Russian flower market on verge of crisis

bloemenmarktAccording to predictions of analysts of the Russian Ministry of Industry and Trade, cut flower sales in the Russian Federation may decline by 15% to 20% this year, which may result in the bankruptcies of some local producers and importers.

So far, some of the Russian Federation’s leading flower importers have already been forced to file for bankruptcy, as, due to the devaluation of the Russian ruble by almost half (compared to the same period of 2014) their costs have hence almost doubled.

In order to compensate the increased costs, some of the importers have already increased prices by 15% to 20%; yet, many of them continue to incur significant losses.

The current situation is aggravated by the fact that most of the Russian banks currently refuse to provide loans even to the Russian Federation’s leading flower importers, amid fears of their possible collapse.

At the same time, those banks that continue to provide loans to domestic flower businesses, have decided to significantly increase their interest rates, which makes further borrowing unprofitable for at least 70% of importers.

In addition, the decision of some of the EU-based flower exporters to demand a 100% advance payment for their Russian customers (fearing of further currency fluctuations) has also severely hit the Russian flower business, which, due to high cost of loans, currently doesn’t have enough funds to pay for imports.

According to some leading Russian companies, specializing in flower imports, none of the importers have been cash constrained like this since the mid-1990s, which is a catastrophic situation for them. This has resulted in the bankruptcy of some importers.

At present, the Russian flower market is estimated at US$2 billion. However, due to the current crisis in the Russian Federation it is expected to have declined by 15%-20% by the end of the current year.

The biggest hopes leading Russian distributors and importers were put on the 8th of March, the International Women’s Day, when sales of flowers in the Russian Federation traditionally increased several fold. This time, anyhow, sales volumes were significantly lower than previous years, due to a significant increase in prices.

According to Nikolai Arefiev, Deputy Chairman of the Duma Committee on Economic, Innovation Policy and Business Development, the Russian Federation should reduce imports of flowers, which is expected to be achieved through the freeze of their prices by domestic producers.

According to Anatoly Fitisov, the director of the Ulyanovsk State Farm of Ornamental Horticulture, the current situation in the market may provide domestic producers with the possibility to increase their market share and withdraw importers from the market. However, he believes, full import substitution will take some years.

Source: FloraCulture International