W16377

ROYAL FLORAHOLLAND: THE DUTCH FLORICULTURE SUPPLY

CHAIN

Ken Mark wrote this case under the supervision of Professor P. Fraser Johnson solely to provide material for class discussion.
The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have
disguised certain names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
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Copyright © 2016, Richard Ivey School of Business Foundation Version: 2017-11-08

INTRODUCTION

Edwin Wenink, program director of FLOW 1 at Royal FloraHolland was meeting with Rob Koppes, supply
chain consultant, at their corporate office in Aalsmeer, the Netherlands, on January 12, 2016, to discuss the
latest change to Royal FloraHolland’s supply chain. Starting the following week, all flowers sold at auction
in Aalsmeer and Naaldwijk would use only image auctioning, ending a 100-year tradition of physically
moving the flowers through the auction room during the auction process for visual inspection by the
buyers. Under the new process, a digital image of the flowers would be presented on the auction clock
located at the front of the room (see Exhibit 1). Royal FloraHolland had been making greater use of image
auctioning in recent years, believing that product quality would be improved if flowers remained in cold
storage. The quality control process provided adequate information to the buyers alongside the virtual
auction clock.

This announcement was one illustration of several recent changes that had been made to Royal
FloraHolland’s supply chain as the co-operative responded to a host of pressures that threatened the
relevance of one of Holland’s largest and most famous industries. Edwin commented to Rob on the
challenges ahead:

Our industry is changing rapidly and I do not see the pace of change slowing anytime in the near
future. The industry is consolidating, the use of information technology is affecting our business
processes and relationships with supply chain partners, and our growers are facing competition
from developing regions across the globe. We need to continue to innovate to maintain a resilient
supply chain. Several of our recent projects, such as HubWays and GreenRail, have challenged
conventional views in our industry and pushed us to change traditional practices. The challenge is
to continue on our path of change management and innovation to reduce supply chain costs while
simultaneously improving environmental sustainability performance.

Royal FloraHolland’s supply chain department needs to identify new areas to target our future
supply chain innovation projects. Put together your thoughts on where you feel we have the best

1
FLOW stands for Floricultural Logistics Optimization Worldwide. This supply chain program is a part of the new Royal
FloraHolland Strategy 2020.

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opportunities to improve the overall performance of the supply chain and we will discuss our
ideas during our meeting on Thursday next week.

The Global Floriculture Industry

In 2016, total global exports of cut flowers, cut foliage, plants, and flower bulbs were worth US$21.8
billion, 2 up from $8.5 billion in 2001. 3 The two biggest categories were cut flowers, which were exported
globally, and plants, which were sold regionally. The Netherlands had historically dominated the global
floriculture trade. However, a key development in the past decade was the rise of large-scale cut flower
production in new locations such as Colombia, Kenya, Ecuador, Ethiopia, and Malaysia. 4

Supporting the growth of these new competitors were innovations in shipping technology that allowed long-
haul transportation of flowers, principally by ships. For example, Maersk, the large shipping company,
developed special containers for transporting Kenyan roses. The Maersk containers were ventilated and
cooled to just above freezing, with the capability to keep roses fresh for 25 days without water. It was
estimated that this method of shipping reduced costs by 70 per cent compared to air transport. 5

In 2013, growers in Colombia were able to ship 15 per cent of total production by sea to Europe. For
example, Colombia sent 700 containers of chrysanthemums to Japan in 2013, with each container holding
approximately 150,000 chrysanthemum stems. The trade flows indicate that Colombia was a large exporter
of flowers, by sea, to Europe (see Exhibit 2). 6

Sea shipment of floriculture goods was typically used for longer shelf-life products such as cut foliage,
flower bulbs, and plants. However, the lower cost of sea freight, and close attention to production
processes, handling, and refrigeration techniques, made the longer journeys commercially viable for cut
flowers. Sea shipment provided transportation cost savings of 30–40 per cent and carbon dioxide (CO 2 )
reductions of 80–90 per cent, depending on distance and weight. For example, a shipment from Nairobi to
Amsterdam resulted in 36 per cent lower comparative transportation cost and 87 per cent lower CO 2
emissions by sea freight versus air freight (see Exhibit 3).

The growth in the number of competitors and improvements in logistics technology contributed to changes in
the way countries sourced their cut flowers. For example, Japanese imports of cut flowers from the
Netherlands fell from 8 per cent to 2 per cent in the 10 years leading up to 2013. During the same period,
Japanese imports from Malaysia rose to 26 per cent from 10 per cent. A similar scenario played out in Russia,
where imports from Ecuador and Kenya were increasing at the expense of imports from the Netherlands. 7

It was typical for large wholesalers to buy cut flowers from auction houses such as Royal FloraHolland,
reselling them to florists and other stores. Increasingly, large customers, such as supermarket chains, were
cutting out intermediaries and buying directly from growers.

2
All currency amounts are in U.S. dollars unless otherwise specified.
3
Information provided by Royal FloraHolland.
4
Cindy van Rijswick, World Floriculture Map 2015: Gearing Up for Stronger Competition, Rabobank Industry Note No. 475, 1,
January 2015, accessed June 15, 2016, www.rabobank.com/en/images/World_Floriculture_Map_2015_vanRijswick_Jan2015.pdf.
5
Nicholas Brautlecht, “A More Comfortable Berth for Lobsters,” Bloomberg Businessweek, June 2, 2016, accessed June 12,
2016, www.bloomberg.com/news/articles/2016-06-02/shipping-lobsters-in-specialized-containers-may-boost-margins.
6
Cindy van Rijswick, World Floriculture Map 2015: Gearing Up for Stronger Competition, Rabobank Industry Note No. 475, 2,
January 2015, accessed June 15, 2016, www.rabobank.com/en/images/World_Floriculture_Map_2015_vanRijswick_Jan2015.pdf.
7
Ibid., 1.

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Yet, despite these trends, the Netherlands continued to be the global leader in cut flower exports, with 52 per
cent of world exports in 2013, down from 58 per cent in 2003. Consumption of floriculture products was
generally flat in the United States and Western Europe, which were two of the three largest markets. (The
other was Japan.) The global floriculture industry grew considerably from 2001 to 2014 (see Exhibit 4).
Flowers were purchased at supermarkets, discounters, (specialized) flower kiosks, and garden centres. In
the United Kingdom, the vast majority of cut flowers were sold by supermarkets. Many of these
supermarkets sourced lower-cost flowers directly from growers in Africa and South America. Growers in
high-cost regions of Europe, the United States, and Japan, in response to competition from the lower end of
the market, turned to high weight-to-value-ratio products such as potted plants, specialty products, and
local flowers and plants.

Floriculture in the Netherlands

Benefiting from a mild climate and a central location in Europe, flower farms in the Netherlands accounted
for the majority of Europe’s cut flowers for the past century. There were approximately 4,000 flower
growers in the Dutch floriculture industry in 2016, many of which were small and medium enterprises,
encompassing only 6 per cent of the total horticultural land area in the Netherlands. A typical flower farm
was on average 0.87 hectares in size, 8 owned by a self-employed individual, and specialized in a particular
flower species. 9 These small growers typically employed four to five people.

The fragmented nature of the industry was supported by a sophisticated co-operative marketing and
logistics infrastructure that had been developed and refined over decades. The development of greenhouses
in the 1850s in the Netherlands boosted the production of flowers. Due to rising wealth in Europe, more
people were able to afford cut flowers—a small luxury—and this demand was met by Dutch growers,
experimenting with glass-covered and heated greenhouses. In addition to serving domestic customers,
Dutch flowers were exported to neighbouring countries such as Germany, France, the United Kingdom,
Italy, and Russia; the Dutch dominated these markets for the next century.

In 1908, the Dutch Horticultural Council, a trade association for growers, was founded. Four years later,
two auction houses were established in Aalsmeer: Bloemenlust and Centrale Aalsmeerse Veiling. These
auction houses took advantage of the fact that they were located close to many of the growers and could be
reached by road, rail, and the canals. Over the next 60 years, the growing volume of the floriculture trade
was the catalyst for the emergence of numerous regional auction houses.

The traditional way of selling flowers was to consolidate the product in a central location, and auction off
the goods after allowing buyers to physically view the product. In preparation for the next day’s auction,
trucks picked up product from growers’ farms, delivering the shipments to refrigerated warehouses at the
auction site. In 2016, one out of every nine trucks in the Netherlands contained floriculture product.

There was no single supply chain customer or grower that dominated the market. To cover the auction
costs, growers and customers paid an annual membership fee and a small commission on transactions. A
Dutch grower commented: “My concern is getting a good price. . . . I get good prices on the auction [yet]
it costs me only 5 per cent to market my flowers through the auction, renting boxes, transportation, and
other things.” 10

8
A 0.87 hectare farm was approximately 2.15 acres in size.
9
Catherine Ziegler, Favored Flowers: Culture and Economy in a Global System (Durham, NC: Duke University Press,
2007), 74.
10
Ibid., 104.

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Royal FloraHolland

In 2016, Royal FloraHolland was the largest co-operative floriculture auction house in the world,
serving 4,500 grower members, including 750 members from outside the Netherlands. Royal
FloraHolland had 2.7 million square metres of auction buildings in total, featuring 38 physical
auction clocks. After each auction, customers coordinated the shipment of cut flowers and plants to
approximately 140 countries through sea ports—such as at Rotterdam—and to Schiphol Airport. The
Aalsmeer facility, at 1.29 million square metres in size, was Royal FloraHolland’s largest auction
building, and the largest commercial facility in the world.

Royal FloraHolland’s mission statement was, “Flowering the world together, planting seeds of opportunity
for our members.” Its stated objective was to maximize revenues for its growers while minimizing costs,
and to provide value to its customers. In the Netherlands, there was only one other floriculture auction
house (Plantion), which served about 275 growers.

In January 2008, the organization merged with a key competitor, Verenigde Bloemenveiling Aalsmeer (also
known as VBA or Aalsmeer Flower Auction). The merger was representative of a trend of consolidation in
the industry. In 2016, the merged organization changed its name to “Royal FloraHolland” from simply
“FloraHolland.” At that time, it had four locations: Aalsmeer, Naaldwijk, Rijnsburg, and Eelde.

Each year, about 12.5 billion cut flowers and 1.5 billion plants were sold through Royal FloraHolland,
generating an annual turnover of €4.4 billion 11 in 2014. There were approximately 115,000 commercial
transactions each day, with 3,200 employees, supporting approximately 2,200 wholesale and direct customers.

The auction started every weekday at 6:00 a.m. In preparation, a steady stream of trucks carrying flowers
and plants began to arrive at the auction facility at 4:00 p.m. the previous afternoon. Growers were
responsible for providing the specifications of each lot, including information about length, ripeness,
diameter of the flower, and number of stems per bunch. In the past, flower trolleys were moved from the
refrigerated rooms to the auction rooms using a cable trolley system, displaying the flowers to the buyers
seated in the auditorium-style auction rooms. As each lot was purchased, the goods were moved to one of
several buffers, and from there, distributed onto trolleys in the main distribution hall. Full trolleys were
transferred by tractors to buyers’ logistics facilities located onsite. After the auction, buyers processed the
flowers based on customer orders. When the orders were finalized, they were moved to refrigerated trucks
and delivered to wholesale warehouses locally, regionally, and in other countries. Under the current
process, all flowers and plants sold at auctions in Aalsmeer and Naaldwijk used image auctioning (see
Exhibit 1). The product bypassed the step of moving through the auction room and was sent from the
refrigerated storage areas directly to the buyer’s storage room.

Flowers and plants spent a maximum of 24 hours at the auction facility, with most product spending less than
12 hours between arrival and outbound shipping to the customer’s distribution network. There were
approximately 70 logistics providers and more than 2,000 buyers, of whom more than 150 were large
exporters that transported product for customers. Royal FloraHolland had relatively consistent levels of income
turnover, business relations, auction activity, and other key statistics between 2013 and 2014 (see Exhibit 5).

Royal FloraHolland’s capital investments were focused on its buildings, warehouses, and material handling
equipment. Space was rented to customers and their logistics firms (see Exhibit 6).

11
€ = European euro; US$1 = €0.74 on January 4, 2014.

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The Auction Clock

One of the defining features of a Dutch flower auction was the auction clock, which featured a declining
price auction. The clock moved counter-clockwise, declining steadily, moving downwards by a few cents
per second. In contrast with a traditional auction where bidders competed with each other to raise the price
of the product or service in question, in a Dutch auction, the first bidder to press a button purchased the
flowers by stopping the clock. Buyers familiarized themselves with the product on hand and decided prior
to the auction how much they would be willing to pay.

The auctioneer decided on the starting point of the clock. The starting point was influenced by the expected
price, based on supply and expected demand. The clock consisted of 100 positions, with each representing
1 cent, 2 cents, 5 cents, 10 cents, or as much as 1 euro (see Exhibit 1).

In addition to indicating what price they wanted to pay for the product, buyers also indicated how many
stems they wanted to buy. Therefore, for any given lot of cut flowers, there could be more than one
purchasing event. Rob explained how the auction process worked:

Consider an example of a lot of flowers consisting of 20 buckets and the auctioneer estimates a
price per stem of 50 cents. He will start the clock at a much higher level to prevent a pricing
mistake and an angry grower on the phone afterwards. Let’s say he starts the auction at 90 cents
and the first buyer stops the clock at 52 cents, buying five buckets. After completion of this
transaction, the auctioneer would then start the clock at 62 cents, raising the price because the
previous transaction influenced the balance between supply and demand. Raising the price by
about 10 clock positions is the standard way of working after each clock stop within the lot. The
15 remaining buckets might then be sold in two transactions: eight buckets at 53 cents per stem
and seven buckets at 49 cents per stem. The way the auction process works, it might be possible
that the second transaction in a lot has a higher price per stem than the first transaction.

Each purchasing event—from when the clock started ticking to when a buyer stopped the clock—lasted an
average of about three to four seconds. As part of its service to its growers, Royal FloraHolland guaranteed
the commercial transactions, ensuring that growers were paid on time.

In the mid-1990s, Royal FloraHolland introduced the concept of an electronic clock that could be viewed
online. Buyers could log-in remotely and participate in the auction process, viewing the flowers with a
video camera that was trained on the carts. This innovation—remote buying—was developed in response
to demand from buyers who were not able to be physically present at the auction. Aside from the buyers
logging in remotely, the rest of the sales and logistics processes were carried out without changes. The
purchased product was sent to the buyers’ storage rooms, and then onwards to their distribution systems.

Royal FloraHolland held about 245 auction days per year. In addition to auctions, it also provided
mediated buying opportunities through its Royal FloraHolland Connect service, which was started in the
late 1990s. This service allowed customers (wholesalers and retailers) to buy large volumes of flowers and
plants directly from growers, bypassing the auction clock system. Large retailers, such as Tesco, believed
that the Connect service offered several advantages. First, it allowed them to leverage their purchasing
power by negotiating long-term contracts at competitive prices. Second, it allowed them to select suppliers,
which were evaluated on quality and delivery performance. Third, it shortened lead times, with the grower
shipping the product directly to the buyer’s distribution facility. Fourth, it helped customers balance supply
with demand. For example, it was particularly useful to manage supply in advance of traditionally high-
volume sales periods, such as Valentine’s Day and Mother’s Day. The service increased in importance

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over time. By 2014, Royal FloraHolland Connect’s turnover was, for the first time, greater than the
turnover generated from the auction clocks (see Exhibit 7). Until the year 2000, virtually all of the flowers
and plants at Royal FloraHolland were sold through the auction clock.

Pressure for Supply Chain Innovation

Rob Koppes surveyed the issues that Royal FloraHolland and the industry were facing. The emergence of new,
large-scale growers in Africa and South America had cost advantages for popular products, such as roses. As a
result, Dutch growers were increasingly focused on specialized varieties, which were sold in smaller volumes
and were often more difficult to grow. The near ubiquity of the Internet and other information technology tools
had allowed—and would continue to allow—far-flung growers to find buyers for their flowers. Improvements
in sea-borne cut flower handling, storage, and refrigeration enabled these growers to send their products by sea
freight. Considering that supply chain costs from Africa by air were typically 40–60 per cent of a cut-flower’s
retail price, Rob was eager to find ways to optimize the supply chain.

He noted that the Royal FloraHolland Connect service had proven extremely popular, with a steady growth
in volume in this channel. “What value can we provide to these customers so they keep using our
services?” Rob wondered. Global retailers were used to sourcing direct and, increasingly, others were
following their lead. Large retailers, such as Tesco, monitored and reported carbon emissions. These
customers had annual targets for emission reductions and expected suppliers to implement programs to
reduce the carbon footprint of their supply chains. On the Dutch growers’ side, many had taken steps to
expand and focus on higher value flowers and plants. “Our growers—our owners—want more control of
their supply chain. They are looking for lower costs and improved sustainability performance,” noted Rob.

Industry consolidation was reducing Royal FloraHolland’s membership. Between 2011 and 2014, the
number of grower members at Royal FloraHolland had fallen to approximately 4,500 from 4,900 (see
Exhibit 8). To ensure that it continued to maintain its market share, Royal FloraHolland had opened its
membership to non-Dutch growers in 1972. “Our international grower members will benefit from our scale
and we benefit from keeping them within our system,” said Rob. In 2016, approximately 750 members
were from outside the Netherlands.

It was becoming more difficult for smaller growers to compete. Large flower growers, sometimes
exceeding 20-million-stem capacity per season, had lower costs than the smaller enterprises. Some Dutch
growers were setting up operations in Kenya and China to take advantage of lower energy and labour
costs. Instead of heating greenhouses in the Netherlands, growers could take advantage of Kenya’s hot,
warm climate around the equator. From 1988 to 2014, Kenya’s flower exports rose twelvefold to 137,000
tonnes, supporting flower farms such as Nin, a 44-hectare rose farm employing over 500 people. 12

Rob looked at Royal FloraHolland’s consolidated profit and loss statements for 2014, noting the
contribution from service fees such as lot and auction trolley levies, packaging, and subletting of real
estate, among other things. He observed that the average transaction size was declining and remote buying,
introduced as an add-on, accounted for more than half of the total turnover. The latest announcement was
the move to 100-per-cent image auction for flower sales at Aalsmeer and Naaldwijk. Image auctions were
different from remote auctions, as Rob explained:

12
“Leaving on a Jet Plane: Kenya’s Flower Trade,” Economist, February 6, 2016, 46, accessed June 15, 2016,
www.economist.com/news/middle-east-and-africa/21690077-long-journey-those-special-stems-leaving-jet-plane.

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Based upon my experience, some people do have problems understanding the difference between
image auctioning and remote buying, or as we say in Dutch, kopen op afstand. Just to make it
clear, image auctioning is based upon a (representative) digital photo and supply information
(product specifications) supplied by the grower. Products do not pass through the auction room;
commercial and logistics process are decoupled. Up until recently, approximately 90–95 per cent
of the auctions at Aalsmeer and Naaldwijk already used imaging auctioning.

Buyers can make use of remote buying from anywhere in the world, as long as they have access
to the Internet, the remote buying software, and a subscription at Royal FloraHolland. Whether
image auction is used or not is not relevant for remote buying.

At Aalsmeer, image auctioning is a daily business for most of the products; at Rijnsburg, it is not.
This has to do with the emotional arguments: buyers want to see the product. It is also influenced
by the suitability of the products. Some products are grown out in the open during summertime
and the quality of these products can be influenced by weather conditions. This aspect makes it
extra important to see the products in real time. Rijnsburg is the marketplace with the broadest
and deepest assortment of these “summer flowers.” Image auctioning for plants still has a long
way to go, so it is not common practice yet.

In general, Rob wondered how the decoupling of commercial and logistics processes would affect Royal
FloraHolland’s service structure. There was the additional challenge of managing sustainability issues,
given that flowers were being shipped to the Netherlands and then reshipped to their destination. “Can we
do a better job in reducing our carbon footprint?” he wondered.

Recent Initiatives at Royal FloraHolland

With the goal of improving its supply chain, there were four key initiatives that Royal FloraHolland had
recently been involved with: GreenRail, GreenBarge, Hubways, and CoolChain.

The first initiative, GreenRail, included several organizations in the Dutch floriculture industry (e.g.,
growers, customers, and logistics service providers), with Royal FloraHolland taking a major leadership
role. The objective of GreenRail was to increase the use of rail transport in place of trucks, in five different
corridors: Italy, Poland, Romania, Hungary, and Switzerland. Transport by rail reduced the carbon
footprint for shipments and overcame several transportation issues that the Dutch floriculture industry had
to deal with: road congestion, limited driving hours for truck drivers, and a shortage of truck drivers in
Europe. Implementing a rail transport solution meant working with a different set of partners, such as
third-party logistics providers and rail companies.

Along similar lines, GreenBarge was an industry initiative involving the participation of several
organizations. GreenBarge focused on inland shipping, with the objective of substituting truck with marine
transport. Royal FloraHolland’s position on logistics was to increase the volume sent through rail or barge
to simultaneously improve the cost position and sustainability performance of the Dutch floriculture
industry. Rob commented on Royal FloraHolland’s role in GreenRail and GreenBarge:

Royal FloraHolland initiated both projects, but co-created them with our industry sector partners.
Our supply chain development department initiated and led projects, with the objective of
optimizing the supply chain. Social innovation is critical to these types of projects, which is why
Royal FloraHolland collaborates with industry sector organizations.

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HubWays was a joint initiative of the Dutch floricultural sector to improve logistics coordination. The
sector pooled its efforts to cluster and optimize intra-marketplace processes and transportation, with the
objective of reducing costs and increasing sustainability. It envisioned one digital platform for the
administration and transportation of products in the country, and the sharing of information and loads to
optimize transportation.

Royal FloraHolland worked with 87 partners within HubWays including VGB, the association for Dutch
Floriculture Wholesalers; Greenport Holland, the association for the Dutch horticultural cluster;
floriculture growers of all sizes; floriculture traders; knowledge providers, such as consultants and
academia; and transportation services providers.

The fourth initiative, CoolChain Management, sought to optimize transportation solutions—primarily

sea-based transport—from locations in South America and Africa. There were eight steps in the
CoolChain process: harvesting and grading (1 day); consolidation and trucking to the seaport (2 days);
antinarcotics checks and container clearances (4 days); sea freight (13–21 days); local transportation to
stores or to a hub (1 day); international transportation for locations farther inland (3 days); display at the
florist or store (2 days); and vase life (more than 7 days).

In general, shipping flowers by sea, managed by CoolChain, resulted in an increase of total flower life to
33 to 41 days. The current standard of shipping flowers by air resulted in a total flower life of about 17
days. The key to CoolChain (later branded as “Flowers@sea”) was in minimizing the temperature
variances in the environments in which the flowers were handled or transported, to ensure that cut flowers
endured the fewest number of “degree hours” possible. Degree hours were calculated by multiplying the
hours spent in transit by the temperature at which the flowers were stored.

Royal FloraHolland 2020

Rob reviewed Royal FloraHolland’s long-term goals, as outlined in its 2014 strategy document, Royal
FloraHolland 2020. 13 The document outlined what the co-operative wanted to achieve by the year 2020,
while acknowledging the challenges of the Dutch floriculture industry and remaining conscious of Royal
FloraHolland’s balance sheet and income statement (see Exhibits 9 and 10).

The key themes discussed in the document included how to become more customer-focused; how to
continue to evolve the marketplace to take advantage of technology and the fact that traditional traders
and growers were to take on more roles within the supply chain; and how to install a “lean” focus in
Royal FloraHolland’s operations.

There were two key targets for the Royal FloraHolland 2020 strategy. First, it aimed to generate higher
margins for its grower members and for customers. This first goal listed some challenging targets:

• We will achieve a €1 billion turnover on our online platform.

• Our European market share will have grown by 20 per cent.
• Our members and their customers will give us a rating of at least 8 (out of 10) in satisfaction scores.
• Our costs will have been cut by a third.
• The costs of our supply flows will have been lowered by 15 per cent.
• Pricing will be optimum and stable.

13
Royal FloraHolland, Royal FloraHolland 2020: Flowering the World Together, Plantings Seeds of Opportunity for Our
Members, December 11, 2014, accessed June 21, 2016.

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Second, the strategy aimed to encourage higher consumer spending on flowers and plants. It set out the
following goals:

• The European consumer will spend 20 per cent more on flowers and plants.
• Royal FloraHolland will facilitate 20 innovations each year.
• Our status will remain as the best knowledge centre for the floriculture industry in the world.
• “Flowered by Royal FloraHolland” will be the number one business brand in the global floriculture
industry.

Looking to the Future

As Rob reviewed the information he had in front of him, he recognized that the Dutch floriculture industry
had faced unprecedented changes in the last 20 years. Information technology had allowed growers to
communicate and transact directly with buyers. Improvements in storage and refrigeration had enabled
distant competitors in non-traditional flower-growing regions—where the competitors could enjoy low
production and labour costs—to emerge and compete. The costs of transportation were increasing,
prompting changes in the supply chain. Lastly, there was the challenge of ensuring that the entire supply
chain was as sustainable as possible. Rob commented that, “Royal FloraHolland, and the larger Dutch
floriculture industry, has always been able to innovate and improve.” He thought about the opportunities
and challenges that lay ahead. With the objective of outlining what some of the next-generation
innovations could look like, Rob started to jot down some notes.

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EXHIBIT 1: THE VIRTUAL AUCTION CLOCK (SHOWING PRODUCT PICTURES)

Source: Royal FloraHolland.

EXHIBIT 2: THE GROWTH OF OTHER FLOWER-GROWING COMPETITORS

Source: Royal FloraHolland.

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EXHIBIT 3: AIR FREIGHT VERSUS SEA FREIGHT FROM NAIROBI TO AMSTERDAM

Costs—Nairobi to Amsterdam 9,200 kilograms

Costs—air freight $18,768
Costs—sea freight $11,950
Savings for sea freight $6,818
-36%

CO2– Nairobi to Amsterdam Tonnes

Air freight 43,498
Sea freight 5,653
Savings for sea freight -87%
Source: Created by the authors using data from Royal FloraHolland.

EXHIBIT 4: GLOBAL EXPORTS OF PLANTS, FLOWERS, FOLIAGE, AND BULBS (IN US$)

25000

20000
US$ millions

15000

10000

5000

0
2001 2003 2005 2007 2009 2011 2013

Plants Cut flowers Cut foliage Flower bulbs

Source: Created by the authors using data from Royal FloraHolland.

This document is authorized for use only in BENAVENTE CHEN PAMELA MILAGROS's Transporte Global (PRE 2022-01) at Universidad Peruana de Ciencias Aplicadas (UPC) from Mar 2022
to Jul 2022.
 Page 12 9B16D015

EXHIBIT 5: ROYAL FLORAHOLLAND, KEY STATISTICS

Change,
2013 2014 year to year
(%)
Turnover and Supply, value (millions)
Cut flowers € 2,468 € 2,486 0.70
Indoor plants € 1,525 € 1,564 2.60
Garden plants € 357 € 351 −1.70
Total turnover € 4,350 € 4,401 1.20
Turnover, by marketplace (millions)
Aalsmeer (clocks) € 1,118 € 1,077 −3.70
Naaldwijk (clocks) € 718 € 704 −1.90
Rijnsburg (clocks) € 336 € 327 −2.70
Bleiswijk (clocks) € 45 € 19 −57.80
Eelde (clocks) € 24 € 24 0.00
Total FloraHolland, auction clocks € 2,241 € 2,151 −4.00
Total FloraHolland Connect (mediated buying) € 2,109 € 2,250 6.70
Total FloraHolland € 4,350 € 4,401 1.20
Units Supplied, auction clocks (millions)
Cut flowers 7,313 6,986 −4.50
Indoor plants 351 315 10.30
Garden plants 188 177 −5.90
Total units supplied 7,852 7,478 −4.80
Daily Turnover and Supply, auction clocks (millions)
Turnover (value) € 9.2 € 8.8 −4.00
Cut flowers (units) 29.9 28.5 −4.50
Plants (units) 2.2 2 −8.70
Turnover, Remote Buying (000s)
Aalsmeer € 696 € 736 5.70
Naaldwijk € 424 € 487 14.90
Rijnsburg € 116 € 127 9.50
Bleiswijk € 2 € 0.00
Eelde € 1 € 1 0.00
Total € 1,239 € 1,351 9.00
Business Relations
Suppliers 6,848 5,736 −16.24
Cooperative members in the Netherlands 3,951 3,790 −4.07
Cooperative members abroad 631 742 17.59
Buyers 2,391 2,189 −8.45
Employees (number) 3,611 3,221 −10.80
Employees (in FTE) 2,874 2,554 −11.13

Source: Royal FloraHolland, Annual Report 2014, April 15, 2015, accessed June 21, 2016,
www.royalfloraholland.com/media/3968368/Annual-report-2014.pdf.

This document is authorized for use only in BENAVENTE CHEN PAMELA MILAGROS's Transporte Global (PRE 2022-01) at Universidad Peruana de Ciencias Aplicadas (UPC) from Mar 2022
to Jul 2022.
 Page 13 9B16D015

EXHIBIT 6: ROYAL FLORAHOLLAND, KEY STATISTICS BY FACILITY (2014)

Facilities Aalsmeer Naaldwijk Rijnsburg Bleiswijk* Eelde Connect

Clocks 14 14 7 0 3
Auction rooms 3 3 1 0 1
Auction buildings surface area (in m2) 1,287,813 736,000 400,000 123,000 46,975
Owned by traders/customers (in m2) 239,861 207,000 67,700 90,957 10,036
Number of customers with accommodation on auction
450 450 180 85 26
site
Surface area of cold storage (in m2) 51,800 40,380 35,880 3,800 3,440
Number of trolleys and containers handled 3,637,823 2,611,595 908,463 206,625 84.45
Number of docks 530 520 296 115 22
Average number of clock transactions per day 44,556 39,962 20,280 0 4,675
Number of active suppliers 4,256 5,825 2,935 0 1,288 3,970
Number of active traders 533 1144 409 0 293 1,100
Cut flowers sales via clocks (Dutch products) in units (in
2,120 1595 1,002 0 57
million)
Cut flowers sales (imported) in units (in million) 1,198 626 457 0 48
Cut flower turnover per marketplace (in € million) 804 550 310 0 19 789
* Bleiswijk was closed July 2015.

Source: Royal FloraHolland, Annual Report 2014, April 15, 2015, accessed June 21, 2016,
www.royalfloraholland.com/media/3968368/Annual-report-2014.pdf.

EXHIBIT 7: TOTAL ANNUAL TURNOVER FOR CLOCK AND CONNECT TRANSACTION

(IN € MILLION)

3,000

2,500

2,000
€ (millions)

1,500 Clock
Connect

1,000

500

0
2009 2010 2011 2012 2013 2014

Source: Royal FloraHolland, Annual Report 2014, April 15, 2015, accessed June 21, 2016,
www.royalfloraholland.com/media/3968368/Annual-report-2014.pdf.

This document is authorized for use only in BENAVENTE CHEN PAMELA MILAGROS's Transporte Global (PRE 2022-01) at Universidad Peruana de Ciencias Aplicadas (UPC) from Mar 2022
to Jul 2022.
 Page 14 9B16D015

EXHIBIT 8: ROYAL FLORAHOLLAND, KEY CHANGES 2010–2014

Financial History (key figures) 2010 2011 2012 2013 2014

Turnover (in €1 million) 4,130.0 4,284.0 4,398.0 4,476.0 4,537.0
Revenue (in €1 million) 378.0 392.0 381.0 402.0 393.0
Total expenses (in €1 million) 366.0 378.0 371.0 418.0 384.0
Salary expenses (in €1 million) 187.0 197.0 191.0 210.0 177.0
General expenses (in €1 million) 84.0 90.0 87.0 102.0 109.0
Depreciation & interest (in €1 million) 95.0 91.0 93.0 106.0 98.0
Profit after taxes (in €1 million) 11.9 11.2 7.9 (15.6) 9.6
Balance sheet total (in €1 million) 941.0 989.0 978.0 965.0 903.0
Net investments (in €1 million) 75.0 82.0 72.0 67.0 41.0

Personnel (FTE, at year-end)* 3,279 3,346 3,154 2,940 2,617

Clock activities indices/prices
Lots (in 000s) 6,615 6,263 6,047 5,941 5,907
Units (in million) 12,449 12,757 12,457 12,405 12,482
Logistical transactions (in 000s) 29,953 29,178 28,274 27,981 28,054
Trolleys (in 000s) 8,583 8,196 7,427 7,081 6,867
Average price for flowers (€) 0.21 0.21 0.22 0.22 0.22
Average price for house plants (€) 1.53 1.53 1.62 1.63 1.67
Average price for garden plants (€) 0.90 0.91 0.96 0.97 0.96
Members (changes)
New members 141 95 97 123
Termination members 366 249 300 332
Number of members at end of year 4,908 4,687 4,582 4,524
Number of contract suppliers at end of year 2,864 2,452 2,267 1,930
* FTE = full-time employees

Source: Royal FloraHolland, Annual Report 2014, 8, April 15, 2015, accessed June 21, 2016,
www.royalfloraholland.com/media/3968368/Annual-report-2014.pdf; “2013 Annual Report,” Royal FloraHolland, accessed
June 21, 2016, http://jaarverslag2013.floraholland.com/en/?_ga=1.19198456.1596708302.1466512644.

This document is authorized for use only in BENAVENTE CHEN PAMELA MILAGROS's Transporte Global (PRE 2022-01) at Universidad Peruana de Ciencias Aplicadas (UPC) from Mar 2022
to Jul 2022.
 Page 15 9B16D015

EXHIBIT 9: ROYAL FLORAHOLLAND, BALANCE SHEET (IN €000)

Assets 2013 2014

Fixed assets Intangible fixed assets 5,798 496
Tangible fixed assets
Land 121,833 113,198
Buildings 380,132 364,270
Machinery and equipment 103,736 92,685
Miscellaneous capital assets 91,055 78,182
Land and capital assets under construction 122,392 127,251
819,148 775,586
Financial fixed assets
Participating interests 17,030 15,202
Amounts owed by participating interests 5,622 4,778
Other receivables 166 115
22,818 20,095
Current assets Receivables
Trade receivables 72,897 76,523
Amounts owed by participating interests 957 109
Deferred tax assets 1,577 1,250
Other receivables and accrued assets 32,391 18,908
107,822 96,790
Liquid assets 9,252 9,872
Total assets 964,838 902,839
Liabilities and Equity
Liabilities Short-term liabilities
Credit institutions including repayment obligations 60,092 76,916
Debts to members/non-members 103,998 57,256
Debts to participating interests 156 0
Other creditors 49,448 40,996
Deposits 77,499 81,474
Other debts and accruals 62,341 60,203
353,534 316,845
Long-term liabilities
Member loans* 171,506 175,382
Liquidity contribution* 32,914 44,759
Voluntary (member) loans* 8,659 8,334
Supplier loans * 8,657 6,442
Long-term bank loans 150,288 122,571
372,024 357,488
Provisions
– Deferred tax provision 3,371 1,687
– Reorganization provision 21,903 7,367
– Other provisions 5,286 5,942
30,560 14,996
Group Equity Equity 206,744 211,224
Minority interests 1,976 2,286
208,720 213,510
Total Liabilities and Equity 964,838 902,839
* Subordinated loans. Together with the group equity, these form the liability capital, which at the end of 2014 stood at
€446.1 million (2013: €428.5 million).
Source: Royal FloraHolland, Annual Report 2014, 26–27, April 15, 2015, accessed June 21, 2016,
www.royalfloraholland.com/media/3968368/Annual-report-2014.pdf.

This document is authorized for use only in BENAVENTE CHEN PAMELA MILAGROS's Transporte Global (PRE 2022-01) at Universidad Peruana de Ciencias Aplicadas (UPC) from Mar 2022
to Jul 2022.
 Page 16 9B16D015

EXHIBIT 10: ROYAL FLORAHOLLAND, INCOME STATEMENT (IN €000)

2013 2014
Operating income
Commission payments* 108,757 105,149
Contributions 8,903 8,745
Lot and auction trolley levies 69,874 69,142
Transaction and service levies 21,557 24,655
Packaging 51,677 53,122
Trolley and CC (container) rentals 24,340 25,355
Subletting of real estate 52,203 53,623
Various incomes † 53,710 53,628
Allocation of the liquidity contribution 10,975 –
401,996 393,419
Operating costs
Wages and salaries 175,100 141,738
Social security expenses 20,568 21,357
Pension contributions 14,479 13,593
Depreciation and other amounts written off 89,038 82,559
Miscellaneous operating costs * † 102,246 109,398
401,431 368,645
Operating profit 565 24,774
Financial income and expenses
Interest expenses and similar expenses (19,028) (18,747)
Interest income and similar income 2,713 3,688
(16,315) (15,059)
Profit before tax (15,750) 9,715
Profit from participating interests (4,034) 2,681
Company tax 4,353 (2,488)
Minority interests (150) (349)
Profit after tax (15,581) 9,559
* In contrast to the 2013 financial statements, item not included in the exceptional items column.
† The figures shown for 2013 have been adjusted for comparative purposes as a result of change in the consolidation of the
FloraHolland Group.

Source: Royal FloraHolland, Annual Report 2014, 28, April 15, 2015, accessed June 21, 2016,
www.royalfloraholland.com/media/3968368/Annual-r

This document is authorized for use only in BENAVENTE CHEN PAMELA MILAGROS's Transporte Global (PRE 2022-01) at Universidad Peruana de Ciencias Aplicadas (UPC) from Mar 2022
to Jul 2022.