Flowers are luxury products. Their only purpose is to decorate house interiors, graves or brighten up festivities. None of these are essential in life.

Nonetheless, consumers in the EU have shown to be willing to spend considerable amounts of money on flowers in the past decades. Per capita consumption increased to € 30 – 50 in the most developed markets. Affluent consumers who don’t have to worry about costs of food, housing and other basic costs of living are eager to spend some money on the joy that flowers bring, whether they bring joy to others or to themselves.

The distinction between flowers for own use and gift flowers is important. The number of flower purchases for own use is generally related to the development of the market. In the less developed flower markets, consumers purchase almost all flowers for others. In the more developed flower markets, consumers with high disposable incomes are increasingly purchasing flowers for own use. Compare, for example, Spain and the UK in 2007. In Spain, only 10% of flower purchases was for own use, while in the UK, 50% of flower purchases was for own use.

The growth of disposable incomes has been a strong driver of the development in EU flower markets in the past decades. This development was heavily disrupted in 2008, when the global economic crisis started.

Global economic crisis causes a shift in retail sales

The global economic crisis had a huge impact on the sales of flowers. Dutch wholesalers reported decreases of an average 0-30% in turnover in the beginning of 2009.

Although loss of purchasing power through immediate job losses and reductions in incomes was significant, it was not in line with the enormous decrease in expenditure on flowers. The latter was mainly caused by the drop in consumer confidence. Consumers suddenly cut back on their expenditures to prepare for some meagre years. They reviewed their expenses and decided that flowers and other luxury products had least priority. This caused a shift in retail sales.

Sales by supermarkets were hit first. Flower sales by supermarkets had made substantial gains in the years before the crisis. The supermarkets mainly target impulse buyers with high disposable incomes, which purchase flowers for themselves. These consumers generally give a very low priority to their flower purchases and were among the first to cut back on flower purchases.

Sales by florists were less affected by the global economic crisis. Florists mainly target buyers, which have planned their flower purchase. The purchases at florists include mostly gift purchases, which have a much higher priority than purchases for own use. Who would skimp on flowers for a celebration by a best friend?

Graphic Shares of retail channels in EU flower sales
Source: ProFound, 2009

What does it mean for growers?

Supermarkets are supplied by so-called flower providers, which have specialised in supplying supermarkets. The global economic crisis put a halt to the strong expansion of the leading flower providers of the past decade. Therefore, growers with a large production of standardised products which focus on direct trade with these flower providers suffered severely.

The most unfortunate growers were the ones focussing on flower providers which supplied supermarkets in the UK, Sweden and Ireland. Flower sales in these countries consisted for a large part of flowers for own use, which were purchased at supermarkets.

Many of the flower providers, which supply supermarkets in these countries, are located in The Netherlands. Due to the devaluation of the currencies of the UK and Sweden compared to the Euro, flower providers in The Netherlands were actually worse off than flower providers in the two end-markets. Growers which relied heavily on sales to these flower providers ran big risks.

Florists, which were less affected by the global economic crisis, are largely supplied by wholesalers, which purchase their products from local growers, wholesale markets or at the auctions. These more traditional trade channels have proven to be more resilient during the economic crisis.

Kasper Kerver, mail@thisisprofound.com
Consultant, ProFound