Dutch flower auctions to merge

A merger of the two biggest Dutch flower auctions, FloraHolland and Aalsmeer, will create a wider range of selling possibilities for growers, streamline standards and see bigger investments in services, says Ard Reijtenbagh, import manager at FloraHolland.

The two revealed plans to merge in October 2006, saying they needed to collaborate to face rising competition from direct selling and new flower markets in emerging economies. The rise of large supermarkets in Europe which buy directly from growers, rather than auctions, to cut costs and ensure control over their supply, has eaten into sales at the auction houses.This trend is expected to increase as consumers spend more in huge supermarkets and less in small specialist shops.

Many growers have been eager to switch from auctions to direct sales as they can target a higher quality market, and in general, higher prices, as well as fixed supply contracts. The auction houses have also tried to capture some of this demand by setting up bureaus to act as intermediaries between growers and supermarkets. They are also looking to online bidding. Aalsmeer reported "explosive growth" of its online remote purchasing system in 2006 to around Euro150 million in trade, about 15 per cent of its total turnover. But scaling up will also help the auction houses hold onto their share.

The proposed merger would give the auction houses economies of scale and also concentrate almost all of the supply and demand at auction houses in one spot. This would be beneficial for growers too, giving them access to a range of markets and new channels. It would also standardise logistics, allowing growers to work more efficiently. Currently, the auction houses work with different trolleys and different software. The merger would remove this inconvenience for growers supplying both houses.

The venture would be the world's largest flower exchange, with annual combined turnover of almost Euro 4 billion. The two co-operatives control more than 90 per cent of the Dutch auction market so there are concerns that the venture would stifle competition. But the auction houses argue that the flower trade is global and their merger should be looked at on a European basis.If the auction houses get the go-ahead, they still need two thirds of members to vote for the move at an assembly meeting in September. The merged company would then be set up from 1 January 2008.

Business Daily