Love's labour lost

‘Red Roses are to Valentine’s day what kisses are to love’ goes a saying. Not surprisingly, four billion roses are sold every year on Valentine’s Day. But lovers across the world, especially in Europe and the US, chose to prove the saying wrong this year. Weighed down by job losses, pay cuts and an uncertain future, they not only gave up flamboyant gifts and dining at marquee restaurants but also the ubiquitous red roses— the ultimate symbol of love. This year, many opted for less expensive flowers such as tulips and hyacinths and even diehard rose aficionados settled for a single stem or two rather than a bunch. Celebrations, nevertheless, carried on.

But for the Indian floriculture exporters, the party was over—at least for this year. This is because roses account for 99 per cent of total Indian flower exports, which, according to Agriculture and Processed Food Products Export Development Agency (APEDA), aggregated to Rs 340.14 crore ($84.49 million) in 2007-08. “Traders held back the orders due to uncertainty. One of the leading traders, who normally buys six million roses for Valentine’s Day, had firmed up orders for just one million by February 6,” says Ramakrishna Karuturi, Managing Director, Karuturi Global, one of the largest players in the industry, with a presence in both India and Africa. Adds Anne Ramesh, Chairman, Suvarna Florex, and a veteran in the industry: “Every year, we used to get firm orders for 70 per cent of the export quantity by February 1. This year, even as late as February 9, we had orders for less than 20 per cent of the volume. This meant that a huge quantity went into auction and prices, naturally, came under pressure.” If at all the exporters managed to liquidate the stocks, it was at the cost of realisation, which fell by 15-20 per cent, the sharpest decline ever since the industry began to export flowers some 15 years ago.

This development has a much larger impact on the sector as the ideal climatic condition for producing best quality roses in India is between December and March. It is only during this period that the flowers effectively compete, in quality terms, with other foreign firms in the global market and the exporters can earn maximum value. In fact, the money they make during this period helps them compensate for lower income during rest of the year. Inability to make money during the Valentine’s Day celebrations will impact the industry’s efforts to expand, develop infrastructure and experiment with newer varieties. Economies of scale are crucial to defray fixed costs. Indian farms are small and fragmented compared to those in Africa. Infrastructure facilities such as green houses, cold room and refrigerated vans need constant investments. More importantly, offering newer varieties is crucial for better prices. But it is a costly proposition as it involves paying royalty fees as high as Rs 50 a stem to the breeders. In fact, lack of new varieties is one of the reasons (apart from recession in Japan and competition from Kenya) that India lost the demanding Japanese market. In 2006-07, floriculture exports from India to Japan was Rs 325.54 crore. It crashed to Rs 32.77 crore in 2007-08.

Flower show Indian floriculture exports are predominantly roses Exporters get the best rates during the V-Day season Four billion roses are sold all over the world on V-Day Some of the major brands sold are: Poison, Tropical Amazon, Acqua, Corvette, Emma and Taj Mahal Exports during other occasions such as Christmas, New Year fetch only half the V-Day price

“New varieties are the key to survival. Floriculture is a fashion industry,” says Najeeb Ahmed, MD, Tanflora Infrastructure Park, the largest floriculture unit in the country, spread over 50 acres near Hosur in Tamil Nadu. This year, the company launched the “Taj Mahal—Symbol of Love” brand of red roses, a French variety with exclusive worldwide rights. “On an average, our realisation for the Taj Mahal variety is 60-100 per cent more than other varieties. We have orders for two million roses, but we are in a position to supply only a few lakhs as it is the first year of commercial cultivation and we do not have the volumes,” informs Ahmed, adding that Tanflora would launch their ‘Kohinoor—Jewel of India’ brand (pink roses) next year. “At any given time, we have 30-40 new varieties on trial to check out the production feasibility, pest attack, vase life and acceptance in the market,” he reveals. Newer varieties also help Indian exporters fend off competition from better placed African players.

“Ethiopia and Kenya are blessed with ideal conditions. The temperature is between 10 and 30 degrees centigrade throughout the year. Also, as days are longer, plants get more sunlight. We need to work very hard and spend a lot of money to match up to their output quality,” explains M. Sridhar Chowdary, MD, Vinayaka Agritech. African players have other advantages, too. Classified as preferred countries, Ethiopia’s and Kenya’s exports suffer from no import duties when they enter Europe. Also, their air freight is much lower than what Indian companies spend due to their relative proximity to European markets. For Indian exporters, air freight alone accounts for almost 50 per cent of the export realisation. Despite the slowdown, the current crisis is unlikely to cripple the industry. It is in a better financial position after a one-time debt settlement in 2005-06, but its profits will be dented this year. “There will be an adverse impact, but it will not be disastrous,” agrees Ahmed. There is an increasing but belated consensus within the industry to reduce the dependence on exports and focus on the domestic market. After all, India’s share in the $60 billion global flower market, at $84.49 million, is minuscule.

Local demand is good and is growing at around 15 per cent annually. The problem is the price, which is not only volatile, but half that of exported roses. “We need to build the local market in a big way. Once local demand increases, prices will move up, too,” chips in Ramesh. “I want to export out of choice and not compulsion. The domestic demand is clearly on the rise. Local orders for this year’s Valentine’s Day exceeded one million roses for us,” says Ahmed. “Domestic market growth is the key to the future,” sums up Karuturi.