Floriculture Industry of Sri Lanka

Floriculture Sri Lankan Economy

Sri Lankas gross domestic product (GDP) growth rate

attained 8.2 % at the end of 2011

Lowest GDP growth rate of 3.5 percent in 2009
Sri Lankan economy is based mainly on tourism, tea

export,

apparel, tourism, textile and rice production sectors

Floriculture
Sri Lankan Major Exports
Tea Rubber Coconut

Sesame seeds and other oil seeds

Unmanufactured tobacco Mineral exports Precious stones Textiles and garments

Vegetables
Coffee Cinnamon Pepper

Floriculture

Sri Lankan Minor Exports

Ayurvedic and herbal products Electrical and electronics

Organic products Ornamental fish Wooden products Plastic Products Printing and stationary Spices and allied products Toys games and sports

Coconut and coconut based products Fruits and vegetables Giftware and lifestyle products Handloom Floriculture

Footwear and leather

Floriculture

Sri Lanka Overall Exports

Floriculture

Sri Lankan Imports

Rice
Flour Sugar

Tyres and tubes Medical and Pharmaceutical products Building materials Machiner y and equipment Chemical elements and compounds

Milk and milk products

Fish dried and fish Fuel Motor cars and cycles Fertilizer

Dyeing, tanning and colouring materials

Exports, Imports and Trade balance

Exports Imports Trade balance

583,967 2004 -227,171 638,276 2005 -253,082 716,579 2006 -350,110 845,683 2007 -404,703 878,499 2008 -647,207 819,911 2009 -358,707 974,387 2010 1,519,737.00 1,172,618.00 1,525,705.00 1,250,389.00 891,359 811,138

1,066,689.00

-545,350
1,167,588.00 2011 -1,073,900 1,245,531.00 2012 -1,195,368 -1,500,000 -1,000,000 -500,000 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 2,440,899.00 2,241,488.00

Floriculture in Sri Lanka

Floriculture industry started in the 1970s and ever since then,

Sri Lanka has been gradually moving up the ladder to become an exporting industry
Sri Lankan floricultural production receives much less than 1%

of its share in the world market

During the year of 2011, Sri Lanka was able to achieve 14.8

million US $ worth of foreign exchange earnings through floricultural exports

Compared to the year of 2010, Sri Lankan floriculture exports

had grown by 9%

Floriculture in Sri Lanka (Contd)

The flower industry covers up to 500 hectares as at present; where

most of the lands reside in the Western Province. Out of which; 472 hectares are allocated for foliage plants, 10 hectares for carnations, 3 hectares for roses, 2 hectares for gerberas, 10 hectares for anthuriums and 3 hectares for orchids
The Sri Lankan floriculture comprises of three sectors for producers

or growers,
Large commercial ventures for export Middle level growers targeting the local market Village level producers who will produce to the above parties

Floriculture in Sri Lanka

HS Code 0601 0602 0603 Description Bulbs, tubers, corms and other propagated materials Live plants Cut flowers and flower buds of a kind suitable for ornamental purposes, fresh, dried, bleached, impregnated or otherwise prepared 0604 Foliage, branches and other parts of plants, without flowers and or flower buds and grasses, mosses

lichens, being goods of a kind suitable for bouquets or ornamental purposes, fresh, dried, bleaches, impregnated or otherwise prepared 1209-3 Flowers seeds

Sri Lanka Export statistics - Floriculture

600000000

500000000

400000000

300000000

200000000

100000000

0 Netherlands Japan United Kingdom 2008 2009 2010 2011 Germany 2012 Saudi Arabia Others

Sri Lanka Floriculture Imports - Cut Flowers and Foliage

2008 2009 2010 2011 2012

60000000

50000000

40000000

30000000

20000000

10000000

Netherlands

India

Thailand

Japan

Egypt

Others

The world Floriculture industry

Floricultural products are exported mainly to THE EUROPEAN COUNTRIES Growing with an annual average of 10.3% Ornamental young plants and cut flowers ARE HIGHLY VITALIZED EXPORTING PRODUCTS FOR SEVERAL DEVELOPING COUNTRIES

The major exporters of floriculture based on cut flowers are Netherlands, India, Ethiopia, Kenya etc.
Based on decorative foliage are Israel, India, Malaysia, Egypt, Sri Lanka, Ecuador and Philippines

Challengers, Barriers and Risks in the Domestic Industry

Lack of information Cost of production

Availability of Skilled Labor

Lack of coordination between relevant stakeholders

Lack of Varieties

Special Characteristics
To keep at the right humidity level

Organic Manure

Import and Export Policies Implemented by the Sri Lankan Government

In regards to Exports,
Clearance certificate from the Forestry Department. CITES certificate from the Wild life Conservation Department. Certificate from the National Aquatic Research and

Development Agency.
Certificate issued by the department of agriculture. Register with the Export development board.

Import and Export Policies Implemented by the Sri Lankan Government

In regards to Imports,
Category 1 Category 2 Category 3

Category 4
Category 5

Trade terms
Payment Period
Trade Documents Delivery

Country Analysis- Netherlands

History of Dutch economic competitiveness Recent economic performance Economic composition Key economic drivers 1. Exports

2. FDI
3. Labour productivity 4. Innovation Macroeconomic Policy 1. Monetary policy

2. Fiscal policy

Dutch Floriculture Cluster Analysis

Cluster context Brief history Cluster structure and value chain

 Performance of the Dutch floriculture cluster

Trends in the Dutch floriculture cluster 1. Share of supermarkets are scaling up

2. Traditional growers moving their production focus to developing

countries

3. Progress has taken place in vertical integration and consolidation

4. More focus on organic products, ethical standards, CSR

1. 2. 3. 4. 5.

Floriculture Industry Netherlands - Porters 5 Forces Bargaining power of customers- High Threat of new entrants- High Rivalry-High Threat of substitutes- Low Bargaining power of suppliers- Low

Growth Prospects for the Industry in the Foreign Market

1. Netherlands hosts the largest auction of flowers and plants in the world

Creates a link between producers (growers) and buyers One stop shop that has a wide and varied assortment of products

2. Worlds biggest trade fair for floriculture products (International Horti Fair) Obtain orders and build up new trade contacts Strengthen and consolidate present business links Study the latest technologies in production Identify new product assortments for the Sri Lankan market Source mother plant suppliers Obtain first hand information on importers, preferences of consumers and new trends in

the market

Make adjustments to cope with international changes

3.

Exceptional distribution networks

Surrounded by markets such as Germany, France and the UK

More access to commercial and industrial centers

4.

Increase in demand for Sri Lankan (i) Fresh foliage, branches and other parts of plants (ii) Un rooted cutting and slip in Netherlands
250000000 200000000 150000000 100000000 50000000 0 2008 2009 2010 2011 2012 2013 Unrooted cutting and slip Fresh foliage, branches and other parts of plants 111029543 86563709 47868881 59499196 42510576 52121836 63403637 204720875

137223078 122098245 120858107 110207187

5. Additional services provided by importers in Netherlands

Challenges, Risks and Barriers in the International Arena

Non availability of new varieties for export Security checks on roads and at airports

Duplication of security documents

Insufficient information about export markets, linkages, market

requirements and demand conditions

Financial barriers
Access barriers to research facilities Risk of nonpayment by the foreign buyer

Issues associated with freight

 Floriculture Industry Netherlands- Diamond theory 1. Demand conditions

2. Factor conditions
3. Related and supporting industries 4. Firm strategy, structure and rivalry 5. Role of the government 6. Changing events PESTEL factors 1. Political and legal 2. Economic 3. Social 4. Technological 5. Environmental

SWOT Analysis of the floriculture industry

Strengths
Different climatic conditions
Existence of natural substrate

Weaknesses
Shortage and costly air cargo
Facilities for R&D Trained personnel

(coco-peat)

Finest quality Climatic disparities Physical location of the

Large initial investment

Lack of information Product varieties

country

Technological know-how
Good Agricultural Practices

Lack of R&D
Small production units Rules and regulations

Opportunities
Necessity to focus on new

Threats
Unstable environment Demand fluctuations Legislative and

products growers

Directly transact with

Quality and environmental

certifications forthcoming

economic uncertainties investments

Polish market will be a

Increasing trend in exports International Trade Events Promotion activities by

Big financial

Export development Board

Floriculture Industry - Porters 5 Forces

Threat of substitutes - Low
Rivalry - Low Threat of entry - High Bargaining power of suppliers - Low Bargaining power of customers High

Floriculture Industry -Diamond Theory

Factor conditions Demand conditions

Related and supporting industries

Firm strategy, structure and rivalry

Other events

Modes of Entry
Exporting
Joint Ventures (JV) Floral Plant Growers, L L C, Denmark

Suera Flowers Ltd, Kenya

Flora Stand, India Bakker Brothers, Netherlands Ammerlaan flora, Netherlands

International Business Strategy

Exporting-Netherlands

Target market- Super market chain, Germany

Advantages exports

Increased sales and profits

Domestic competitiveness International Market Shares Lesser Per Unit Costs Business risk

 Risks
credit periods given the risk of settling the payments delays in shipment environmental uncertainties

Distribution channels
Local operations

Information systems
Reporting parties

Recommendations
1.Local exhibitions, fairs and markets should be organized

more often for growers, suppliers of inputs and buyers in the floriculture sector of Sri Lanka.
2.Marketing efforts of the above mentioned local and national

exhibitions should be improved in order to reach target groups located in rural areas.
3.Establishing regional trade centers.

4.The services carried out by the Export development board

should be marketed and advertised more widely.

5.A separate database of growers and collectors should be

developed.
6.Compiling a directory of input suppliers.

7. A better price control has to be facilitated between growers/collectors and exporters Collective selling of floriculture products should be encouraged through

associations, regional trade centers and exhibitions/fairs.

Through forward agreements a pricing system could be established between

exporters and growers in relation to different grades of quality.

8. Awareness on market requirements and demand conditions in both the domestic and

international market should be increased

Introduce standards such as EurepGap and other quality certifications to small

growers/exporters
Distribute existing manuals or develop new manuals for growers/exporters which

mainly focus on growing different varieties of floriculture products that will help

them to be competitive.

9. Business development organizations could develop and conduct

training programs, mainly focused on how a nursery should be managed

10. Encouraging exporting businesses to adopt Buy-back systems 11. Capacity of growers associations should be improved and

strengthened towards providing a better service to its members.

12. Issues faced in security checks and with regard to the duplication of

security documents at airports could be minimized by:

Educating the security personnel Establishing an efficient checking procedure 13.The communication gap between the institutes that carry out research

and development and the floriculture businesses/exporters could be enhanced by

Publishing research findings of new varieties of plants Undertaking more field visits by the institutes and Conducting training camps for growers

14.The risk of default can be covered by obtaining an insurance

policy from Sri Lanka Export Credit Insurance Corporation (SLECIC). More than that the exporters should be encouraged to use the letter of credit system

15.The exporters association and relevant authorities should take

up the issue of high freight charges

Conclusion

Thank You