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Tales from the Development Frontier
pesticides. Local suppliers also nourish the postharvest supply chain, including packaging and labeling materials and cooling technology. Marketing and freight costs are distributed among growers. Most flower growers export through the same distribution channels as fruit and vegetable growers. New flower buyers are emerging in China and Japan, and auction houses have been established in India (Mumbai) and the Middle East (Dubai). Direct flights are also planned for Japan and the United States. All this market expansion ensures that Kenyan exporters will continue to perform well. The Kenyan flower industry benefits from a variety of sophisticated investments along the supply chain that simplify trade logistics. Largescale farmers have invested in a sophisticated postharvest cold chain infrastructure. From cutting to market takes about 72 hours. Flowers are delivered to the airport in refrigerated trucks about four hours before departure. Nearly all (90 percent) of Kenya’s flowers are handled by airfreight forwarders, three of which are linked to the top flower producers. Because transport costs are important elements of total cost, tight control and efficiency in the supply chain are key for ensuring industry competitiveness. The economics of the industry have been quite profitable, with low labor costs and sufficient access to finance for the largest firms. The favorable climate along the equator (22°C–30°C during the day and 6°C–12°C at night) allows year-round production. The cost breakdown for a large farm (10 hectares) comes to 45 percent for production, 4 percent for postharvesting, 25 percent for transport and marketing, and 26 percent gross margin. For medium farms, the costs are 25 percent for production, 4 percent for postharvesting, 61 percent for transport and marketing, and 10 percent gross margin (figure 6.4). Labor costs are low for large and medium farms. Financing is provided by banks and development finance institutions. Kenyan exporters use letter-of-credit services on the domestic finance market, which includes major banks such as Barclays, Citibank, Commercial Bank of Africa, and Standard Chartered Bank. Small-scale growers struggle with finance, however. Kenyan flowers are sold in auction markets, which allow for speedy marketing and sale. There are four categories of buyers: auction houses, supermarkets, wholesalers, and florists. Most sales are arranged through