Saturday, April 13, 2024

Flower market of Ukraine survived three assassination attempts

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Pavel Kuliuk, ARR.News
Pavel Kuliuk, ARR.News
My name is Kulyuk Pavel Valerievich. Born in 1977 in the Russian Urals, but have lived all my life in European Ukraine. I graduated from secondary school No. 30 in the city of Lisichansk, Luhansk region. Then I studied at the International Institute of Business Management and Law in the city of Slavyansk, Donetsk region. I started my career as a grocery wholesaler. Then I started working as a marketer in a publishing house. I have been a journalist since 2007. The globalisation of the economy is the driver of my career growth. Being a journalist has become a way of life. Each reportage is a kind of journey to some topic and country. Heterosexual, in a civil marriage, no children. I love gardening and sports. I prefer a cosy home to beautiful travels. With respect and sincerity, Pavel.

Growing and selling flowers is a cool business. In this area, the income is as high as the risks. Therefore, only a few people can appreciate the taste of this mixture. In Ukraine, participants in the flower business are three times heroes. In 2014, the war with Russia began. Then, in 2019, the COVID-19 pandemic began. And in 2022, Russia invaded the territory of Ukraine. Over eight years, the business industry has experienced a catastrophic recession three times. Even so, the flower business continues to thrive. The love of Ukrainians for flowers is stronger than any problem.

The rose has become a symbol of the survival of the Ukrainian flower market

The Ukrainian market for cut flowers is US$250 million.1 About 150 million cut flowers are sold annually in the country.2 However, these are the maximum market indicators that are typical for a favorable economic situation. For the last 8 years this is a rarity for Ukraine. In 2014, due to the war with Russia, flower sales decreased by 58 per cent. By 2018, the market recovered 40 per cent of its previous volumes.3 But already in 2020, there was a new decline. The COVID-19 epidemic has been more devastating than the war. The largest market participants reported that flower sales decreased “several times”.4 Because of this, part of the flower plantations was liquidated. And some companies went bankrupt. The impact of COVID-19 on the market has not been studied. The epidemic didn’t end when Russia attacked Ukraine. This cut flower sales by 40 per cent.5 Statistical reporting has been disrupted because of the war. However, it is clear that the situation is very bad. Market volumes are less than US$100 million per year. Perhaps this value is only a few tens of millions of dollars. Importers of flowers to Ukraine report the closure of enterprises due to the reduction of the Ukrainian flower market.6

In the current situation, few types of business can be successful. Perhaps the most optimal is the cultivation and / or sale of roses. Rose is the most popular flower in Ukraine. This flower provides almost half of all sales. More than 60 million roses are sold annually in Ukraine. If a businessman grows a rose in Ukraine and sells it in bulk on the domestic market, then the income is 15-30 per cent.2 A businessman who grows roses and sells this flower at retail earns 85-100 per cent. If a flower shop owner resells roses, the income is about 70 per cent.*7 Businessmen who import roses and sell it in their retail stores make the most profit. This business scheme gives a profit of 200 per cent.8

Let’s be frank.  As of 2021, such a highly profitable sales scheme is difficult. The Ukrainian government has passed a law protecting national companies that grow roses.9 Prior to this, cheap imported roses crowded out those roses that were grown in Ukraine.10 In addition to the law, various administrative barriers reduce income from rose imports. For example, some large importers of flowers report that customs officials require several times the value of invoices. And this increases the amount of taxes paid. This cuts down on profits.7 That is, highly profitable rose imports remain a very difficult task. To run this business, a businessman needs a lot of capital and administrative resources. It is much more realistic to grow flowers in Ukraine and sell them wholesale or retail. Decisiveness, professionalism and luck can make selling flowers a happy ticket even in times of war.

The business lady answered the war with a bouquet of flowers

One of the entrepreneurs who decided to try such a business was Natalya Gordeychuk, the owner of the “Sady-Bakhmuta” company.11 The main assets of the business lady were in Bakhmut, Donetsk region.12 There Natalya’s family grew fruit trees, conifers and flowers. However, due to the capture of Bakhmut by the Russian army Natalia moved to the city of Dnipro. The woman, together with her husband, was able to evacuate some of the grown plants and open a flower shop in a new place of residence. She talked about how it happened in an interview.

Gordeychuk Natalia, owner of the business, ‘Gardens-Bakhmuta’ (C), and her sons, Nazar (L) and Ivan (R). Photos: Pavel Kuliuk

Tell us about your business

Natalya Gordeychuk: We started growing fruit tree seedlings in 1998. We started by laying a rootstock for 300 pieces of apple trees. At that time, we only knew how to properly plant this rootstock. Everything else was studied and mastered gradually. To do this, we consulted with experts and read the literature. When the war began, we grew seedlings of fruit and ornamental trees, shrubs, conifers and roses. We independently built a trading platform for the sale of plants right at the place of cultivation.

What happened when the Russian army approached Bakhmut?

Natalya Gordeychuk: We spent the entire summer of 2022 on our plot of land, completed all the necessary work, despite the increasing shelling. We hoped that our city would stand and the war would not come to us. At the beginning of September 2022, we still had to make a difficult decision for us. We decided to leave Bakhmut. We decided to evacuate not furniture and appliances, but our animals and at least a small part of the plants. We dug up our plants to the whistle of shells and the rustle of flying fragments on neighboring roofs. Arriving in the Dnieper, we rented a house.

How is life in the new place?

Natalya Gordeychuk: All winter we lived in shock without emotions and desires. With the advent of spring, when nature began to come to life, we also began to come to life. Life goes on and we must continue to live. We understand that we will not achieve what we have lost, but we need to somehow live on, and for this we need to do what we can. We analysed the demand for plants in the Dnipro and Dnipropetrovsk region. We concluded that there is a demand for plants, but there are very few offers. Therefore, we decided to open a flower shop “Flower Gallery” in the city of Dnipro.13 We are currently selling plants that we have evacuated from Bakhmut. We are also looking for new supply channels to expand the range of goods. Our sons help us in the family business. Ivan is 11 years old. Nazar is 8 years old. Boys change the water for the flowers. Clean up the store. They do it on their own initiative and desire.

What are the goals of the new business?

Natalya Gordeychuk: We hope that in the end we will sell our roses in our store. But so far we have no money to buy a new plot of land.

The enterprise “Gardens-Bakhmuta” in the pre-war period.

What would you like to say to Australian businessmen and politicians?

Natalya Gordeychuk: Turning to Australian politicians and businessmen, I would like to say that they put their efforts and opportunities to end the war in Ukraine as soon as possible. We don’t know how to ask. If any of the businessmen have the opportunity to help us restore the business, we will be grateful. My contact number is +380990057735

Details about flower stalls in Ukraine

In addition to Natasha’s shop, there are at least 6,000 flower shops and kiosks in Ukraine. Also, during various holidays, tens of thousands of people who want to earn extra money sell flowers. Often these people sell rare flowers that are protected by law. Picking these flowers in local forests and fields, people try replenish the family budget. This harms nature and the authorities fine people for such actions.14

There are no prohibited flowers in shops and kiosks. In a period of economic stability, the assortment of a regular store consists of 30-40 kinds of flowers. During the crisis, this figure is reduced to 15-20 items.15 During a crisis, sellers refuse exotic and expensive flowers. The demand for such flowers is very small. For example, these are orchids. Roses, carnations, chrysanthemums and tulips are characterised by the most stable demand. These flowers are sold in stores during any crisis.2

In any economic situation, imported flowers are of great importance for trade. In winter and spring, imported flowers make up about 80 per cent of the assortment in retail stores. In summer and autumn, imported flowers form approximately 50 per cent of the supply.3

Ukrainian legislation does not regulate prices for flowers.16 As a result, the retail markup varies greatly. The average value of this indicator is about 70 per cent. However, during the holidays, this value can reach 150 per cent.17 The markup on related products balloons, packaging or decorative ribbons is 50-60 per cent.18

Depending on the season, the store’s income can differ by three times! In some months, even a profitable store can be characterised by losses.18 At the same time, three holidays provide almost 30 per cent of annual sales. These are International Women’s Day (March 8), Valentine’s Day (February 14) and Knowledge Day (September 1).3

If everything is done correctly, then the payback of a flower shop is about one year.19 The cost of starting a business is highly dependent on the location and type of outlet. However, there is an average national price level. These are the values:

  • Internet shop – US$300,
  • Kiosk in the market or in the shopping center – US$3000,
  • Separate flower pavilion on the street – $5000,
  • Flower boutique – US$16,000-17,000.20

The cost of opening offline retail outlets takes into account the rent, not the purchase of premises. Is it a lot or a little? This can be found by comparing the cost starting a flower business with other indicators. For comparison, the average salary in Ukraine was US$433** from February to April.21 In February, the average national price of apartments in the secondary real estate market was US$657m2.22 At the same time, the average price of a used car in Ukraine was US$5,150.23 That is, the price of opening a flower business is quite comparable to the price of a used car. This is much cheaper than the purchase price of a home. A Ukrainian with an average salary can save up to open a kiosk or pavilion within two years. For this, a Ukrainian needs to set aside half of his earnings. As the example of Natalia shows, there are those who want to start a new business.

*This value does not include the retail markup for the holidays March 8, February 14 and September 1. Then the cost of flowers increases greatly, and sellers’ incomes grow.

** The dollar exchange rate is 36.94 hryvnia for 1 US dollar.




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