The Colombian flower industry and supply-chain practices

1. The Colombian flower industry and supply-chain practices IX AIR CARGO AMERICAS November 7-9, 2007

2. Content • Flower industry • Supply-chain practices: farm to customers • Asocolflores and logistics • Next steps

3. Content • Flower industry • Supply-chain practices: farm to customers • Asocolflores and logistics • Next steps

4. World flower exports 2006 Ecuador 6%

5. Per capita consumption AIPH, 2007 (Euros) CountryPer cap. CountryPer cap. Switzerland 80Slovenia 3 Norway 59 Italy 23 Holland 55Spain 22 Japan 54 USA 21 Austria 45 Portugal 16 Denmark 44 Greece 16 UK 44 Hungary 15 Sweden 38 Chec Republic 10 Germany 36 Poland 8 Ireland 35 Slovaquia 7 Finland 34 Croacia 7 France 31 Russia 3 Belgium 30 China1

6. Flower market trends in U.S.A • Size of the floriculture industry: US$19.4 billion (US Department of Commerce U.S.A) • Over the last ten years, the supermarket share has grown from 41% to 52%, while the florist shops have lost market share falling to 32% to 20%. • Specialty-cut flowers increased their share in sales to US homes. • Ten years ago, half the sales of ornamental products in supermarkets were flowers, today they represent two thirds. • Fresh-cut flowers make up 75% of the transactions in florist shops. • Internet sales of flowers held its participation at between 5% and 6% of the number of transactions. Ipsos/AFE Consumer Tracking Study, 2005

7. The Colombian flower industry • 182,184 jobs (98,641 direct / 83,533 indirect) • 1,000,000 Colombians depend on floriculture • Exports 2007: US$967 million • 7,266 hectares • 60% of the workforce are women • 95% of total production is exported • Colombia is: • the first supplier of flowers to the United States • the first supplier of carnations worldwide • the second largest flower exporter in the world. • Largest non-traditional agricultural export (10%) • 75% of air cargo exported from Colombia in the last 10 year were flowers

8. Colombian flower exports 1.000 900 200 800 700 150 600 Thousand tons 500 Millions dollars 100 400 300 50 200 100 - - 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 2005 2006 Thousand tons Million dollars

9. Netherlands Germany 1,6% Canada 0,9% 2,0% Japan 2,2% Spain 2,2% Others 3,6% United Kingdom 4,2% Russia 4,4% United States 79% Exports by market

10. Miniature Alstroemeria carnation 5% 7% Other 34% Standard carnation 15% Chrysanthemum and pompon 8% Rose 31% Exports by product

11. Area

12. Regions

13. Share of the U.S. import market • 77% of flowers imported by the USA are Colombian • 98% of Alstroemerias • 97% of Carnations • 82% of Chrysanthemums and Pompoms • 67% of Roses • 35% of other types of flowers Source: USDA, 2006

14. Bouquet exports to U.S.A. 76.8% comes from Colombia

15. Comparative advantages • Supply of labour • Soil quality • Abundance of water • Luminosity • Proximity to main markets • Cluster conditions • Importers of plant material and agro-chemical products located in Bogotá • Closeness to Eldorado and Rionegro airports • Main research centers located near Bogotá

16. Contents • Flower industry • Supply-chain practices: farm to customers • Asocolflores and logistics • Next steps

17. Supply-chain Practices • This is not a new issue, but a common factor for anyone in the market • This is used to respond effectively to world competition • Competition is stiffer because of technology, globalization, market saturation, lower productions costs, etc. • The objective is that customers receive the product with the required quality and on time, always adding value

18. Logistics and competitiveness • The Netherlands is the European perishables hub and the first flower exporter worldwide; Kenya has been doing sea shipments to The Netherlands, and is their first supplier; Ecuador is reevaluating the process of cargo consolidation; the Mexican flower industry has been stimulated with subsidies and has the opportunity of sending flowers overland by truck • World maritime shipments, including Colombia, have grown significantly in the last years • Supermarkets require more efficiency in shipping and traceability • We still have reports of problems with the cold chain, as it is currently managed in the US • Air tariffs are still 30% of the cost of flowers CIF

19. Flower Exporting by air Airport El Dorado: most important airport in Latin America because flowers exports Flowers: 223,000 tons per year Bogotá 79% cultivated area Rionegro 17% cultivated area Daily: 709 tons on average. During Saint Valentine’s there were close to 1,500,000 boxes, or 111,000 boxes daily, and 816 pallets

20. El Dorado and Rionegro facilities • 30.600 m2 + 11.000 m2 in the international cargo areas • In Bogotá: • 37% for flowers flowers • 50% are cold rooms • 212,000 per year only in 5,660 m2 • 37 ton/m2 per year • 2035 boxes m2/year • 2 kgs m2/day • Four years ago, delays were up to 13 hours, today with logistic coordination they have been reduced to 2.5 hours

21. The industry handles around 60,000 boxes/day, one by one …there is room for improvements

22. The flower export process Yes The product To the airport Planning a load Move into the cold room Posthaverst Planning In the cold room Load a truck No • Coordination with brokers, airlines, merchandising areas. • Define type of truck • Planning the cargo according to destination • End of the load • Flights • Real Weight / volume Verification of: temperature, Security Schedule of load Temperature verification Cargo identification Preparation of the load Analyses truck-airline Transport to other farms If the truck is going to another farm, procedures for loading the truck must be followed A

23. Security checks At airport Take-off Load airplane The flower export process The product Cargo to the consolidators agencies or airlines Cargo consolidation Pallets configuration Time and temperature verification Airplane loading plan Storage to weigh pallets Verification of temperatures in cold room. Limits to have this cargo in storage Verification of the temperature in load conditions Verification of time Weight-Balance

24. Theflowerexportprocess With the cargo agency Final AWB. AWB with # of pieces and weights Inform the farm # of the AWB assigned Gives the AWB and cargo requirements to the airline Farm prepares the boxes Verification of arriving farm trucks Pre-alerts destination and Track & Trace

25. The flower export process Cargo agency and airline Security warnings Confirmation of projections Projections for next week Confirmation of quota Program itineraries vs capacity Allocation of flight and arrival slot

26. The flower export process At destination CBP (antiterrorism and plant health inspections) (separate sample, prepare listing, call inspector) Pre-alert Flight Unload Pick up order AMS documents and customs manifest

27. Customers’ requirements: Colour Size Freshness Sturdiness Shape Free of residues Free of agrochemicals Free of pests The costumers They are increasingly more powerful. They reject based on quality and tardiness and demand social and environmental standards. • Price • Brand • Destination • And they want to be sure of • Sustainability • Environmental standards • Social standards

28. Quality is a pillar for creating value and customer satisfaction The exporter or importerusually end up paying for the inefficiency of the chain

29. Logistic practices To get quality requires • Effective coordination of the chain • Coordinated cargo and document flow

30. We can improve if: The chain can respond effectively to • cold chain management... • many box sizes… • coming from many farms... • going to many clients... • asking for special packing, standards and varieties In a sample of over 200 firms, the critical logistic delays occur mostly during loading and unloading

31. Contents • Flower industry • Supply-chain practices: farm to customers • Asocolflores and logistics • Next steps

32. Asocolflores in Logistics The Asocolflores Logistic Committee has worked towards better document and physical cargo procedures in Colombia and foreign markets. • We are part of the WF&FSA´s Logistics Coalition (cold chain, packing, GTIN project) • 52 farms have been trained in Logistics Management • Asocolflores actively participated in establishing the procedures for the bids for the airports of Eldorado (Bogotá) and Jose María Cordova (Rionegro) • We provide simulation models to optimize procedures in transportation and management of cargo at the airport • We offer timely information about new legislation, procedures and its implementation to our affiliated companies

33. Logistics During high seasons, we coordinate with cargo agencies, airlines, governments and concessionaries so as to ensure better attention to the supply of flowers

34. Logistics Postharvest Best Practices Manual (includes logistics topics such as traceability)

35. Asocolflores • Non-intrusive inspections (DIAN) • Protocol for narcotic inspections • BASC - CTPAT • Aeronautic issues (open skies, IATA – CASS) • Colombian custom and exports procedures: MUISCA, Plan Vallejo, VUCE, certificates of origin • International customs and requirements

36. Contents • Flower industry • Supply-chain practices: farm to customers • Asocolflores and logistics • Next steps: chain

37. 1. Operational improvements Efficiency between LTO and ATO contact Consolidation area Unified security process

38. 2. Protocol for Cold Chain Management throughout the chain • With the national and international LTO and ATO • Verification of temperature at critical points of the chain • Data-bases and feedback

39. 3. Packing • On the farm, LTO, ATO • Protocol of consolidation, palletization and deconsolidation processes • Indicators

40. 4. Increase efficiency In recepction of palleted boxes • ConsoIidation • Non intrusive inspections • Cargo through-put

41. 5. Register indicators Management and processes • Ex. Delays, load time, consolidation time

42. 6. Enforce security standards • Certification of members of the floriculture chain (farm, LTO, ATO, cargo agency, broker)

43. 7. Fullfill international requirements

44. Sustainable floriculture with social responsibilityThank you