Flowers are a must-have for any celebration. However, there is almost no local produce in the Russian market, most of the flowers are imported ones, newsnn.ru reports.
Flower business requires constant investments and is related to certain risks. The weather can spoil the whole crop, ready to be cut.
Flower shop owners note that it is often easier to purchase imported flowers and sell them at a higher price than to try growing their own ones with the risk of losing a part of the crop.
Ms. Elena Dybova, the Vice President of the Chamber of Industry and Commerce of Russia noted that anything can be grown but the priority factor is the price. It is not enough to grow the product, it should also have such a cost that it would be sellable.
The fact is, that not all the flowers are in equal demand and some require more significant investments. Consequently, a flower is spent more resources and time on and becomes more expensive, while Russian customers prefer cheaper options. Thus, orchid bouquets are not in demand in Russia, they are costly and require special growing conditions.
Many entrepreneurs take loans for greenhouse construction and hope that over a certain period would be able to pay out the debt. In 2019, the official market of cut flowers in Russia exceeded 2 billion euro. Overall, over 1.8 billion flowers were sold in the territory of the country. Most of them arrive form the Netherlands, where biggest flower auction is located. The cost of flowers together with transportation happens to be lower than that of locally grown ones, especially once exotic options are considered as well as out of season.
Over 85% of the flowers sold in the territory of Russian are imported ones. Local producers can boast considerable crops only in tulips and roses.
Roses are predictably in biggest demand. They take over 60% of all sold flowers. Chrysanthemums are in the second place and carnations in the third one. Tulips are also popular, with the peak of sales in the beginning of March.
According to the National Flower Association, the rose, being the most popular flower among the customers, is the most unprofitable for the growers. In imported roses, the main part of the cost is related to transportation and in local roses to lighting and warming. The cost of energy sources sometimes reaches 40%.
Russian growers started having issues in 2013 when custom duty on imported flowers was lowered from 15% to 5%. Which is more, since last year, the industry players started paying VAT in addition to the general agricultural tax.
There are 15 roses growing greenhouse complexes in Russia. New Holland, located near Saint Petersburg, is one of them. The co-owner of the company, Mr. Aleksey Antipov noted that the flower market in Russia is not the most profitable one. Thus, New Holland was planning to pay out the debt within 7 years but had to postpone the date.
“The greenhouse complex cost us 463 thousand euro, 70% of the resources were loaned. Now we realize that the enterprise will become cost-effective later than it was originally planned also because of the fact that we modernized the greenhouse, mentioned Mr. Antipov.
According to the expert, New Holland is facing serious challenges and is not planning any further investments in the sphere. The board of directors are considering engaging in cucumber growing instead of flowers as in that case they could count on state subsidies.
For a couple of years the growers have been trying to reach equality with the fruit and vegetable growers so that they could receive more support from the government. Now the matter is under consideration by the Minister of Economic Development and Ministry of Finance. The initiative is also supported by the Chamber on Industry and Commerce of Russia.
“There was a period when there were no offers in the market from Russian producers. Now we have them, new companies appear. In order to solve the matter, we need more subsidies and preferential taxation”, noted the Vice-President of the Chamber on Industry and Commerce of Russia, Ms. Elena Dybova.
According to BusinessStat, Belarus was the main flower importer into Russia, having 49.5% of imported produce share. Flowers delivered from this country are mostly reexported ones, often produce of other countries is passed off as that of Belarus. In 2015, the supplies constituted only 348 tons and in 2016, they grew to 1.6 thousand tons. By 2019, import reached 5.8 thousand tons.
The second and the third places in the amount of imported flowers in 2019 were taken by Ecuador and Italy with the shares of 15.5% and 9.2% respectively.
The biggest rose growing complexes in Belgorod region are LLC Izovol Agro and MBU the Department of Belgorblagoustroystvo.
Recently, Belgorod flowers shops are trying to do without the expensive roses and flower bouquets. According to local authorities, such presents are impractical and do not last long. In various city events, preference is given to potted flowers. The initiative was started by the governor, Mr. Evgeniy Savchenko.
According to regional Department of Economic Development and the Department of Agricultural Complex and the Environment Reproduction, potted plants are purchased from different suppliers. Preference is given to those, whose produce matches the requirements and whose pricing strategy and other conditions are the most attractive ones.
There are several major companies engaged in flower growing in Belgorod region. LLC Izovol Agro is the most famous one; its produce is known under the brand Roses of Belgorod. In 2018 the company received sales profit in the amount of 6.7 million euro, with that the net loss constituted 1.9 million euro. LLC Izovol Agro has been incurring losses for at least four years in a row, so the business does not look profitable just as most of the other flower growing companies in the region.
It is safer and more profitable to purchase flowers, rather than grow them. One can adjust to the demand of the population and purchase the produce that is guaranteed to be sold. The theory can be supported by the numbers provided by LLC Dom Tsvetov company, for instance. They sell cut flowers and home plants. Company sales profit for 2018 constituted 733 thousand euro, net profit being 54 thousand euro. Within the past four years, the company incurred no losses.
Unless local producers are supported in the Russian Federation, florists would turn to the foreign suppliers. Flowers are the only agricultural sector in the country considered a luxurious one by the opinion of the government. Thus, producers receive no subsidies or other state support.
“Let’s create a special program. Let’s include subsidies and preferential taxation in it. Let’s give the producers a period of, let’s say three years for development. With flowers there is a possibility to reach full capacity and get the required results in a shorter period”, urged the Vice President of the Chamber on Industry and Commerce of Russia, Ms. Elena Dybova.
The representatives of the Chamber on Industry and Commerce of Russia note that within the past five years there has been no greenhouses constructed for flower growing. The sphere can be revived, if local flower growers are regarded as all other agricultural growers and have equal rights with the importers.
https://m.bel.ru/news/economy/13-03-2020/kolyuchiy-biznes-vyraschivat-tsvety-v-belgorode-nevygodno?id=kolyuchiy-biznes-vyraschivat-tsvety-v-belgorode-nevygodno&published_date=13-03-2020&rubric=economy&type=NewsItem
Source: newsnn.ru
