08 February 2022
The Lynch Group is a third-generation, vertically integrated wholesaler of cut flowers and potted plants for the Australian and Chinese floral markets. In an exclusive interview, the company’s CEO Hugh Toll and Chief Scientist Scott Salter talk to FCI about the floral mass market in China today and the current state of ornamental horticulture Down Under.
As a leading player in supermarket floral at home and in China, the Lynch Group business incorporates growing, wholesale, and retail. In April 2021, the Lynch Group started trading on the Australian Stock Exchange (ASX). Then came the horticultural headline acquisition news that the Lynch Group had acquired the Kunming-based flower farm from long-term business partner Van den Berg Roses.
Scott Salter: “In 2004, we were developing our import programme, looking for different markets and products. Then, our senior director Mr John Khalil discovered the large potential of the growing areas in Yunnan province, in the south of China. After, we saw how this area boasts perfect growing conditions for flowers in the volumes and quality that fits our business. From there, we started looking for supplying growers, and we sought the possibility of building a processing facility from which to ship the product to Australia.”
Hugh Toll: “Setting up a business network of suppliers in China was an exciting first step, followed by the introduction of our first flower farm in 2012, to which we added another farm in 2017. These flower nurseries enabled us to grow varieties that enjoy strong demand on the Australian market, but also help us to develop the industry in China.”
Scott Salter: “Once we had established our business in China, we focused on securing supply, but also on long-term opportunities in the consumer market. Arie van den Berg and Nic Pannekeet built their first greenhouses in Kunming in 2007, gradually expanding their business to 35ha. It seemed similar to what we were doing, except they focused on the domestic market. We have been partners in business for a long time, a relationship that culminated in acquiring their business in 2021. We obviously want to use economies of scale. The acquisition of Van den Berg Roses China means that we can accelerate our push into the local market in China. The goal is to combine our strengths in production, sales and marketing. Our flower farms in China serve as a platform to Australia as well as to further develop the Chinese consumer market for flowers.”
Hugh Toll: “There are strong parallels and significant differences. If you start at a very high level, the top five varieties sold in China are similar to the top five sold in Australia. However, the flowers’ journey to the Chinese end consumer is very different. So are the modes of transport, the layers of wholesaling, and crop times. On the consumer side, how people buy and what colour they prefer is different. Online flower delivery service is also much more developed in China than in Australia.”
Scott Salter: “China is one of the most competitive marketplaces worldwide. I reckon economies of scale is a prerequisite to compete. We are currently developing different market segments, servicing traditional wholesale and direct sales. We also started supplying supermarkets online and offline. We’re starting to push more towards what we do in Australia by developing product ranges working with customers to underpin further development back at the farm. We continue developing the customer side of the business to become an important partner to the retailers in China. Our mission is to provide consumers with an unforgettable floral experience and develop strong partnerships with our B2B customers. In working with retail customers, knowledge on mass floral and capabilities will grow stronger.”
Hugh Toll: “China’s retail channels are sophisticated, and retailers are very smart. There are plenty of products available, but the question is how to get your flowers into the supply chain reliably, in the right quality and volumes. And that’s been a challenge.
But larger growers like us are emerging, offering the right amounts and a quality product that is stable and uniform. I would not say the floral mass market in China is in its early stages, but retailers now understand the many opportunities in this segment.
We want to provide the retailer with a competitive range that offers a solution to the customer and be a partner that can be relied upon. We help them with display and merchandising to give them in-store support if it’s an offline retailer. Always bearing in mind that how the product gets to the consumer in China is different. They are much more advanced on grocery deliveries.”
Scott Salter: “Until recently, we’ve attended almost all editions of IPM in Shanghai and Beijing. The younger generation tells us they marvel at the beauty of flowers. Particularly in the last decade, the industry’s demand has been transformed. Ten years ago, there was a lot more government buying and more buying for events and ceremonies. Interestingly the demand profile for fresh flowers has changed with younger generations driving self purchases. There’s a natural desire for the beauty of flowers and plants in homes and offices and to offer as a gift.”
Hugh Toll: “It partially boils down to changing demographics. The most recent generation or two have more disposable income than wants and can buy flowers. Chinese culture teaches people to appreciate beautiful things already from a young age, so the child is catching up.”
Hugh Toll: “I cannot speak for the younger people. But there is definitely a difference between age groups, by virtue of the fact that we’re probably a bit more mature and have been around for a lot longer. In Australia, the challenges and opportunities are in the mass market, and we invest time and effort in ensuring our offer is always innovative, enticing and engaging. Important questions to ask ourselves include: How do people view supermarket floral? Are supermarkets their venue of choice for all things floral? Overall, Australia boasts a well-established flower buying pattern in flowers for weddings, funerals, and anniversaries.”
Scott Salter: “When I first travelled to China, I spotted many old varieties on the market, with some cultivars being as old as 30 years. Over time, newer varieties debuted. Breeders from the Netherlands and other parts of the world, including China itself, are very active in China introducing cool new varieties to the Chinese consumer. When we talk about improved quality, we are not only talking about cold chain and growing systems but also about plant genetics. The Lynch Group recognises the hard work which goes into flower and plant breeding and looks for long term relationships with the breeder. We think of ourselves as a very stable base. So the point now is that we are agents representing breeders in China to help them develop, commercialise, and represent plant variety protection in the Chinese market. The Chinese government deserves credit for taking PBR very seriously. There is a lot of debate and policy architecture around how plant varieties in China are protected. I think we’ve got the right level of awareness and action now. Our work focuses on developing relationships with breeders and talking to the Chinese authorities about the best way to protect PBR.”
Scott Salter: “From an Australian perspective, local for local is extremely important. There have been times when pricing was pretty good, but also tough times. When we went into our first lockdown, local flower and plant nurseries suffered a huge blow. However, currently, they are doing better than average. Whether that encourages more volume into the market, I think it’ll take a bit more time and see. It also means there is an opportunity for new players to be growing new and exciting varieties that are not necessarily seen in the marketplace. To date, demand exceeds supply. And this is why imports are so important for us, so we can constantly meet and exceed the expectations of our customers and consumers.”
Hugh Toll: “It’s a combination of facts. Many local growers are on land reasonably close to the major metropolitan centres. As you may read, the land price in Australia is at record levels. So the land values, the cost of building greenhouse infrastructure, input costs of energy, laws and many more make it an expensive occupation.
Part of the local discussion encourages the next generation of growers. Because we have been a company in the market for more than 100 years, we see it as our responsibility to understand what keeps growers busy and cooperate with them. Also, we try to encourage new growers to come into the market continuously, and it is a challenge for us.”
This article appears in FloraCulture International February 2022 magazine.
Lynch Group: The Essentials
• Founded in 1915
• Core business: wholesale of fresh-cut flowers and potted plants plus production of ornamentals
• Number of wholly owned and operated flower farms: seven, of which four are in China and three in Australia
• The total size of flower farms in China in hectares: 61ha under production in FY21, confirmed 18ha expansion in FY22, 101ha potentially available.
• Annual turnover: AUD $331 million for FY21
• Number of employees: c. 1,400 direct employees
• Value of Lynch Group on the stock market: publically available information
• Lynch’s wholly-owned and operated farms grow Amaryllis, Aster, Banksia, Eucalyptus, Dianthus ‘Green Trick’, Geraldton waxflower, Gerbera, Gypsophila, Hypericum, roses, tulips, Viburnum carnations, and a large diversity of seasonal crops and a vast number of species and varieties of potted plants.