Kenyan roses to blos­som in new mar­kets

China Daily European Weekly - - Cover Story -

Flower pro­duc­ers see great po­ten­tial for growth in China as they seek fer­tile ground for fresh sales

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 ex­por­to­ri­ented 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.

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