Distribution Channel options in International marketing

Chandrika Flora, a Pune-based firm had so far been a major supplier of roses to hotels
and other corporate in Mumbai. In view of its strong production capabilities, Chandrika
flora has set up green house facilities and is exploring the possibility of entering
international markets. The firm has no idea as to how to go about it. Therefore, Chandrika
Flora engaged Dr. Vidhu, an international floriculture marketing consultant, to explore
various channels to enter international markets. The excerpts submitted by Dr. Vidhu is
as follows.

The global trade of cut flowers alone is estimated to be US$ 7 billion and is dominated by
Europe, Japan and USA. Due to high cost of production in developed countries the trend
is to outsource flowers from developing countries where the cost of production is low.
India has an inherent advantage in floriculture production due to its favourable agro
climatic conditions, cheap labour.

India’s exports of cut flowers have grown consistently over the last decade. Roses
account for 95% of total cut flower exports besides lilies, carnations and orchids.
Netherland is the largest produces and exporters ( 54%) of flowers in the world followed
by Colombia, Ecuador, Israel, Kenya, Spain and Italy. The channels of international
distribution for flowers involve auctions, agents, exporters, wholesalers, local
wholesalers, purchase organizations, and retailers

Auctions:
The auction system is particularly used in the Netherlands and Japan. The growers try to
obtain the highest possible price for their products through the sales organizations and
cooperatives.

The Mediating Agency:

Mediates on behalf of sales cooperatives in direct sales between the producers and
wholesalers or retailers. The mediating agency is an outlet which is used by producers
and traders to guarantee sales.

Wholesalers:
The wholesalers perform the collection and the distribution functions. The collection
function consists of purchasing a wide range of cut flowers and plants, whereas the
distributing function consists of catering to the needs of clients. There are various types
of wholesalers viz. breeder/wholesalers( purchase, sell or auction flowers of other
producers to widen his own product range), Domestic wholesalers( who sell only to the
domestic wholesalers/ retail traders.), Cash and carry wholesalers( purchase and sell cut
flowers and plants in small numbers), exporters( supply wide range of flowers to foreign
florists, wholesalers and super markets), door to door wholesalers( who deliver to order.
Deliveries are made once or twice a day or even throughout the week )
Commission Agents/Importer:
Specialize in imported flowers, bouquets, painted flowers and/or sale of flowers
purchased at other auctions. The wholesale trade is in touch with its customers on a daily
basis. The personal relationship between the customers and the sellers is of great
importance in the flower trade. Sales in the wholesale trade takes place by telephone, fax,
internet or personal visits. The gross profit margins applied are 10- 15% for commission
agents and approximately 15% for other wholesalers. Deviation in the margins depend on
transport distances and customer needs. The whole sale trade is generally promoted by
means of trade fairs. Advertisements and trade names are hardly an issue in wholesale
trade and among producers.

Processing:
A wholesaler always bears it in mind that cut flowers and plants are perishable products
must be sold on the same day of purchase. The freshness of cut flowers is preserved by
means of storage in water, cooling of the storage halls. Purchased flowers are preserved
on the basis of market demand. The flowers ordered are then packed according to
customers” need and placed in boxes or in water. The water boxes or buckets are sent to
the customers as per their order via their own or a third-party transport.

Transportation:
Cut flowers and plants are transported by road, water, and air. Transport by air is used in
intercontinental deliveries. The importance of transport by air has increased over the past
years as a result of the increasing intercontinental trade in floriculture. A few airline
companies offer door-door services or have a branch of their own at important wholesale
markets or auction centers.

International supplies may be hindered by lengthy customs formalities, phytosanitary

inspections and hence fast clearance and inspection are required. In order to limit the
problem involved in Japanese market, Netherlands and Columbia have set up a pre-
inspection system and inspections takes place in Netherlands and Columbia before
products are supplied to Japan.

Retail Trade:
It is a link between the wholesaler and the consumer. The consumers can choose from
four types of retailers viz. Florists, Supermarkets, Street vendors, and Garden Centers for
purchasing cut flowers and plants. The market share which these four groups have in the
flower retail trade is different in different countries. Florists are firmly established in
Japan, Italy, USA and Norway. Super markets sell to many customers in Switzerland and
Denmark. In Spain, Italy and Netherlands sales via street vendors are substantial.

The importance of supermarkets in retail trade has been increasing, especially in

European markets, the USA, and Japan. The major supermarket chains dealing in cut
flowers include the Swiss CO-Op. German Aldi, the Dutch Albert Heyn, the French
Carrefour, the Swiss Migros, and British Sainburys and Marks & Spencer.

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In Europe and Japan, the retail trade uses personal sales method. In the USA, in the other
hand, people are more familiar with the sales of cut flowers and plants by telephone. In
telemarketing a courier delivers the requested flowers to the desired address.
Telemarketing is mainly concerned with the gift segment.

Consumer segmentation:
Consumers can broadly be divided not two types: Individual/households and institutional.
The latter group includes government institutions, hotels, and other non-profit businesses.

After making the presentation Dr.Vidhu left the decision to Chandrika Flora’s
management.

Action Plan

Your group represents different departments of Chandrika Flora (Distribution,

Marketing, Business development and Exports) based on the information given by Dr.
Vidhu what suggestions would you put forward to the management and what plan B if
your first recommendation is rejected by the management