Brazil continues to bloom despite economic uncertainty

Located halfway between Holambra City and Santo Antonio de Posse, not far from São Paulo, Brazil, the Veiling Holambra Cooperative occupies an area of 92,000 square meters, where more than 30% of Brazil’s living plants and fresh cut flowers are traded.

FloraCulture International sat down with Cooperativa Veiling Holambra Director André van Kruijssen and Ibraflor (the country’s primary industry body representing Brazil’s flower industry) Director Renato Opitz to share their views on the present and future landscape of Brazil’s ornamental horticulture.

Van Kruijssen’s and Opitz’s combined experience spans nearly 50 years and there is little they haven’t seen or dealt with. Not only do they offer valuable insights, but they also have data to back them up.

Key figures

In Brazil, the world of flower and plant growing and trading has come a long way since its fledgling days when customers at the Cooperativa Veiling Holambra would raise numbered cards to make their bids.

Today it is a 3.5 billion dollar industry with industry insiders like Ibraflor Chairman Kees Schoenmaker estimating it has as many as 8,000 growers, with a total of 13,770 ha devoted to floriculture production, including potted plants, bedding plants, fresh cut flowers, trees, shrubs, perennials, seeds, bulbs and young plants produced in the open field (12,300ha), greenhouses (1200ha) and shading houses (270ha). The industry is diverse, made up of the following three broad production sectors: nursery stock products, houseplants (potted Phalaenopsis) and fresh cut flowers (Rosa, Alstroemeria, lily, Chrysanthemum and Gypsophila).

When asked about the total sales of the Brazilian floral industry in 2015, Van Kruijssen stressed that his Cooperativa Veiling Holambra realised a turnover of 580 million reais, around €160 million. “I believe that the country’s total turnover is three times higher, as this figure only includes ornamental plants and cut flowers.”

Land and land availability, geographic concentration

Brazil stretches over 4,000 km (2,500 miles) from east to west and 4,300 km (2,700 miles) from north to south. Land prices and land availability are complicated issues. They are, like many aspects of the country itself, a picture of contrasts. “In the vast country that is Brazil this is a very complicated issue. Land prices can range from R$1.00 per square meter to R$500.00 or even more. It is well known that production areas near the auction and good quality soils are extremely expensive,” said Ibraflor Director Renato Opitz.

“Almost all (85%) of the ornamental horticulture businesses operate in south and southeast Brazil. This result is not surprising as most nurseries seek to be in the direct vicinity of the mass consumer markets such as Rio de Janeiro or São Paulo.

Rosas Adriano van Rooijen.

Roses remain, by a wide margin, Brazil’s most important and popular cut flower type. Holambra is the country’s traditional rose-growing region (next to Veiling Holambra it also hosts the Cooperflora cooperative with an annual turnover of 100 million reais through the sales of mainly roses and Alstroemeria), but surprisingly enough the estado (state) Ceará transformed (albeit very locally) its semi-arid coastal plains into a lush green oasis of blooming roses during a 15-year period.

Ceará, with its capital Fortaleza, is Brazil’s eighth-largest state by population and now the nation’s second-largest rose production area covering 60ha of land (Brazil has an estimated 250ha of rose greenhouses). CeaRosa reaped the benefits of being first when they opened their  nursery in 1999. Run by Mr. Paulo Selmay, CeaRosa is the largest grower of cut roses in northern Brazil. Over 15 varieties are produced annually from 13ha of production in São Benedito (320km from Fortaleza). The world market is flooded with blooms at the moment so CeaRosa concentrates on the local market and operates its own distribution centre in Fortaleza. Other rose growers in Ceará include the Reijers Group and the Swart Group, all facing long periods of drought, with rainfall being almost wholly concentrated in the three months of March, April and May.

Regarding the country’s potted plant industry, Van Kruijssen noted that the epicentre of production is in Holambra (São Paulo), located at an altitude of 600 metres where the region basks in sun and at an average temperature of 19.8°C. Average annual precipitation in Holambra is 1305 mm. Within the Köppen Climate Classification System, the region has a CSA climate type with generally warm and humid summers and mild winters. “Cut flowers are mostly grown within a 300 km radius of Holambra with Munhoz, Andradas and Atibaia ranking among the most important production areas, located at altitudes between 800 and 1,300 meters where nights and winters are cold,” said Van Kruijssen.

Export versus import sales

In 2015,  Cooperativa Veiling Holambra realised a turnover of 580 million reais, around €160 million.

Though today’s growers and traders are predominantly focused on the domestic market, floral exports played a significant role not so long ago. Export sales of young plants and bulbs to the USA and the European Union peaked at US$ 35.5 million in 2008. But according to market research consulting company Hortica, export sales have continued to drop since 2008 reaching $24 million in 2014.

The good news is that consumer demand for flowers and plants in Brazil is strong and growing. “Regarding ornamental plants and flowers, the industry’s focus is mainly on the home market. One shouldn’t forget that Brazil is not only the largest country in South America, but also the fifth largest country in the world covering an area of 8.55 million sq km with over 200 million inhabitants. In the Netherlands, transportation flows between Aalsmeer and Oberhausen are dubbed ‘exports’, while in Brazil distances between cities are huge.There is no comparison. However, a sizeable import and export flow of mainly bulbs and young plants continues to exist to this day. So far, in cut flowers and potted plants I don’t see many opportunities for exports at this moment,” said Van Kruijssen. Opitz added, “Brazil’s floral exports only concern young plants and bulbs. Export sales of cut flowers stopped about four years ago due to high transportation costs and unfavorable exchange rates. But most of all, a strong domestic demand made the need for export less urgent.”

The year 2016 saw a 15% increase in the quantity of cut flower imports from Ecuador and Colombia. Traditionally, imports reach their peak from May to September when sales are dropping in other markets. However, over 90% of the Brazilian flower supply was grown domestically.

Business size

Andre van Kruijssen.

Despite these large numbers, Brazil’s flower industry continues to be dominated by small to medium sized enterprises. “In employment terms, the majority of businesses employ on average 10 employees/ha. In production, horticultural businesses provide work to over 20,000 people,” said Van Kruijssen.

As elsewhere in the world, flower growing has stringent labour regulations. Asked about the development of wages over the past two decades, Opitz said, “Last year, the government raised the minimum wage by 6.78 percent to 724 reais ($310) per month. Wage increases in the last two decades mean that wage levels are now up to 20% of a flower farm’s sales turnover (depending on what crop is grown). As a result, growers are increasingly searching for ways to automate their greenhouse operation in an attempt to reduce labour costs.”

Industry issues

The majority of ornamental crops are grown in dedicated nurseries. Commenting on the main changes experienced by Brazilian nurseries over the past two decades, Van Kruijssen said that growers increasingly care about sustainability. In 2014, for example, Veiling Holambra  partnered with MPS to stimulate sustainable growing of flowers and plants through an independent auditing and certification system.

Overall, horticultural companies continue to grow and sometimes not all costs increase with them, and some may even go down. Brazil now hosts companies who have economies of scale and hence have a significant cost advantage over new entrants and smaller competitors.  Van Kruijssen says, “More priority is also given to cold chain management with investments being made in cool chambers, refrigerated trucks, storage facilities and distribution centers serving supermarket chains.”

Mass market floral is clearly gaining ground in Brazil. The Veiling Holambra director feels that there is an unexpressed potential in the retail market, although there is also room for improvement when it comes to the overall flower quality, presentation and knowledge of personnel.  He says, “The retail  industry has grown over the past years fuelled by an increase in the number of shopping centres in the country. Supermarkets have an estimated 40% market in Veiling Holambra’s turnover.”

Per capita spending

Having no official consumption data, FCI presents here the closest reliable figures as estimates. The per-capita spending on cut flowers and ornamental plants in Brazil is about R$ 26.27, with trees and plants used for landscaping and gardening representing 41.55% of this value, followed by cut flowers and foliage (34.33%) and potted plants (24.12%). In relation to the economic, social and cultural mix of Brazil’s population, as well as different climates, the average spend per person yearly varies per geographic macro-region and the Brazilian states.

In this context, it is noted that the Federal District has the highest per capita consumption of flowers and ornamental plants in the country (R $ 44.23), followed by the states of Minas Gerais (R$ 43.40), Rio de Janeiro (R$ 41.53), Santa Catarina (R$ 37.84), São Paulo (R$ 35.52), Rio Grande do Sul (R$ 35.34), Goiás (R$ 32.62), Espírito Santo (R$ 28.98), Paraná (R$ 21.94) and Ceará (R$ 20.99).

Economic uncertainty

Regarding future trends and issues facing the nation’s ornamental horticulture and gardening industry, Van Kruijssen pointed to uncertainties, mostly about the domestic economy, that  undermine consumer confidence. While growth projections for all the BRICS have been lowered, for the first time in years Brazil’s economy contracted in 2016.

“In 2016, consumers tightened their belts instead of opening their wallets,” concluded Van Kruijssen. Opitz added, “Over the next two years, we anticipate a lower growth rate (8%) than seen over the last five years which had an average growth rate of 12%. However, as inflation is expected to be around 7-8%, there will hardly be any real growth. On the plus side, if the Brazilian economy has recovered over the next two years, there will be a lot of opportunities to recover as you would then expect annual growth rates of more than 5%.”