Dutch flower traders provide glimpse of Brexit consequences

Dutch flower traders provide glimpse of Brexit consequences

Flowers leaving Royal FloraHolland's processing center, pictured, must find new destinations after Brexit is complete.

 

AMSTERDAM — The British public’s vote to withdraw from the European Union is expected to trigger slowdowns in trade and higher costs for many European shippers, but the so-called Brexit may have one victim that’s been overlooked: Dutch flower traders.

Officials at Royal FloraHolland, the world’s largest trading center for plants and flowers, say they are already bracing for their No. 2 customer’s departure. The June referendum did not have an immediate impact on the flower trade, but UK prime minister Theresa May’s announcement last week that she plans to trigger a two-year window for exit talks by the end of March has put the Dutch flower traders on a deadline.

The traders — who trade more than 12 billion flowers per year and whose international business has a 40 percent market share — are now looking for new markets. This decision is going impact links down the supply chain, particularly in air cargo, as the traders are heavily reliant on it to move their cargo.

“The Brexit, certainly for our industry, is not positive,” said Edwin Wenink, director of the center’s Floricultural Logistics Optimization Worldwide, or FLOW, program. “You can already see it coming. At the moment still we do not see a huge effect, but we can imagine in the future there will be an effect.”

Wenink and other Dutch officials peg that future date at two and a half years from today, roughly the date of May’s planned “hard break” from the European Union.

Today, the majority of Royal FloraHolland’s goods are consumed by the European market, primarily the United Kingdom, Germany, France, and the Netherlands. The UK is second only to Germany as a destination for Royal FloraHolland’s products, and annual trade with the UK totals $947.2 million.

That turnover will take a hit if Royal FloraHolland loses UK customers that will face additional customs duties and delays once the United Kingdom leaves the EU’s multinational free trade network.

The impacts of a hard break from the EU are already beginning to appear. The British pound for example has been suffering at the hands of nervous traders, falling to its lowest-ever level earlier this week during a brutal sell-off Tuesday afternoon, and the currency remains under pressure. A cheaper pound means more expensive flowers and plants from the Netherlands, and thus a decrease in sales to the UK, Dutch officials said.  

“What we’re hearing from these British sellers, these people will sell flowers but won’t make profit anymore,” Wenink said.

It’s spurred Royal FloraHolland to reassess its demand markets, something the conglomerate has historically left to its individual traders.

Because of the significant reliance on a market that will soon diminish, Royal FloraHolland needs to change up its approach, officials said.

The flower trader now is looking at markets it previously avoided because of their self-sufficiency for the flower trade. These markers include places such as the United States and China.

In the United States, flower sellers typically purchase from growers in Central and South America, where flowers grow in abundance and the price is cheap, but the quality is not necessarily up to Dutch standards.

And that’s the selling point for Royal FloraHolland, the executives of which believe “Dutch high-end quality” may be their entree into the US market.

China is a different story.

"The growth potential is enormous. But you can't enter the Chinese market if you fail to win over your Chinese partners. In China, it's all about connections," Guido de Wit, program director of the World Flower Exchange, said. "We're used to doing everything the Western European way. That won't do in China, you'll have to learn to deal with a whole other kind of society. Sure, in all countries it's important to establish connections, but this is especially true for China.”

It can take years and years to forge those connections, but on the other hand, you can reap the benefits for many years as well, said de Wit. That long-term thinking may be a tall order for some companies, but not for Royal FloraHolland, an enterprise dating back more than 100 years.

Conglomerate executives say they can date their history back to when their supply was Dutch and their demand was Dutch. The market has since evolved, using Dutch supply to meet European demand for a time, and now flowers and plants are sourced as far away as Kenya and Ethiopia while demand is international.

Reconfiguring the supply-demand balance will take some time in the wake of the looming Brexit and it will take a “mental shift,” said Wenink, but it won’t take the impossible.

The Netherlands Foreign Investment Agency assisted with travel costs that helped make the reporting of this story possible.

Contact Reynolds Hutchins at reynolds.hutchins@ihsmarkit.com and follow him on Twitter: @Hutchins_JOC.