Team Flowers: A Flower Market Tour of China
Written by Leah Finn, Mary Harty, Anne Kramer, Laura Smith, and George Panagiotakapoulos
Agripacific Holdings is a holding company that owns a number of cut flower farms and distribution centers across Asia, including its two main growing sites, Kunming Hasfarm in Yunnan, China, and Dalat Hasfarm in Dalat, Vietnam. For our IBD project, our team (a.k.a, Team Flowers) partnered with Kunming Hasfarm (KMH) to develop a marketing strategy for selling cut flower crops throughout China – at the moment, most of KMH’s flowers are exported to Japan, while the domestic market is primarily served through a small scale of imports from Dalat Hasfarms. As Chinese incomes rise, a growing middle class is spending more money on luxury home products like flowers, creating a promising market. KMH tasked our team with helping them strategically scale their domestic sales of cut flowers by considering the optimal target customers and sales channels.
For our in-country visit, KMH planned an itinerary that would give us a thorough look at the flower industry in China by visiting six cities – Kunming, Beijing, Shanghai, Hungzhou, Guangzhou, and Hong Kong – to tour flower markets, interview wholesaler customers, and even visit the farms of several of their competitors. Luckily for us, this meant we got to experience a diverse range of Chinese cultures, food, and sights as we learned about some of the nuances of each local market.
We began the trip in Kunming, a small (by China standards) city of 6 million in the western Yunnan province. We spent two days touring KMH’s greenhouses and learning about the processes of growing carnations, green wicky (a fuzzy green flower described to us as “soft, like a panda’s face), and hydrangeas. We also visited the Dounnan Flower Market, one of the largest flower wholesaler markets in China. The coolest part about this was the flower auction: an enormous warehouse full of lower-quality flowers (mostly roses) and a huge room to the side where wholesalers gathered to bid on them, Dutch auction style while smoking heavily and doing business on cell phones. It was quite a sight!
In Beijing, Shanghai, Hungzhou, and Guangzhou, we visited KMH’s largest wholesaler customers and the Shanghai-based distribution center for the import business. Through our many interviews, we learned that KMH has a strong reputation as a high-quality grower; most of their wholesaler customers would buy more flowers from them if not restricted by supply. Since the China-based farm already had plans to expand growing, we saw an opportunity to organize their Shanghai- and Beijing-based sales teams to begin selling domestic product in those regions, rather than solely managing the import business.
Another powerful opportunity we recognized for KMH is the meteoric rise of e-commerce that has taken place in the past few years, impacting all industries. In many ways, China has surpassed the US in its use of technology in commerce: for example, rather than credit cards, nearly everyone pays for things by scanning a QR code on the item with an app on their phone called WeChat. In the flower industry, many startups have innovated by offering weekly flower delivery services through a subscription model, and several wholesalers have shifted all of their operations online. We had the chance to interview several contacts from these companies to learn about their innovative models. A key question we investigated for KMH was how they could incorporate technology into their business model, and how far down the value chain they should reach to implement it – that is, whether to switch from B2B (selling to wholesalers) to B2C.
The trip concluded with a trip to Hong Kong, where we delivered our final presentation at Hasfarm’s office there. In addition to recommendations about reorganizing their sales force and adopting a technology platform to track customer data, we discussed the trend we observed of new flower companies, particularly in the eCommerce model, shortening the value chain (typically grower to wholesaler to retailer to customer) to increase margins and lower prices beyond the offerings of their more traditional competitors. We encouraged KMH to pay attention to competitors adopting this model as the market grows.
Overall, we were incredibly impressed by the hospitality provided to us by our clients and associates in the industry. After nearly every interview or market visit, we were taken to an elaborate meal, treated to a tea ceremony, or toured around sights like Tianenmen Square by members of the KMH staff or their wholesaler clients. We feel lucky that this experience introduced us to the warmth, beauty, and diversity of China.