The turnover is high, maybe higher than ever, but will the margins be just as high? It is a question many growers in Kenya are asking themselves as input costs have gone up significantly. Also rose grower Sachin Appachu of Bliss Flora, located in Njoro. So far, he is extremely pleased with the sales, but explains that the high costs and particularly those of freight are forcing many growers to discover or increase sales to the direct market, and consider other transport options, like sea transport. "In order to achieve this, we need to cooperate as an industry."
Sachin Appachu in the greenhouse.
Good year so far
According to Sachin Appachu, the year has been very good so far. "Sales are going through the best times ever. It started mid-November and demand and prices have remained high afterward. The best part is that it continued to be high during the entire month of February. Usually, the prices drop after Valentine's, but demands now remained high, resulting in a much need high turnover month’ specially coming after the period what we all have experienced."
High freight costs
Freight is still an issue. There is often a lack of capacity and freight rates are high. "Transport costs are 20% higher than usual, excluding 2020." In turn, production costs are higher as well. "Usually freight takes up about 50% of the costs and now it is 65%." On top of that, the rates increased for more holidays. "Usually, only in the run-up to Valentine's Day, the freight rates are increasing, but this year, the rates have been higher in the run-up to more holidays, like Women's Day and Mother's Day."
More towards direct
The lack of freight capacity combined with the freight price volatility, makes more and more growers decide to start shipping directly, Appachu explains. "We also had to sharpen our marketing skills to push the direct demand. Prices have been very good at the auction, but as the costs are so high as well, the impact of a drop in prices is significant. Therefore, we like to spread the risks. We used to ship 70 percent to the auction and 30 percent to the direct market. Now it is 60-40 and we are aiming for 50-50."
Alternative ways of transportation
According to Appachu, it is important to find alternative ways of transportation. "Last year, we joined a sea shipment trial that was organized by Royal FloraHolland. I really liked it and I can't wait till they do another one. It is important for the industry to cooperate and it would be great if an organization like Royal FloraHolland could coordinate it. In this way, growers can lower their transportation costs and in turn, continue supplying their flowers via the auction clock."
Will there be record sales too?
When looking back at the last 5 to 7 years, this year's sales have been the highest ever, but will profits be too? "We cannot complain at all, but as all input costs increased, profits will probably not see the big spike as the turnover. All input costs increased like costs for fertilizers, pesticides, labor, and packaging. Also, the suppliers of these products are dealing with shipping issues, like a lack of containers or an increase in prices for containers. In the end, the grower will pay the price. By the end of the year, we can see if profits reached a record as well."
Expectations
When looking ahead, even though it will be low season for the coming months, Appachu is optimistic. "First of all, regarding the freight issue, maybe things will change when the international flights will start again and I hope this will be in two months or so. Also, I'm curious if the flight rates will decrease like they usually do during the coming months; from June 1st till Mid of August, with the low-season rates. On top of that, there might be fewer flowers on the market as Colombia and Ecuador are dealing with the same freight issues as we. All in all, time will tell, but for now, positivism is all around."
For more information:
Bliss Flora Ltd
Sachin Appachu
Email: [email protected]