The European Horticulture Market Opportunities for Sub-Saharan African Exporters AFRSD Department’s Knowledge Network Seminar Washington, 9 January 2007

The European Horticulture Market

Opportunities for Sub-Saharan African Exporters

AFRSD Department’s Knowledge Network Seminar

Washington, 9 January 2007

Ronaldt Thoen – Hans de Vettearchitects engineers consultants

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Report “The EU Horticulture Market …”

Recent developments

Future business models

Agenda

architects engineers consultants

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The EU MarketIssues


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Value-volume ratio - HIGH

Value-volume ratio - LOW

Perishable

DAYS

Perishable

WEEKS

FHFPs

Storage

Commoditiese.g. banana,

citrus, top fruit, onions

Specialities

Fresh

Commoditiese.g. tomatoes

Fresh VegetablesEU Imports (1.000 t)

0

2.000

4.000

6.000

8.000

10.000

12.000

1992 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004(p)

Extra-EUIntra-EU

SSA 1.1% of total EU-imports

The EU Market


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Fresh FruitsEU Imports (1.000 t)

0

5.000

10.000

15.000

20.000

25.000

1992 1994 1996 1997 1998 1999 2000 2001 2002 2003 2004

Extra-EUIntra-EU

SSA 10.1% of total EU imports

The EU Market


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The EU Market


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FlowersEU Imports ('000 Euro)

-

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

1996 1997 1998 1999 2000 2001 2002

Africa

Non Africa imports

SSA >50% of total EU imports

Consolidation in retail industry shifts power to downstream

links

Chain traction

The EU MarketSupply Chain Dynamics


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Fruits and vegetables became strategic product category

90ties conception



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Food scandals, GMO triggered

Legislative and Public concerns

Legislative and Public thrust



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Fruits and vegetables became potentially suspicious

Y2K conception



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_+

+

__

Usage of chemicals

Usage of water and nutrients

Usage of fossil

energy


Limiting freedom (flowers, fruits,

vegetables)


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_+

+

__

Toxic contamination

Microbial

contamination

Physical contamination


Limiting freedom (fruits, vegetables)


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_+

+

__

Service level

Control on logistics

Product range

- -


Limiting freedom (flowers, fruits,

vegetables)


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Exclusive

markets

Emerging markets

Spot market

Consistency

+ +

_

_

Massive expansion

of production

Product specs



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Mainstream

Discount and loss leaders

Standing order market

Consistency

+ +

_

_

Product specs

Left-over spot

market

“Catch of the day”

Massive pressure

and shake-out



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Traditional market conception

output consistency and traceability

- - - Required investments +++

+ + + + + +

- - - - - -Modern market

conception

Eurep-GAPBRC

Global Food Safety Initiative

MPSFlorimark

Just in TimeJust in Shape

Producer strategies


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Traditional market conception

output consistency and traceability

- - - Required investments +++

+ + + + + +

- - - - - -Modern market

conception

Additional investments

Advanced management

Eurep-GAPBRC

Global Food Safety Initiative

MPSFlorimark

Just in TimeJust in Shape

Producer strategies


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Land Green thumbs Rural coops

Financial resources

Managerial skills

Entrepreneurship

Traditional Farming Concept

Modern Horticultural Concept

Producer Strategies


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Recent Developments


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• Less saturationbut

• Increase regional production (EU subvention)

• Turkey expected to be major exporter to new member states

Expanding marketEU-27


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• Operational 2nd half 2006, $ 70 million

• Objective: global hub for perishables (flowers AND fruits and vegetables);

• Comparative advantages:• Labor cost• Fuel cost• Free trade zones• Massive increase of flights• Geographical position

New Perishable HubDubai Flower Center


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• Intercontinental sea transport for high perishable products started 10 years ago

• Rotterdam-NY (peppers, tomatoes)

• Operational in flowers since 2 years• Israel-Marseille (Agrexco)• Rotterdam-Boston (FloraHolland)

• Based on new technology • Loading/unloading techniques• Conditioned containers• Preservatives

TransportSea transport


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Consequences for SSA • Substantially lower freight tariffs• Increased sea transportable assortment• New logistic hubs

But also• Increased intercontinental competition


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TransportSea transport

• FloraHolland and VBA announced merger

• turnover 2,0 + 1,7 bln

• Consequences• concentration of 50 % of EU imports in one hand• Subject to NMa (anti trust)

• Possible reactions• Alternative logistic structures: increased direct

sales from SSA to Europe?

Further Chain ConcentrationMerger of Flower Auctions


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New Technology100% conditioned greenhouse

• Strong technology development in EU horticulture driven by:

• Food safety• Consistency• Energy• Labor

• Expected direction• Conditioned greenhouses based on:

• Subterranean heat/cold storage• Combination pad-fan & forced cooling

• Robotizing harvest and post harvest activities


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Heat buffer tank

Boiler

HeatCO2

Gas

Electricity

Water

Bassin

Heat

Pump

Aquifers

Warm Cold

Cold

Heat buffer tank

Heat buffer tank

Boiler

HeatCO2

Gas

Electricity

Water

BassinBassin

Heat

Pump

Aquifers

Warm Cold

Cold

New Technology100% conditioned greenhouse

• Upscaling in EU horticultural industry

• Dramatic decrease of # of EU growers as a result of• Food safety act• Retail consolidation

• Dramatic increase of average horticultural operations

• Family farms replaced by corporate farms• 50% less units than 10 years ago

UpscalingEnd of Family Farm?


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• Key issues in retail industry are food safety and access to sources

• Resulting in long(er) term commitments and direct access to sources (excluding middleman)

• Strategic term procurement between retailers and service providers (… and service providers and producers)

• Mutual investments in logistical infrastructure (retail-service providers and service provider-producer)

• Spot markets loose importance

Strategic alliancesNew Models


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Future Actions


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Smallholder

Grower

Entrepreneur

Corporate farm

Integrated Farm Development

Integrated Product Range Development

Future actions Developing horticultural business models

Exportorientation

Domestic marketorientation

Advanced productionstructure

Basic productionstructure

5

4

3

2

1

1 = Subsitance farmers2 = Small scale commercial farms3 = Large scale export farms4 = Professional horticultural farm5 = Multinational agro-enterprise

a

b

c

d

e

Overall development strategies in

horticulture/floriculture

Today's practice: Sher Ethiopia (Turnkey-projects)

• General and production infrastructure• Develop and maintain social infrastructure• Acquire professional growers• Hire purchase facilities to professional growers• Support professional growers

Future actions Integrated Farm Development


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Driven by:• Supply chain management

Focussed on:• Mainstream products

Organized by:• Franchise-like formula

Supported by:• National/local government

Initiated by:• Foreign investors



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Existing Investor

Supportive

Government

Professional growers


Investments and services

market control ROI

infrastructure

economic development

rent fees

access indust

ry

Driven by:• Need for widening product range

Focussed on:• Small scale specialties

Organized by:• Production cluster

Supported by:• Public sector and World Bank

Initiated by:• Public-Private-Partnership

Future actions Integrated Product Range Development


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Public/Private

investor(s)

Supportive

Government

Smallholder

Future actions Integrated Product Range Development

Investments and services

market development

infrastructure

economic development

rent fees

access marke

t

Exportorientation

Domestic marketorientation

Advanced productionstructure

Basic productionstructure

5

4

3

2

1

1 = Subsitance farmers2 = Small scale commercial farms3 = Large scale export farms4 = Professional horticultural farm5 = Multinational agro-enterprise

a

b

c

d

e

Overall development strategies in

horticulture/floriculturePrivate sector

Public sector

and World Bank

Questions


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Documents

The European Horticulture Market Opportunities for Sub-Saharan African Exporters AFRSD Department’s Knowledge Network Seminar Washington, 9 January 2007