US Flower Retail Business hit hard by economic downturn
In the United States, which accounts for about 80 percent of Colombia's flowers exports, people are cutting down on purchasing non-essential products such as flowers because of a deteriorating economy and personal hardship. Colombian plantations, which sell about $1 billion worth of flowers annually are also hard hit by the fallout of the US downturn and had to lay off some 20,000 workers over the past several years. Things are getting worse today as they are pinched between the weak U.S. dollar, which dilutes export revenue, and higher costs driven by inflation and oil prices. "We now have the same revenues we had in 1999 and 2000, the last time the dollar was this weak, but our costs are 68 percent higher," said Felipe Arango, a flower industry consultant who is trying to help the MG farm in the Bogota suburb of Chia find ways to cut costs.
Two out of every three flowers sold in the United States come from Colombia, but as the U.S. economy slows further, American buyers are in no mood to help out Colombia by paying more for flowers, or even buying them at all. Most of the US consumers have stopped buying flowers all together. They say that food on the table takes the priority over flowers in times of hardship. Increasing the problem is the weakening U.S. dollar, which has fallen about 18 percent against the Colombian peso over the last year. This means that exports to the United States are worth less when the sales are translated back into pesos, the currency in which the farms and factories have to pay their rising production bills. To improve revenues Colombian growers are now also exporting more flowers to Russia, Japan and other countries, but the quantities are very small. "Flowers are high on the list of things that U.S. households are cutting now the US has gone into a recession," Arango said. "So, here we are, squeezed by increasing costs, lower exports and the inability to raise prices."
"In the US Flowers are seen as some sort of extravagance for special occasions only," said Robert Weatherford Jr., president of Houston-based wholesaler Southern Floral Co. "I'm not sure why, but that is a fact" Annual per capita spending on flowers in the United States is around $25, compared with $50 in Great Britain and $101 in Switzerland, according to a study by the Flower Council of Holland. Much of the US flower retail business has also shifted from neighborhood floral shops to supermarkets and large stores, such as Wal-Mart, that now sell half of all flowers purchased in the United States. But their low prices have cut into the earnings of Colombian producers. All told, about a dozen large Colombian flower farms have closed in the past three years, eliminating 20,000 jobs, Solano said.
"How long can this pressure be endured by the floral chain?" says Ernesto Velez, a veteran flower farmer and board president of the exporters association.
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