One favourite expression of affection is likely to become costlier this year. Karuturi Global Ltd (KGL), the world’s largest producer of rose buds, is planning to raise the prices of each stem by 15-20 per cent this year.
Having failed to raise prices in the past year despite a spurt in cost of production due to uncertainty in the global economic recovery, KGL has seen demand emerging from Europe, especially from Germany, the world’s largest consumer of cut roses. Hence, KGL is considering a price rise in tune with market demand.
“Prices may move upwards this year by at least 15-20 per cent,” said Sai Ramakrishna Karuturi, founder and managing director of the world’s largest rose plantation, spread over 300,000 hectares in India, Ethiopia and Kenya. The head office is in Bangalore.
Currently, the short cut rose is sold at 10 euro cents (Rs 6) per stem) while the large cut rose is quoted at 18 euro cents (Rs 10.50) per stem).
There has been a sharp increase in transportation cost, linked to oil prices. High labour cost is also forcing many European floriculture units to close operations. Several floriculture producers in Spain have converted their rose farms into holiday villas, leading to the growth of newer floriculture hubs across Latin America, Africa, and Asia, including in Ethiopia, Ecuador, Colombia, India, China, Kenya and Tanzania.
Demand has risen faster than supply, pushing prices up. The average US cut rose price increased from $0.377 per stem to $0.430 per stem in the past year.
Recently, the demand for cut roses has re-emerged from European countries, especially from Eastern Europe and the United Kingdom after over a year of lull. Hence, a price rise is imminent, said Karuturi on the sidelines of a seminar organised by ICICI Bank here on Wednesday.
Europe contributes about 80 per cent of the company’s annual turnover of over Rs 500 crore. KGL is the global leader in cut rose production, with a current capacity of 650 million stems a year. The company is implementing a plan to raise annual capacity to a billion stems. Most of the production comes from Ethiopia and Kenya, due to favourable climate, support from the government, a tax advantage given to these countries, proximity to the European markets, availability of land and, above all, cheap labour.
Currently, KGL has 250 hectares (a ha is 2.5 acres) under cut rose cultivation of which 174 ha is in Kenya, 70 ha in Ethiopia and 10 ha in India.
The government of Ethiopia has allocated 450 ha to the company and they are planning to bring all these under cultivation in the next two to three years. The company has another 311,700 ha in Ethiopia and Kenya and it plans to use these for other agricultural forays over the next two years.
The sales target is Rs 2,500 crore by financial year 2011. Karuturi sees no further need for land acquisition in African countries: in the past decade, land prices in Ethiopia and Kenya have surged. The global cut rose business, now $70 billion, has been growing at 10-15 per cent for the past two years and this pace is likely to continue, he said.