01/22/2024

Description of the flower and plant market

2023 was a year of surprises

One thing was already certain at the start of 2023: the flower and plant business would not get any easier. Plant closures in the Netherlands and Germany, planned conversions of production to cold cultivation and many other factors led us to expect a challenging year in terms of product availability and procurement. At the same time, at the beginning of the year, it was certain that specialist retailers would purchase more and more in line with demand and at shorter notice in their day-to-day business in view of the uncertainty among customers. System retailers would also reserve significantly less due to uncertainty about future demand and allow their suppliers to produce in uncertainty. Conclusion: 2023 holds little predictability and many challenges! Knowing full well that 2020 and 2021 were two above-average years for horticulture - all expectations were exceeded and 2022 was also rated as a good year at a normal level - the industry entered 2023 with a kind of optimism for a purpose. Because at the beginning of the year, very few people were really convinced that 2023 would be a very successful year. However, the fact that things didn't turn out as badly as expected shows how flexible but also how stable the industry is - flowers and plants are simply part of life!

For an assessment of the general market situation for flowers and plants, it is interesting to look at Dutch flower and plant exports, as the Netherlands is by far the most important hub for trade in the EU and Germany. The Association of Wholesalers of Floricultural Products (VGB) presents reliable figures based on export statistics from "Floridata". According to these statistics, the export value for flowers and plants fell by around 4% in the first quarter of 2023 for both flowers and plants. Overall, the Netherlands achieved an export turnover of approx. 2 billion euros (flowers approx. 1.3 billion euros; plants approx. 0.7 billion euros).

The decline in exports is primarily due to weaker exports to the traditional top three export countries of Germany (-4%), the UK (-11%) and France (-9%). When looking at the sales channels, it is striking that supermarkets and department stores declined somewhat in importance in the first quarter of 2023, although they had discovered flowers and plants for themselves under coronavirus. Despite the fact that the Netherlands' export value for flowers and plants fell by 4% overall, this can be seen as a success. Market experts secretly expected a decline of at least 10 to 15 percent in advance.

A relaxed start to the season

In Germany, too, it was found that the shortage of goods and slump in consumption predicted at the beginning of 2023 due to the energy crisis did not materialize to the extent feared. For example, the first quarter of 2023 at the German marketing organization Veiling Rhein-Maas was on a par with the previous year.

Wholesale flower markets in Germany reported declining sales at the beginning of the year. However, it turned out that these were not as severe as expected in view of inflation and the energy crisis. As expected, January was a weak month. Accordingly, the season began somewhat more relaxed. There was also hope that the procurement of goods would not be as dramatic as feared and that a full range could be offered all year round despite the announced production shutdowns in the factories. The calmness paid off. The mood at the wholesale flower markets in the first quarter of 2023 was more positive than expected. Once again, the sunshine boosted sales. The picture at the companies was also quite serene.

Valentin 2023 turns out differently

Alongside International Women's Day, Valentine's Day is the most important special sales day for flowers and plants in the first quarter of each year. It is an important indicator of success in the flower trade and is therefore observed with great interest in the industry. The balance sheet for Valentine's business varies among the leading marketing organizations: Landgard, Germany's largest marketing organization for flowers and plants, reports that expectations in the specialist trade were not met. Royal FloraHolland, the largest Dutch marketing organization for flowers and plants, also reported a decline in sales compared to the previous year. The marketers Veiling Rhein-Maas (D) and Plantion (NL), on the other hand, describe sales at the previous year's level. The Association of the German Flower Wholesale and Import Trade (BGI) also reports sales for Valentine's Day at the previous year's level.

Red roses on Valentine's Day are becoming less important

Although red roses are still the number one gift for Valentine's Day, according to specialist retailers, they have become less important as a gift, especially among younger consumers. In 2023, it was noticeable that in addition to the classic "red" for rose products, colors such as pink, rose and other pastel shades combined with fresh green were also in great demand among consumers. Sales of roses for Valentine's Day were good overall, and cut flower prices were slightly higher than in the previous year. However, the purchase prices for roses - as well as other products such as tulips, gerberas and ranunculus - did not explode to the extent previously assumed in the industry. "Exploding prices" for roses were feared because the sharp rise in freight costs during the winter months meant that African rose farms were very reluctant to deliver. At times, many overseas farms preferred to destroy their goods rather than export them to Europe at an unprofitable price.

Higher prices in specialist shops are not a deterrent

Higher prices did not deter customers in specialist retail to the extent that had been assumed. However, spontaneous purchases in food retail and at discounters declined according to some experts. According to a survey conducted by the Trade Association of German Florists - Federal Association (FDF) after Valentine's Day 2023, it was reported that customers' willingness to spend on flower-based Valentine's gifts was relatively high. The wholesale trade was correspondingly optimistic after Valentine's Day 2023 that consumers would continue to buy flowers and plants despite product price increases due to the passing on of cost increases in the supply chain - precisely because of the experience gained in 2022, when some price thresholds were broken and the price increases were accepted by consumers without hesitation.

Pots are getting smaller

The observations of the Agricultural Market Information Company (AMI) are very interesting in the context of consumers' supposed willingness to pay prices. The AMI analyzed the market for primroses at food retailers and discounters at the start of the season. As one of the first crops of the year, primroses are heavily traded in terms of volume until the beginning of April. In 2022 in particular, when many consumers consciously demanded "cheerful colors" as a kind of "mood lifter" after an initial general reluctance to buy, more primroses were sold and more sales were made with the product than ever before. It was therefore difficult to exceed these figures in 2023. Despite this, many growers were satisfied with sales, although the analysis of prices for primroses in the years 2019 to 2023 shows a shift towards smaller pots. To compensate for the increased production costs, there was a "downsizing" of products; in other words, "shrinkflation". An exciting finding at the start of the year, which was observed even more frequently by the AMI in its market analyses over the course of the year.

Easter somewhat below expectations

Easter business with flowers and plants in 2023 was somewhat subdued for many retailers due to the cool weather, sometimes even accompanied by ground frost, and did not quite meet expectations. However, it was still satisfactory and at a similarly good level to the previous year. It was reported from the Netherlands that spending per customer increased slightly, meaning that the decline in the volume of goods
(-7%) was not reflected in sales as much as might have been expected. Veiling Rhein-Maas also reported a good price level at Easter, although this must be viewed in a more differentiated way: cut flowers and houseplants were above the price level of 2022, garden plants slightly below. Overall, April 2023 was very cold, which was reflected in sales of garden plants.

The breakthrough came in May

After a very weak start to the bedding and balcony plant season, the breakthrough came at the beginning of May 2023. The hesitant start to the bedding and balcony season was forgotten by many. The mild temperatures led to a buying mood. Herbs and young vegetable plants did disproportionately well at the wholesale flower markets. TASPO also surveyed the situation at businesses regarding the course of spring business: 55% of respondents stated that it was "good to very good", 35% rated it as "rather mediocre" and 10% as "sluggish". A look at the "hub of the flower and plant trade" in the Netherlands confirms that May felt strong. Royal FloraHolland's balance sheet for May 2023 shows an excellent result compared to April 2023. Both the volumes of the top ten products and the prices were higher than in the same month last year, resulting in higher sales.

Mother's Day business up and running

Mother's Day business - the busiest time of the year for the flower trade - was generally satisfactory in 2023. According to the FDF, 90% of specialist stores were satisfied. The wholesalers affiliated with the BGI were also satisfied to very satisfied with sales, with sales on Mother's Day 2023 at the same high level as in 2022. The so-called repeat order business was also very good. The marketers Landgard and Veiling Rhein-Maas point to the good weather on Mother's Day as a reason for brisk sales. The political uncertainties, the overall economic situation and the cost increases did not dampen end consumers' enthusiasm for Mother's Day. In terms of their assessment of the season, suppliers were more unsettled than consumers.

Tree nurseries are satisfied

A survey conducted by the Schleswig-Holstein Tree Nursery Association and the North Rhine-Westphalia Tree Nursery Association among its members in summer 2023 shows that the strong surge in demand during the pandemic is over, but that the market has picked up momentum after a quiet start at the beginning of the year and is at a good level. Spring sales of nursery plants in the garden center segment are highly dependent on the weather in the respective sales region.

Satisfied into the second half of the year

At the end of the first half of 2023, Veiling Rhein-Maas announced a very good performance for the first six months. Despite the less than ideal weather for the gardening season, product sales increased by 4.2% compared to the same period in 2022. Fears of a sharp slump in sales in the flower and plant trade therefore did not materialize in the first half of the year. At the very least, declines in demand were often offset by higher prices.

In the first half of 2023, many companies in the horticultural sector noted that consumers feel that the value of flowers and plants is increasing, but that not everyone can or wants to afford them. In discussions with specialist retailers, it became apparent that, according to them, flowers and plants are becoming more relevant to many customers in economically and socio-politically uncertain times. They are deliberately bought to beautify their own homes and to create a kind of "feel-good atmosphere", according to the experts.

And again the pots are getting smaller

Similar to primroses, the AMI also kept a close eye on pelargoniums as a key item in German horticulture (second place in the top ten) and examined their development in the retail sector. For 2023, the start of the season for pelargoniums showed that they were characterized by very weak prices. Similar to primroses, the shift in supply towards smaller pots is responsible for this development.

Summer gets off to a quiet start

As expected, the second half of 2023 got off to a quiet start. Many consumers were on summer vacation, which - as is usual every year - depressed demand. When asked about anomalies at the time, many market players reported that prices for plants were slightly higher than usual, which is correct in view of the failure to adjust prices to actual cost developments over the past two decades. The statements about the perceived higher prices are verified by the monthly balance sheet of Royal FloraHolland for the month of July. A look at the top ten garden plants shows a clear increase in prices. On average, prices were 26% higher than in the previous year.

Third quarter better than expected

Contrary to expectations, the third quarter of 2023 also went better than expected. According to reports from Veiling Rhein-Maas, product sales increased year-on-year in the third quarter of 2023 despite the difficult market environment. The increase in sales is due to good demand coupled with lower supply and the resulting high average prices. However, the high prices alone are not an indicator for assessing the 2023 season. If we look at Dutch flower and plant exports cumulatively over the first three quarters, the export value of around EUR 5.3 billion shows a decline of 4% compared to the previous year. Cut flowers show a decline of 5% to 3.2 billion euros; plants a drop of 3% to 2.1 billion euros. The three top export countries Germany (approx.
-3%), England (approx. -8%) and France (approx. -10%) are responsible for the declines.

2023 is a difficult year

In line with the decline in flower and plant exports in the Netherlands, the VGB is already predicting a recession in autumn 2023, not least because the costs for transport, energy and personnel are continuing to rise and suggest that times will remain difficult in the future. In addition to the Russian war of aggression in Ukraine, the conflict in Israel is increasingly exacerbating the situation. Dutch wholesalers alone have purchased flowers and plants worth more than 15 million euros each year from more than 200 producers in Israel. Conversely, the Netherlands also used to export goods to Israel. According to trade experts, the current economic damage is difficult to estimate. There are great fears that the conflict will spread to other regions - with far-reaching consequences for the trade in flowers and plants.

For 2023 as a whole, the VGB expects a decline in sales of -4% - the final figures are still pending. Observations at wholesale flower markets in Germany suggest that the predictions of declining sales in the flower and plant trade will be of this magnitude and can no longer be reversed by the Advent business. Sales at the beginning of the Advent season were lower than in previous years.

Discussions with logistics companies for flowers and plants also confirm the observations. According to "sound bites" in the forwarding industry, trade has fallen sharply and capacity utilization has slumped significantly compared to previous years and even before the Covid-19 pandemic. In her view, it was far too quiet for the time of year and a clear indication that consumers were saving. We will shed light on whether consumers are really saving later.

And again to observe: The pots are getting smaller

The classic product for the Advent and Christmas season is the poinsettia. In 2022 alone, it achieved a sales volume in Germany of around EUR 100 million at retail prices, making it a star among flowering houseplants. If we take a closer look at the pot sizes and which plants are mainly advertised in the trade, we can also see that smaller pots are increasingly being advertised and the standard sizes of the past are disappearing more and more into the background.

Special features and outlook for 2024

It should be noted that in 2023 the garden market has remained relatively stable compared to other sectors despite a challenging environment characterized by the energy crisis and consumer caution among customers who are uncertain about inflation and politics. The declines predicted in advance did not materialize as strongly as feared.

This suggests a combination of a growing interest in gardening and greenery in general, as well as an increasing awareness of the importance of nature and green spaces for health and well-being. More and more people are recognizing the benefits of gardening, whether as a hobby or as a way to grow their own food. In the current "Industry REPORT Garden Living, Gardening and Living Green - Prospects up to 2030", the garden market is said to have great potential.

According to the forecasts for the German garden market, the report's best-case scenario predicts significantly better development than the long-term trend. Accordingly, growth potential of around 21% to EUR 17.7 billion is seen by 2023, provided that the most popular communication and information sources of the target group can continue to be used and consumers remain enthusiastic about flowers and plants. Current studies promise that this can be achieved.

More time in the garden

Even after the coronavirus pandemic, consumers are still interested in flowers and plants and are spending more and more time in the garden, according to a recent survey by power tool manufacturer Stihl. It is interesting to note that this observation was made primarily among younger garden owners. The reasons given by the majority (multiple answers) for spending more time in their own garden are that they see the garden as a "place of relaxation and tranquillity" (77%) and that they enjoy "being together with friends and/or family" (63%). In the study, 59% state that they want to "spend time in nature" or "get creative and implement projects themselves" (41%).

Gardening for my life

Einhell's Do-It-Yourself Study 2023 built on the Delphi Study "The Home 2030" conducted in 2021. The current study analyzed consumer behavior within their own four walls and in their own garden in even greater depth. The key finding is that 69% of respondents agree with the statement "I like gardening for my life". According to the 2023 study, the main motives for this activity are independence, relaxation, self-realization and self-affirmation.

Healthy snacking is booming

Edible plants are still a big hit in the range. In 2023, vegetables and herbs that grow reliably and produce a tasty yield will continue to be very popular with hobby gardeners. The trend towards self-sufficiency is unbroken, as long as the plants are tasty and aromatic. Grafted cucumbers in particular are in high demand. However, there is also a trend towards true-to-seed tomato varieties and even historical varieties.

According to individual specialist retailers, sales of vegetables are stable to rising. In 2023, for example, increases of +10 % were often recorded for this range compared to 2022. The increases were often due to higher-quality varieties or pot sizes.

Strong products for a strong market: "The new nature"

Innovations in the plant market are presented every year at IPM ESSEN. In 2023, the "green climate heroes", plants that cope particularly well with drought, heat and heavy rain, were offered. The topic of climate change has become noticeable after another hot summer. According to evaluations by the German Weather Service, the summer of 2023 was too warm on average for the 27th time in a row. To put it bluntly, this means that a person under the age of 30 has basically never experienced a "normal" summer. Accordingly, according to a study by Stihl AG, the issue of drought is already an important topic for consumers. 62% take the issue into account when selecting new plants, 29% even strongly or very strongly.

Native wild perennials and native shrubs as well as natural-looking plantings with a meadow character attracted attention, according to trade experts. It has also been observed that more and more consumers are willing to redesign their gardens in a more natural way. At IPM ESSEN, solutions were offered with perennial plant combinations that offer ecological added value for the preservation of biodiversity and at the same time thrive in gardens and cities.

Easy to care for and bee-friendly

Easy-care and bee-friendly are two requirements that customers will continue to increasingly demand at the point of sale in 2023. Plants should often be robust and, if possible, prevent the ongoing extinction of species. For example, "Insect joy with regional wild plants", a project in the Federal Biological Diversity Program, is an important component in promoting regional wild plants and transforming gardens and green spaces into more biodiversity. The new products are often based on promising concepts: From the "Dry Artist" or the "Professional Bed" to "Future Nature", "Green Conquerors", "Fitness Partners", "Wild Aunt" or "Hero Qualities", there is a lot on offer. What all the concepts have in common is that they make consumers strikingly aware that they can make their own small personal contribution to climate and nature conservation with living greenery and are offered ready-made solutions.

Ecosystem services are becoming more important

Futurologist Max Thinius ascribes ever greater social significance to gardens. In his view, plants and gardens are important for both the environmental climate and the social climate. The ecosystem services provided by flowers and plants in particular are a relevant topic for the future, which the German government has also recognized as worthy of support. For this reason, the federal government decided in mid-2023 to provide around €790 million in urban development funding in 2023 and 2024. The budget will be used to finance investments in green and blue infrastructure in the municipalities.

At the 15th Association Congress of the German Federal Association of Garden, Landscape and Sports Field Construction in late summer 2023, politicians once again emphasized the importance of urban greenery. The aim is to make cities more climate-resilient in the future. As a result, more and more cities, such as Munich, Berlin, Trier, etc., are significantly expanding their budgets for planting trees in the city. The so-called "tiny forest", in which many trees are planted in a relatively small area in the city, is just one of many manifestations of the growing importance of greenery in the city. At times, the question arises as to how the increased demand for trees and shrubs can be met.

In terms of making a positive contribution to ecosystem services, the German government has a major lever with horticulture, but not all decision-makers have yet recognized this. According to the latest evaluations by the Federal Statistical Office, the vegetation area in Germany is the largest area in Germany in terms of proportion, at around 29.8 million hectares. The potential is therefore huge.

The need for research is correspondingly great. One example of this is the INUGA project. In 2020, the Federal Ministry of Food and Agriculture published the "Announcement on the promotion of innovations in urban horticulture" as part of an innovation program. The aim is to strengthen the horticultural sector as an economic sector in general and with regard to its contribution to green infrastructure, sustainable plant production and social aspects in urban areas. As a result, twelve forward-looking joint projects have been set up with a total of 31 private companies and research institutions involved, which are researching various issues relating to urban horticulture.

Digitalization and smart gardens are becoming increasingly important

The trend towards more digitalization in the home garden is progressing in parallel with the move towards natural gardens. Almost 7% of all garden owners are already using smart gardening solutions. Automatic watering systems (83%) and robotic mowers (63%) are particularly popular.

Purchasing power: less money available

Regardless of the importance and relevance of flowers and plants, the question is to what extent consumers can afford flowers, plants and other horticultural products in times of inflation and crisis. Despite rising wages, the purchasing power of Germans is falling, according to analyses by the Institute of Economic and Social Sciences (WSI). Wage increases of 5.6% on average in the first half of 2023 were offset by price increases for consumers of 7.4%. The result is a decline in average real wages in Germany. Seemingly high wage increases will be offset by cold progression. According to the experts, the mood is still characterized by uncertainty and worry, which is putting the brakes on carefree consumption.

E-commerce weakens

The poor consumer sentiment in Germany is also reflected in online retail in mid-2023. Sales in the first half of 2023 fell by around 14% compared to the first half of 2022. In 2022, e-commerce also suffered an unexpected and significant slump for the first time in years. If you compare the value with the entire half-year 2019, i.e. with values before the coronavirus pandemic, you can see that the supposedly poor values from 2023 are still around 15 % above the standard. In the HDE Online Monitor 2023 published by the German Retail Association, the association describes clear shifts: While online food retail is growing significantly, sectors relating to home, garden and DIY are shrinking online.

Traditional retail is not dead

In view of the weakening online sales, it is interesting to see how sales in over-the-counter-retail are developing. Although sales in the DIY and specialist garden centers (DIY sector) will fall by -2.7% by the end of the third quarter of 2023, the decline will not be on the same scale as in other sectors. In this respect, the sector still appears to be relatively stable.

As is generally known, inflation, consumer anxiety, price increases in all food sectors and political uncertainties are responsible for the declines in the DIY sector, which have significantly dampened consumer sentiment in the "Leisure and seasonal goods" range with -15.7% compared to the previous year. The long-standing sales driver "garden equipment" also recorded a drop of 11.4%. Contrary to the general trend, the "pesticides, soils and seeds" segment developed positively at +8.8%.

According to industry experts, many consumers spent their vacations at home on the balcony or in the garden again in 2023, which benefited the stationary garden market. The analysis of average receipts in specialist retail confirms this assumption. The purchase amount per customer increased in the summer months, although customer frequency decreased.

This means that bricks-and-mortar retail is also weakening, but no more than online retail. This means that bricks-and-mortar retail is far from dead - even if this is often prophesied.

Inflation puts the brakes on sustainability

According to a recent representative household survey by Konzept & Markt GmbH, the topic of sustainability is relevant for eight out of ten garden center customers, but is clearly behind quality and value for money as a decision criterion when making a purchase. According to GfK research, inflation is currently putting a significant brake on sustainable consumption. In the study, 48% of respondents now state that they cannot afford sustainability (compared to 31% in 2019 who stated that they could not afford sustainability financially). According to the study, the current situation clearly shows that sustainable consumption is increasingly becoming a question of income and that people with a net monthly household income of EUR 4,000 or more are particularly willing to make sustainable purchases and 65% of consumers do not want to do without a certain level of comfort despite their ecological awareness.

Change in the flow of goods is recognizable

AMI's newly published product flow analysis describes the marketing channels for flowers, ornamental plants and woody plants. It is very interesting to note that the flow of goods is becoming increasingly dynamic. Increasingly, bulk consumers, retailers, service providers in the gala and cemetery construction and interior greening sectors, as well as end consumers, are organizing themselves differently when procuring their flowers and plants. They are increasingly relying on direct imports or shortening the supply chain. This shift was also observed by the Netherlands in its 'Market Potential Export Position' matrix at the beginning of 2023.

Cocooning is strong again

Many retail experts assume that consumers will focus even more on their own four walls in 2024 due to uncertain global politics, accompanied by energy cost increases and rising inflation. The cocooning effect is back on the starting blocks, although the market for garden plants will no longer grow in the same way as in the last three years due to the garden projects that were largely completed during the pandemic. Nevertheless, it is clear how important living greenery is, especially in times of crisis, even when consumers' budgets are tight.

Minimum wage continues to rise

The industry is somewhat concerned about the development of wage costs. After several increases in the statutory minimum wage in recent months, most recently to 12 euros gross per hour, the wage will rise again on January 1, 2024. 12.41 euros will be the new statutory minimum wage, which is to be increased to 12.82 euros from 2025.

These wage increases will pose challenges for many companies in horticulture, as labor costs generally account for 20 % to 25 % of costs in ornamental plant cultivation. In view of the considerable competitive pressure from abroad due to plant imports, rising wage costs will increase the risk of a lack of competitiveness.

"Confidence is an entrepreneur's duty!"

Regardless of how costs will change in 2024, it is important to seize the opportunities that horticulture offers with confidence. The opportunities are numerous, as we saw in 2023 alone that topics such as "Barbie" and digitalization are surprisingly inspiring customers.

Conclusion

Looking back: 2023 was a difficult year for horticulture and demanded a great deal of commitment and nerves of steel from everyone involved at the various market levels. However, production and trade proved to be much more resilient and up-and-coming than was expected at the start of the year.

The negative forecasts were heavily influenced by high energy prices, which eased over the course of the year. Product price increases were implemented and cultivation methods and product ranges were adjusted. Whether these measures will be enough to bring operating profitability up to the previous year's level will be revealed by the next evaluation of the key business figures of the Center for Business Management in Horticulture (ZBG). Germany remains a strong production location.

Society has become aware of the climate crisis and extreme weather events. Measures for the necessary climate and environmental protection open up new opportunities and marketing potential for horticultural products.

Private demand over the course of the year is always determined by the weather; however, in 2023 it is clearly influenced by inflation and the amount available for private household consumption. The relevance of flowers and plants for the population remains high.

Horticulture sells emotions and ecosystem services - coveted products with great significance. But the sector should also clearly demonstrate this to consumers.

Andreas Löbke, CO CONCEPT, on behalf of Messe Essen for IPM ESSEN 2024

Sources

  • Statistical Office of the European Union (EUROSTAT)
  • Agricultural Market Information Company (AMI)
  • Association of the German Flower Wholesale and Import Trade (BGI)
  • Flower agency Holland (BBH)
  • Society for Consumer Research (GfK)
  • Association for Wholesalers in Floricultural Products (VGB)
  • Publications of TASPO - Haymarket Media GmbH
  • Garden Industry Association (IVG)
  • Publications from the horticultural portal GABOT
  • Various expert discussions with those responsible for the sale of flowers and plants:
  • Tree nursery production companies,
  • Ornamental plant production companies,
  • Gala construction companies,
  • Retail nurseries,
  • Marketing organizations,
  • Wholesale flower businesses,
  • Advisors to the florist retail trade
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