To stem competition, Taiwan’s deep-rooted orchid industry must be innovative and stay optimistic
On the second leg of our trip, we visited Yu Pin Biological Technology Co. Ltd. in the town of Minxiong in Chiayi County in a bid to better understand the division of labor in Taiwan’s agricultural sector as well as its ability to go global. Among Taiwan’s orchid growers, Yu Pin Biological Technology Chairman Chang Neng-I was the first to set up greenhouses in the United States, thus controlling both ends of the smiling curve — R&D and the market.
In the past, Taiwan exported orchid seedlings to the United States, where local growers continued to cultivate the plants in greenhouse nurseries, forcing them to bloom at the desired time. Only then were they sold in the domestic market. Chang, however, exports potted mature orchid plants that he brings to bloom at his own greenhouses in the United States before selling them to his customers.
“We make great efforts to sell Taiwan orchids to every corner of the world,” he says, proudly. “The island of Reunion in the Indian Ocean has a population of just 800,000 people, but Taiwan is able to ship ten containers with about 200,000 orchids to Reunion per year. Where there are business opportunities there are Taiwanese. Phalaenopsis orchids are a highly globalized business.”
In order to ward off competition, Chang continues to come up with new ideas. His latest brainchild is a six-centimeter high flowerpot with a small orchid just 13.5 centimeters in length. When packaged in a box, the potted orchid meets U.S. courier service companies’ size restrictions for the lowest domestic delivery fee. This means that these miniature orchids can be delivered directly to the domestic market upon arrival in the United States via local express delivery services. Chang points out that phalaenopsis orchids are not yet available in several American cities. He hopes to use pharmacies across the United States as a sales channel, selling potted mini orchids for the price of a hamburger.
The continued growth of Taiwan’s orchid industry hinges on exploring markets overseas. Chang currently plans to build greenhouses in the Middle Eastern emirate of Dubai. He is also getting ready to enter the Indian market.
Why does he want to sell orchids in a desert country? “In Dubai, the wholesale price for an orchid stands at NT$1,000,” ex- plains Chang. With such lucrative prices, Dubai could become a new business paradise for Taiwanese orchids, should it be possible to invest in greenhouses there.
Taiwanese orchids will probably not just bloom in the desert but also enchant consumers in long-isolated Iran with their beautiful blooms and vibrant colors once trade sanctions are lifted in exchange for a freeze of Iran’s nuclear program. While the world still debates how the resumption of Iranian crude oil exports will affect the international oil price, the Sogo Team has already zeroed in on Iran as a new consumer market. At the same time, Chang also sees great market potential in Mexico, Columbia and Brazil.
He does not worry about competition from the Netherlands at all. “The world is so big, there are so many people... there are opportunities everywhere, and there is no such thing as who destroys whom,” Chang says.
Sometimes, competitors can even become business partners.
I-Hsin Biotechnology Corp.,
The third leg of our tour takes us to another orchid breeder in Dalin in Chiayi County. The strategy of I-Hsin Biotechnology Corp. highlights the coopetitive relationship with Dutch orchid growers.
In recent years, I-Hsin has mainly exported Taiwanese orchid seedlings, young plantlets and seedlings in flasks to European countries such as Denmark, Germany, Italy and the Netherlands.
Surprisingly, the Netherlands counts among I-Hsin’s three major export markets. Not only has the Netherlands failed to completely eliminate competition from Taiwan’s orchid growers, the country has even become one of the major markets for some Taiwanese orchid breeders.
I-Hsin Biotechnology President Jian Wei-tso observes that Taiwan boasts many orchid varieties, while the Netherlands has market access. Europe is the world’s largest market for orchids, with annual demand reaching 150 million plants.
Dutch orchid marketers are able to sell orchid varieties that do not sell well in Taiwan in great quantities in Europe. Therefore, I-Hsin Biotechnology came up with an ingenious strategy. “We discussed whether it would be possible to sell the orchid varieties that were not picked by our customers to the Dutch orchid growers. Then Taiwan would take the royalty fees,” Jian explains.
Inside I-Hsin’s tissue culture lab, every cultivar has a product number. Over the years, more than 12,000 breeding experiments yielded more than 2,300 phalaenopsis varieties with product numbers, which means they were successfully bred and commercialized for mass production.
Given that it can take a decade to breed a novelty orchid and bring it to market, I-Hsin’s more than 2,000 successful varieties represent many years of painstaking, hard work.
Although orchid exports keep growing, challenges and crises loom on all fronts. After Japan’s multinational imaging and optical company Canon opened a production plant in the Chiayi Dapumei Intelligent Industrial Park three years ago, a growing number of manufacturing jobs became available in this traditional orchid growing region. As a result, orchid growers in Minxiong and Dalin find it increasingly difficult to find farm workers. Labor shortages have become the major obstacle that stands in the way of further orchid industry growth.
Second, while the cultivated area of the Taiwan Orchid Plantation in Houbi, which hosts the annual orchid show, continues to expand, the water supply cannot keep up with demand.
For the past three years, the 175-hectare biotech park has faced severe water shortages, throwing into doubt the long-term development of Taiwan’s largest orchid production base.
Third, Chen Chia-chung, professor at the Department of Agricultural Machinery Engineering of National Chung Hsing University in Taichung, found during a recent fact- finding mission to Europe that Taiwan’s orchid growers lag behind in their R&D of European mainstream varieties by three to five years. He warns that by the time Taiwanese breeders are eventually able to launch mass production of these orchids, market trends might already have taken a different direction.
Chen believes this is a serious problem. The Netherlands controls the world’s largest market for potted plants and phalaenopsis orchids. Taiwan can only rely on its large variety of orchids but is not able to control or lead market trends.
Fourth, Taiwan is playing catch up with the Netherlands, while other competitors are on its heels. China has already obtained permission from the United States to export phalaenopsis in growing media such as sphagnum moss. This means that Chinese orchids are competing with Taiwanese orchids under the same export conditions.
Although Chang and Jian both believe that Chinese orchid growers have higher costs than their Taiwanese counterparts have and cannot compete with Taiwan when it comes to breeding new varieties, they still fear that China will unleash cutthroat price competition in the United States.
“In the past, the Dutch posed a threat; now there still is a threat,” Feng admits. In order to cope with recurring challenges and relentless competition, Taiwan’s orchid breeders will need a good dose of unshakable optimism. Translated from the Chinese by Susanne Ganz Additional reading selections can be found at http://english.cw.com. tw