinese market at the Red Lands Roses, which is about 45 minutes’ drive from downtown Nairobi.
Wairimu says the company has developed links with distributors in Guangzhou and Beijing whose customers have a preference for spray roses, which feature several blooms on one stem, and garden roses. “Shanghai, however, remains our biggest market, and I think it’s largely unexploited,” she says.
For more than two decades, Kenya has taken its flowers to the European Union, where it now has a 38 percent market share.
However, with global competition intensifying and increased production in Kenya, the need to focus on emerging markets such as China has increased.
“Since we entered this market two years ago, the demand for our flowers has gone up exponentially,” Wairimu says. “We send at least 30 boxes weekly with approximately 300 stems per box, depending on clients’ demand.”
She says the farm does not participate in the auction market in the Netherlands because it seeks higher profit margins and hopes to build its brand. “And this is the strategy we are approaching the Chinese market with. The profit margins are higher and it promises a sustainable, longterm business,” she says.
Tushar Vyas, general manager of the Subati Flowers farm in Naivasha, says roses grown at an altitude of around 2,230 meters, coupled with high temperatures, produce big-head roses of 7.5 centimeters or more, which fetch high prices in the global market.
“China has great potential, and we are banking on them to be our biggest market in the near future,” he says.
The market dynamics have attracted private Chinese investors. Kevin He, an entrepreneur from Fujian province, has turned Kevin International Group Africa into a prosperous venture in just four years. He says demand for Africa’s cut flowers is gaining traction in Shanghai, Beijing, Kunming, Chengdu, Chongqing, Hangzhou, Guangzhou and Hong Kong. His company’s exports have grown from 350 metric tons in 2016 to more than 1,000 tons in 2017.
“The Chinese market promises to significantly increase Kenyan farmers’ earnings,” he says.
He supplies flowers from at least 30 farms in Kenya and works with around 20 distributors in China. “Besides having big-head roses, and more than 10,000 types of roses, the flowers from Kenya have a long shelf life, lasting between 14 and 21 days,” he says. “Buyers want value for money.”
The sector brought in around $814 million (717 million euros; ￡639 million) in 2017, an increase of 20 percent year-on-year. In a CNN report, Qi Bo, the director of distributor Jiuye Supply Chain in Guangzhou, was quoted as saying the demand in China for flowers from Kenya had increased by 25 percent year-on-year, and the company expected its imports to double this year to 5 million flowers.
Despite the growing demand, Kenya’s market share in China is under 5 percent, which Clement Tulezi, CEO of the Kenya Flower Council, a growers’ association in Nairobi, attributes to tariffs ranging from 4 to 10 percent. He says this makes flowers uncompetitive in a market that also buys from Europe, South America and Ethiopia.
Tulezi says a duty-free agreement between China and Ethiopia has seen the African country’s products flourish. “Ethiopia pays zero duties. We would be happy to have such an agreement, too,” he says. “A trade agreement with lowered tariffs has the potential of growing our market share by 10 percent from the current levels.”
Duty-free status is behind Kenya’s success in the EU, where the East African country has been given beneficial trading terms under an economic partnership agreement.
Tulezi says China is one of the top markets that Kenya has been eyeing. He points to the burgeoning middle class, which has high disposable income and a taste for luxury goods. “The demand per capita in China is high,” he says, adding that other new markets are the United States, Japan, Australia, Turkey and Russia.
An attractive trade agreement is expected to be part of discussions between China and Kenya during the China International Import Expo, to be held in Shanghai from Nov 5 to 10. A high-level government delegation, led by Kenyan President Uhuru Kenyatta, will go to China for the talks.
Tulezi says such an agreement is urgently needed. First, Kenya’s traditional destinations in Europe have been facing headwinds, including a market glut, stiff competition that is eroding profit margins, and falling demand caused by slower economic growth, he says.
Second, domestic demand for flowers accounts for less than 1 percent, so Kenya is eager to diversify. “New emerging economies including China therefore hold more potential for us,” says Tulezi.
The Flower Council has been working closely with the Kenyan government to forge improved trade ties with China.
An agreement is plausible, according to experts. Chinese President Xi Jinping is behind the push to build improved and stronger Sino-African cooperation through trade and investment. He has frequently emphasized the need to build a community with shared future for mankind, which was underscored during the recent Forum on China-Africa Cooperation summit in Beijing, where he committed to importing more non resource products from Africa and increasing corporate investment, among other measures.
Robert Kagiri, an economics scholar at the University of Nairobi, says: “The two partners are eager to reduce the yawning trade deficit and so China, over the recent past, has embarked on building bridges that would increase African exports into China. This is what Africa wants, too.”
Peter Biwott, CEO of Kenya’s Export Promotion Council, a government agency, says flowers are among the premium products that will be exhibited at the Shanghai import expo. “This is a renewed strategy by China to support Africa’s growth through its export sector. We are buoyant that once we have favorable trade agreements in place, it will pave the way for an increase in foreign investments into Africa, as more Chinese private investors would venture into lucrative opportunities in the country. The flower sector still has potential for growth, and we hope investors will take advantage of our improved environment to bring in capital and expertise.”
Better access to the Chinese market will also create an enabling environment for increased direct flights between the two countries, a solution to current logistical challenges. “It will further enhance commercial relations that would have a multiplier effect on the East African economy, such as more efficient logistics, increased demand for modern infrastructure and an uptick in tourism,” says Kagiri. He adds that lower tariffs would help Kenya build an export-oriented economy and achieve sustainable economic growth.
The entry of Kenyan flowers into China has also opened new opportunities for startups in the Asian country. According to the Red Lands Roses, most retailers in China are entrepreneurs eager to seize the opportunities of a large and sophisticated consumer market.
“They are leveraging online platforms such as 24hua.cn,” says Wairimu, the sales executive.
(China Daily European Weekly 11/02/2018 page9)