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Unfortunately for many ornamental horticulture firms, however, the world has changed over time, and so has the ornamental horticulture industry. From the beginning of the 1980’s and especially the 1990’s, increased competition from the Netherlands resulted in decreasing prices, shifts in market demand and a completely new market situation. Instead of a demand surplus, ornamental horticulture firms were suddenly facing a supply surplus, with tumbling prices as a result. Increased competition and decreasing margins pushed for restructuring of firms with more need for managerial skills, marketing, innovation, efficiency and scale enlargements than the traditional craftsman skills and small scale firm had (Taragola et al., 2000; Verspecht et al., 2003). Many of the firms, however, were passed on in the beginning of the 1980’s or the beginning of the 1990s from father to son, without taking these changing market conditions into account. Several interviewees pointed at the impact of this path dependency on the structural characteristics of many firms today. Many firms are still working on the smaller patches and the aged greenhouses that they inherited from the previous generation.

“There are many firms like that. That had better never acquired their firm from their parents. (…) Too small, no space, badly structured. And then the father that says “well, I earned a living on this firm, so why wouldn’t you be able to earn a living on it.” So they ask a lot of money for the firm, because they think it’s worth a lot of money. But that’s simply not true.” (K2) The interviews made clear that the ornamental horticulture sector is a sector in transition, moving from a period of stability to a period of increasing competition, uncertainty and complexity. In the following subsections, we will show the most recent developments and characteristics of the Belgian ornamental horticulture industry as it has become today. More specifically, I will focus on the general demographic and socio-economic descriptives of the Belgian ornamental horticulture, the general business environment and the institutional environment in which it is embedded. General demographic and socio-economic characteristics The National Institute of Statistics (NIS) reported that in 2004, 2395 firms were active in the ornamental horticulture sector as producers. The entire Belgian ornamental horticulture sector generated an estimated total turnover of 552 million euros, which represents about 12%

Chapter 5

of the total turnover in agriculture (€ 4,55 billion) (EROV, 2006). With this production, the ornamental horticulture sector realizes a net positive trade balance: while the imported value of ornamental horticulture products in Belgium amounted to 384 million euro in 2004, it assumes the third place (behind the Netherlands and Italy) as an exporter in Europe, with over 500 million euro exported value. In total, the sector employed 11 213 people in 2005. Figure

5.4 shows how, over the last decade, the ornamental horticulture in Flanders (representing 90% of the Belgian production) combined a strong decline in number of firms with a steady growth in turnover.

–  –  –

The decreasing number of firms in the sector and the strong traditional features as were described before, lead to a number of additional demographic characteristics of the Belgian ornamental horticultural sector. Table 5.8 shows the high average age of ownermanagers, the small general firm size and the low level of education of owner-managers and employees. Three things can be learned from this table. First, half of the owner-managers in the sector is over fifty years of age. This suggests a very high level of experience, yet also a very high level of potential inertia. The influx of new firms or the acquiescence of firms either within or from outside the family is very low. Both the increased financial capital requirements and the bad reputation of the agricultural sector as an unprofitable sector have deterred many young people from considering a career in ornamental horticulture. As a result, the remainder of owner-managers are members of an aging population, but are also stalling structural renewal and investments in the future. Unfortunately, this also has a negative impact on the general morale in the sector. Due to the increased competition and the low

–  –  –

investment in the future, the remaining owner-managers look back on the times when life was easier for them and hope that they will be able to survive with their firm until retirement.

Table 5.8 - Demographic data on ornamental horticulture firms in 2006.

Source: AMS, APS

–  –  –

“About 60 to 70 % of growers have a rough time these days. Those that have been able to save enough for their pension rather prefer to retire in the current conditions.

(…) We are confronted with growers without a future every day, where the last spark of professional pride has been squeezed out. Almost no one has a successor.” (K4) Second, almost all firms are micro-enterprises, with most of them having less than 10 employees. In fact, the majority does not have more than 3 employees. This reflects a highly fragmented landscape of small, autonomous, mostly family owned firms. Although firms are experiencing a strong push to grow their firm size, with substantial financial capital requirements as a result, only a small group of firms is investing in expansion. In addition to the reasons of decreasing influxes of new people in the sector, a much heard influence is the

general “individualism” of the Belgian grower:

“Some policy makers are dreaming of clusters like the Dutch model, where a number of facilities are shared. But the Flemish grower wants a piece of land with his own company on it and a shed around it. That is his territory where he makes a living.” (Representative of professional association, 2006) As a result, a 2004 study of the Centre for Agricultural Economics reported that only 5% of the firms were large enough to work in optimal circumstances (Verspecht et al., 2003). On the other hand, the smaller size and family based character is also mentioned as one of the major strengths of the Flemish firms. The dedication of a family to the firm is considered essential for the specific requirements of the ornamental horticulture industry. One consultant reported


Chapter 5 “The fact that many firms are small to middle-sized family firms results in a tremendous flexibility with regards to commerce. If it’s necessary, people will work weekends and nights during the commercial season.” (Consultant in arboriculture) Thirdly, the generally low education of both owner-managers and employees reduces the possibilities for innovation and absorption of new practices and technologies. Although the data on education in Table 5.8 reflect those of the primary sector in general, several sources confirmed that they are applicable to the ornamental horticulture sector as well. The generally low education of owner-managers has two main effects. First, several interviewees complained that they did not possess the skills and knowledge for management and marketing. One important hurdle in this perspective was the lack of language skills. Given that most of the plants were exported across Europe, many firms were unable to establish contacts across Europe and decrease their dependence on intermediaries. Second, many owner-managers encountered difficulties to understand new legal, technical and commercial requirements. As a result, they hold on to their traditional practices and follow the incremental changes that are introduced by peers. This mimetic behaviour is the strongest around the traditional epicentres and production clusters of specific products.

“A lot of growers still work like their parents did. We are working in a sector under heavy pressure, and the reasons for that are mostly to be found in a lack of dynamism, entrepreneurship and management competencies. Yet the supply of training about how to run a company, for example from the Economic Council of Eastern Flanders, is quite good. But people don’t use it.” (grower) Together, these demographic and socio-economic characteristics indicate that (1) firms are generally small, (2) firms generally have low levels of human capital in terms of employees and (specialized) knowledge, and (3) the high competition and little potential to sell the firm results in reduced financial resources and willingness to invest in new infrastructure. General business environment Providing a description of the general business environment in quantitative terms is a complex task in the ornamental horticulture. Although a number of studies have investigated the ornamental horticulture industry from a public policy point of view, very few studies have made comprehensive overviews of the general attractiveness of the industry from a business point of view. From the multiple data sources that I collected, a general picture can nevertheless be sketched. For reasons of consistency with chapter 3, I will present the general business environment in terms of its munificence, complexity and uncertainty.

Chapter 5

Munificence Recall that the munificence of a business environment is determined by an abundant supply of resources that may facilitate organizations to achieve their objectives (Dess & Beard, 1984; Castrogiovanni, 1991). Ornamental horticulture firms, for example, may benefit from the research and dissemination activities that are done by the government sponsored research institute, the Proefcentrum voor Sierteelt (PCS). Furthermore, both government and independent consultants provide extension services that provide advice and disseminate knowledge throughout the ornamental horticulture community. The government also supports investments at the firm by providing capital subsidies if the investment meets certain criteria.

Over the last years, environmentally friendly investments have thus been favoured in these subsidy schemes. Finally, the close presence of the Netherlands, a highly munificent business environment in terms of supporting institutions, consultants, machinery, construction and many more, is a great source of resources for many Belgian ornamental horticulture growers as well. Although the general business environment is thus not entirely devoid of supporting resources, the overall picture is nevertheless one of hostile competition and a decreased willingness of constituents to supply critical resources to cope with it.

A first indicator for the low munificence in the Belgian ornamental horticulture is the fierce price competition and decreasing margins. Instead of the several market regulation instruments (subsidies and production quota) that protect arable and dairy farmers from price competition, the ornamental horticulture industry has a free market in place which is no different from any other manufacturing industry. In recent decades, a number of (costly) technological innovations have allowed increasing levels of productivity and have also pushed firms to increase in size and to capitalize on the returns to scale that come with the costly technologies. Especially in the Netherlands, as a result of supportive government policies and the more collaborative nature of Dutch growers, this trend has facilitated the growth of firms to sizes that allow a cheap and standardized supply of products in larger volumes. Since market volumes subsequently grew faster than the increases in demand, prices have gone down over the years. With such decreasing prices, many firms that were unable to grow have stopped their activities, and the remaining firms have produced larger volumes (see Figure 5.4). In addition, the downstream markets have undergone substantial changes as well.

Besides fast consolidation of the classical distribution and trade channels, ornamental plants are now increasingly sold in supermarkets and large retail chains. As a consequence of the increasing size and bargaining power of these downstream players, prices were driven further

down. As one distributor explained:

Chapter 5

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