Kenya: direct markets can offer better prices

It’s now almost two years since Clement Tulezi succeeded Jane Ngige as CEO of the Kenya Flower Council.  FCI’s Ron van der Ploeg interviewed Mr. Tulezi on the key challenges facing Kenya’s flower industry today and the opportunities presented by his new role.

Those in the industry who listened to his keynote speech at the Flower Logistics Africa conference last year might remember Tulezi say that working in Kenya’s flower industry fits him like glove. “Every day is fulfilling. There are no dull moments. The dynamism and day-to-day demands of the industry keep us on our toes. It’s also a new experience and I am learning every day, from changes at the farm level and challenges of regulations to new requirements in the marketplace. I love innovation and the flower industry is just a perfect fit,” said 40-year old Tulezi who took on the job as KFC’s CEO on January 1, 2018.

FCI: You brought over 23-year of experience in media, communication and marketing which prompts us to ask you about the key message you would like to spread about Kenya’s floriculture sector?

Clement Tulezi:  “Kenya is the home of the best flower growers. Leveraging cutting-edge technology and good human capacity, you are assured of class 1 quality, long vase life and consistency with the Kenya flower brand.”

What’s your view on the health of the industry?

“High commodity prices, low prices at Dutch auctions, skyrocketing freight rates, lack of enough cargo space in peak periods, increased local levies, ongoing Brexit uncertainty and some key markets being under pressure are among the major challenges. But the industry is resilient. As we concentrate our resources on the most significant areas, we are keeping tabs on the growing demands from the markets. KFC is currently pursuing opportunities in markets such as China, the Middle East and the US. The best way to overcome any organisation challenge is to tap that vast knowledge, working closely with government agencies, Kenya’s foreign missions and international partners to solve problems in the field of logistics, plant health and import tariffs. Meanwhile it’s our job to enhance the positive image of Kenya’s flower brand in the market. We believe the industry is still promising.”

The Kenyan flower industry is markedly dynamic consisting of hundreds of farms covering a total production area of around 4000ha. The sector directly employs around 150,000 people. As an industry association, KFC has a five-year plan. Why is that?

“Over-regulation is holding back the industry, while both national and local government continue to introduce levies. What’s more, there’s non-commitment from the government to adequately support the floriculture industry and new requirements in the market. Challenges in logistics exacerbate the situation. When the logistics in the supply chain are working smoothly, the customer is assured of a quality fresh product.”

Traditionally, the Netherlands has played an important role as a logistical hub for flowers from Kenya. The question that naturally arises is whether Netherlands will continue to occupy this dominant position?

“Europe continues to be Kenya’s most important market for cut flowers,” said Tulezi. He continued, “the Netherlands continues to be the main hub into the region. We are proud of our leading position in Europe and prepared to keep it.”

Overall, you predict that trade will become increasingly direct with omitting the Dutch flower auctions and the Netherlands’ logistical hub.

“I am certain that the auction and direct market have their place in the business. But it’s true that direct markets have grown a lot in the last five years. Whereas the auction is a more stable market, direct markets can offer better prices. It’s no wonder that a number of exporters supply to both to spread the risk.”

Meanwhile, at Schiphol-Amsterdam airport, Europe’s third-largest cargo hub in terms of volume, air cargo is increasingly locked into traffic congestion. What has been the impact so far?

“It’s not serious yet. However, it’s no secret that if volumes continue to increase, there will be delays in clearance and movement. This will definitely call for a reorganisation of logistics into Europe and maybe trying sea freight.”

With regard to transporting flowers by container ship, you believe there’s a world to win when it comes to a high-velocity supply chain.

“There are shipments of roses by sea container from Kenya to the Netherlands with over 200 different communications along the way involving over 30 different parties; all to the detriment of product quality.  As long as the mode of transport is convenient and the cold chain is optimised, the quality of the flowers is not compromised. One major block in our new strategy is innovation. KFC is prepared to support ongoing tests on sea freight. We are certain it will turn out positive.”

‘Direct flights by Kenya Airways to the United States in October last year was expected to be the icing on the cake for Kenya’s flower exports’

Kenya Airways has begun direct flight services to New York’s John F. Kennedy International Airport (JFK), making it the eighth African country to offer a direct US service. If direct flower exports to the US were to become a reality what are the main issues to be solved?

“The advent of direct flights by Kenya Airways to the United States in October last year was expected to be the icing on the cake for Kenya’s flower exports. We understand the potential that the US possesses. For many Kenyans, this is a market they wish to break into. Nonetheless, we are alive to the reality that if we are to significantly increase Kenya’s market share there is a need for; increased cargo space; a relook at the logistics to access Miami as the main flower hub; improvements in our packaging to conform to local preferences; vigorous promotion of the Kenyan brand; a review of our pricing and a review of rates by logistics companies.”

Meanwhile sustainability moves up the agenda for Kenya’s flower industry. The 2013 IPM ESSEN show marked the launch of the Floriculture Sustainability Initiative (FSI) to encourage greater adoption of sustainable practices, improvements to auditing and compliance, and simplified assessment processes for organisations and suppliers in the ornamentals sector.

“The KFC Flowers and Ornamentals Sustainability Standard (F.O.S.S) is one of the 15 sustainable standards in the FSI basket and as such plays a prominent role in promoting sustainability in floriculture worldwide. In May 2019, F.O.S.S was accepted as compliant with the enhanced environmental criteria through the transition period to the end of 2020. After 2020, sustainable production under FSI will be defined according to the combined benchmarks on good agricultural, social and environmental practice. The KFC Standard adequately addresses all three areas and ticks all boxes on market requirements for sustainability and quality.”

On the subject of sustainability, the scarcity of water and the poor quality drinking water in the Rift Valley region have been under the scrutiny of the international press. How urgent is the shortage of water currently?

“We were worried at the beginning of the year with delayed rainfall. But currently, there is enough water in the country following the rains that started mid-April. The international press has many times got it wrong. We invite the media to visit the Rift Valley and the flower farms therein. I am certain their reporting will change dramatically. A lot has been done and is ongoing to conserve and maintain the quality of water in the region. We are proud to be a part of some of these initiatives.”

Speaking of shortage, has the shortage of fertilisers been solved?

“Yes. KFC fought tooth and nail. It was good that ultimately the government positively appreciated our view. Imports of fertilisers are currently flowing and the Kenya Bureau of Standards and other regulators have put in place a system to maintain the flow. KFC is nonetheless monitoring throughout on behalf of growers.”

Fertiliser manufacturing companies but above all the top of Kenya’s flower exporters were again present at the 8^th IFTEX show, held June 5-7, 2019 at Nairobi’s Oshwal Convention Centre. Tulezi believes the show combines exposure and personal interaction, offering an experience for the exhibitor and attendee that no other form of marketing can replicate.

“IFTEX is one of the largest flower exhibitions in the world, where buyers witness the best of the Kenya flower brand directly from the source. Also, it’s a great opportunity for the growers who cannot otherwise promote themselves in the market place to meet buyers. For us, IFTEX confirms the importance of Kenya in the global floriculture space and the contribution of the industry to Kenya’s economy. We are confident that many business deals were penned at IFTEX with buyers from all over the world in attendance.”

IFTEX and other trade shows such as IFTF offer a perfect opportunity for open dialogue of all partners of the value chain with open market access high on the agenda. Now that trade wars pose a threat to the global economy, does Tulezi feel free trade is dead?

“What we may be seeing now is an escalation of trade wars between economic giants and partners within trading blocks. Trade wars have been there, but mainly subtle through technical barriers to trade such as sanitary and phytosanitary requirements and skewed market-driven requirements to comply to certain standards among others. Although it is not absolute, free trade cannot be considered dead as industries globally evolve, innovate and adapt to the above dynamic scenarios.”

More recently, EUROPHYT, the notification and rapid alert system for interceptions (for plant health reasons) of consignments being imported into the EU or traded between Member States, published its annual report revealing a pronounced increase in harmful organism interceptions, mainly attributable to false codling moth interceptions on roses from East  Africa. Is the problem on KFC’s radar?

“Sometimes the numbers are higher, sometimes lower, but there is no structural increase in discovered pests. If fac,t for some months, the numbers are zero. We understand the risk the pest poses on Kenya’s biggest market. Europe covers 80 percent of our export markets – and when the numbers keep increasing, we fear the consequences. We are therefore doing everything to tackle the problem. We are working together with Kenyan grower/exporters, Kenya Plant Health Inspectorate Service (KEPHIS), the Dutch Embassy in Nairobi, several importers and the European Commission. Currently, a lot of our growers are scouting. They are also doing physical checks in the greenhouse and packing areas and have set up mass traps in and outside the greenhouses. We are assessing the efficacy of these methods to give us a way forward.”