Australian Floriculture Industry Production update

High import penetration and price competition from supermarkets have put pressure on profit margins in the Floriculture Production industry in the past five years. For this reason, industry research firm IBISWorld has updated its report on the Floriculture Production industry in Australia.

The Floriculture Production industry in Australia has struggled against adverse trading conditions over the past five years, facing stagnant demand for flowers by consumers, rising import penetration, and dwindling export earnings. Spending on cut flowers is seen as a discretionary outlay, and traditional flower arrangements may be readily substituted with other products such as chocolates, gift vouchers and charity donations. The industry is projected to generate revenue of $330.0 million in 2013-14, up by 1.5% on 2012-13 due to stronger consumer sentiment and household consumption. Despite the current upswing in sales, industry revenue is projected to decline by an annualised 1.3% over the five years through 2013-14, corresponding with the deterioration of domestic demand conditions in the aftermath of the global financial crisis and heightened competition from imports. The level of import penetration has climbed to about 8.6% of domestic demand in 2013-14, while industry export earnings have contracted.

The sale of cut flowers and seeds by supermarkets and convenience stores is increasing, which has had a mixed impact on the industry. It has lifted consumers’ exposure to flowers, but has also fuelled intense price competition. Industry profitability has been eroded over the past five years by price competition from supermarkets, rising production costs and the inflow of cheaper imports from low-cost producers. The industry exhibits a low level of market share concentration with no dominating participants.

The Floriculture Production industry’s prospects are forecast to improve marginally over the next five years, supported by stronger household consumption and consumer sentiment, and broader consumer exposure to flowers and foliage displays through supermarket chains. There may also be improved opportunities for growers engaged in the research and development of new flower varieties.

For more information, visit IBISWorld’s Floriculture Production report in Australia industry page.

Posted 15 April 2014