Greenhouses A Blue Ocean Case Economist Agricultural Business Summit - - PowerPoint PPT Presentation

Embassy of the Kingdom of the Netherlands in Greece

Market Opportunities in the Greek Sector of Fresh Vegetables & State-of-the-Art Greenhouses A Blue Ocean Case

Economist Agricultural Business Summit Thessaloniki, 8 December 2015

Embassy of the Kingdom

• f the Netherlands in

Greece

Embassy of the Kingdom of the Netherlands in Greece

Local supply deficit cannot fully meet the increased levels of domestic consumption, creating thus a market gap historically serviced by imports

KANTOR Management Consultants Year-1 Year-0

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Growing period Harvesting period Growing period Harvesting period

Tomato cultivation period over the year

Peak of demand

Open-air OR Local-style Greenhouse** – Double Cultivation

Idle period

1 FAO 2 Interviews with sector expert 3 Greek Statistical Office

** Open-air cultivation and local-style cultivation are grouped since both ways are tightly bound to the climate condition, even though the one is considered greenhouse cultivation and the other is not.

Double cultivation of Tomatoes over the year2

• 30
• 20
• 10

10 20 30 40 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Trade Balance Imports Exports

Key Points

• During the summer months “Greek salad” becomes

the salad of choice for the tourists that visit Greece, which increases consumption and creates the urge for further vegetable supply.

• The peak of demand coincides with the peak of

tourist arrivals and domestic demand peak for “Greek Salad”.

• Open-air or Local style greenhouse production fails

to satisfy the increased demand.

• Average vegetable supply is a good indicator of the

average vegetable consumption per capita (this method does not diversify processed from fresh vegetables). 2 Tomatoes trade balance (‘000 tons) 1

Spain 150.68 49.82 (33.06%) 100.86 Italy 163.49 12.89 (14.27%) 77.42 Belgium 125.99 26.28 (20.86%) 99.71 73.02 89.52 16.50 (18.43%) 90.31 Netherlands Germany 54.89 (33.57%) 108.60 Greece 252.46 103.89 (41.15%) 148.57

• Avg. Tomato Supply
• Avg. Rest Vegetables Supply

Average Annual Total Vegetable Supply* per Country1 (in kg/capita)

*Total Vegetable Supply = (open-air + greenhouse) production + Imports - Exports

Embassy of the Kingdom of the Netherlands in Greece

Favorable climatic conditions, lead to superior quality of local products, and demand less energy requirements for greenhouse type of cultivation

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1 Hellenic National Meteorological Service 2 “Tomato Plant culture in the Field, Greenhouse and Home

Garden”, Jones, 1999.

3 Agricultural ministry of Cyprus

Key Points

• Tomatoes and cucumbers are vegetables

that require high temperatures and extended sunshine.

• For

the case

• f

tomato,

• ptimal

temperatures coupled with extended sunlight contribute to the improved development of crop characteristics such as red color, firmness of the exterior and more “intense” taste; characteristics that signal higher quality2.

• In Greece, It is possible to grow tomatoes in

the field 2 periods within a year.

• For the case of cucumber optimal climate

conditions contribute to the size of the crop, taste and growing time3. 2

5 10 15 20 25 30 Dec Nov Oct Sept Aug Jul Jun May Apr Mar Feb Jan Jan

• Avg. Monthly Temperature in northern European countries
• Avg. Monthly Temperature in Greece

Growing period for Greece 5 10 15 20 25 30 Jan Dec Nov Oct Sept Aug Jul Jun May Apr Mar Feb Jan

• Avg. Monthly Temperature in northern European countries
• Avg. Monthly Temperature in Greece

Process of reaching optimal temperatures through technical means (e.g. greenhouses)

Optimal growing temperature for tomato cultivation – average monthly temperature1 Optimal growing temperature for cucumber cultivation – average monthly temperature1

Embassy of the Kingdom of the Netherlands in Greece

KANTOR Management Consultants

The attractiveness of the sector as determined by labor, energy costs and capital needs is improving

0,045 0,040 0,035 0,030 0,025 0,000

• 7,3%

2015S1 0,032 0,029 0,020 0,027 2014S2 2014S1 2013S2 2013S1 Comparison of Prices for Natural Gas Consumption1 (in EUR/kWh)

Key Points

• Minimum wage has been significantly reduced since

2012 and remains at this level still.

• Natural gas energy costs have exhibited considerable

decline over the past period, converging to the other southern Eurozone countries’ value.

• The total capital expenses are determined not only by

the size of the construction, but also by the level of desired segmentation* within the greenhouse.

CAGR of Greece

3

1 Eurostat 2 Interviews with sector experts

684 684 684 877 863

• 22.00%

Minimum wage 2015 2014 2013 2012 2011 2,000 1,500 1,000 500 2,000 1,200 Range of Investment for State of the Art Greenhouses2 (‘000 EUR/hectare) Progress of Minimum Wage for the period 2011-20151 (in EUR/month) Spain Italy Romania Turkey Greece

*Segmentation is defined as the area within the greenhouse that offers total climate control. A segmentation process is followed in cases of cultivation of different crops, radical changes in the greenhouse’s climate, etc.

Embassy of the Kingdom of the Netherlands in Greece

The attractiveness of the sector is enhanced due to the low degree of penetration of State of the Art investments

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Total cultivated fields of Greece1 (in hectares)

1 Greek Statistical Office 2 Interviews with sector experts

* 2014 numbers are estimates

Key Points

• Total Greek cultivated area has

been more or less steady.

• Fields

that are cultivated with vegetables (e.g., tomato, cucumber, eggplant, etc.) account for around 3% of the total cultivated fields in Greece.

• Greenhouse

vegetable fields represent a small percentage of the total vegetable cultivated areas (4.5%

• f

the total vegetable cultivated area).

• State
• f

the Art greenhouses represent a tiny fraction (1%) of the total greenhouse cultivated area (i.e., 50.9 hectares).

• This type of investments took place
• n 2007 and afterwards, due to the

liberation of energy production on 20062.

3,649,453 5,177 (0.14%) 89,380 (2.45%) 3,554,896 3,676,610 5,075 (0.14%) 93,502 (2.54%) 3,578,033 3,708,030 5,137 (0.14%) 105,359 (2.84%) 3,597,534 3,697,600 5,032 (0.14%) 105,197 (2.85%) 3,587,370 3,722,200 4,937 (0.13%) 106,958 (2.87%) 3,610,305 2010 2008 2012 2014 2006 Greenhouse vegetable cultivated fields Vegetable cultivated fields Other cultivated fields

4

50.9 Other* 5.0 Sum 45.9 2014 1.0 2013 10.1 2012 2.3 2011 1.5 2010 0.0 2009 11.0 2008 10.0 2007 10.0 Rest Greenhouses 99% State of the Art Greenhouses 1%

Timeline of major State of the Art greenhouse investments2 (in hectares)

*Investments noted as Others refer to 2 investments with unknown date of start of operations as State of the Art greenhouses.

Embassy of the Kingdom of the Netherlands in Greece

State of the Art Greenhouse investments are driven by entrepreneurial spirit, extensive know-how and holistic enterprise management

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Know-how

• Technical support in the operation of the highly

sophisticated technological systems that State of the Art greenhouses employ is considered vital for its

• ptimal production.
• Both international and local companies can offer some

assistance to that end ensuring production with the minimum possible disturbance. 5

Name of Investment CAPEX (in m. EUR) Starting Year Name of Investment CAPEX (in m. EUR) Starting Year 1 Agritex 32 m. 2007 5 Elastron Agrotiki & Spata 1.9 m. & N/A 2014 2 Wonderplant 22 m. 2008 6 AGAN – Greek Tomato 2 m. 2013 3 Drama Greenhouses – Greek Peppers 20 m. 2009 7 Tsahalos S.A. N/A N/A 4 Thrace Greenhouses 2.3 m. 2014 8 Tampakis S.A. N/A N/A 5 Savvidis Greenhouses N/A 2013 10 Tommaccini – Greek Greenhouses 2 m. 2011

Holistic Management

• The complexity of a State of the Art greenhouse exceeds

the level of technology applied, to the total management of the crop.

• Issues such as crop cultivation, packaging, labelling and

distribution are part of an integrated management process, which is not restricted simply to technological know-how.

• Both international and local companies assist greenhouses

in their operations for 2-3 years and disseminate the knowledge to the management of the operation.

2 3 Entrepreneurship

• Entrepreneurs who have participated in State of the Art greenhouse investments are often professionals with experience in different

sectors than the agricultural, let alone greenhouse, one.

1

Embassy of the Kingdom of the Netherlands in Greece

The dynamics of the State of the Art Greenhouse sector is highlighted in the following analysis

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6

Substitutes

• The general public is unaware of the quality
• f greenhouse crops.
• Open-air cultivated crops are more appealing

due to their lower prices.

• On the other hand, greenhouse crops are

available all year round, thus being the only

• ption when the market gap is apparent.

New Entrants

• Barriers of entry almost non-existent.
• In absence of “critical mass”, new entrants

will be incentivized to enter the sector.

Suppliers

• Every kind of raw materials can

be purchased by an extensive pool of suppliers.

Customers

• In absence of “critical mass”,

major retailers are seeking the deals with State of the Art Greenhouses, which would provide them with standard and high quality of fresh vegetables, all year round.

Rivalry of Competitors

• Due to the market gap and export
• pportunities, there is still “room

to grow” for existent players, thus rivalry is not so fierce.

Strong Threat Moderate Threat Weak Threat

• Opportunity for new entrants

Embassy of the Kingdom of the Netherlands in Greece

The case of Greece for State of the Art Greenhouses provides remarkable investment opportunities that strategic investors can exploit through certain developmental pillars

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Domestic Consumption Production

• Advanced quality of crop

due to extended sunlight and superior weather conditions.

• Lower personnel expenses

than northern European and other Eurozone neighboring countries.

• Potential for achieving

significant energy cost savings due to better weather conditions and use

• f geothermal fields.
• Leading internal

consumption among European countries...

• … which is enhanced by the

influx of tourists during the summer months and the increased popularity of the branded “Greek Salad” product.

• In the absence of critical

mass, local supply does not meet the local demand and imports are considered. Intangible Assets

• Entrepreneurial zeal shifts

the attention to State of the Art greenhouses.

• Know-how providers

educate the entrepreneurs

• n the technical details.
• Holistic management

services eliminate divergences in production

• utput and assist in faster

execution of the learning curve.

7

State of the art greenhouse investments

• Form and participate in joint venture

investment schemes with

• ther

greenhouse local players.

• Perform own investments in the Greek

vegetable greenhouse industry.

Greenhouse know-how & technology expertise

• Provide

support, advice and assistance for the creation of new local State

• f

the Art greenhouse implementations and critical mass vegetable production.

Export growth and access to major European markets

• Identify

international market

• pportunities and enhance relative

exporting marketing activities.

• Provide support to the international

logistics operations.

2 3 1

Developmental Pillars

Financing

• New financing

instruments via European Programs 2014 – 2020.

• Increased

possibility for Greece to attract European funding.

Embassy of the Kingdom of the Netherlands in Greece

Η αναλυτική μελέτη που ανετέθη στην Kantor από την Πρεσβεία της Ολλανδίας στην Αθήνα, μπορεί να αναζητηθεί στη: Πρεσβεία της Ολλανδίας στην Ελλάδα http://greece.nlembassy.org/ Υπουργείο Οικονομικών Ολλανδίας https://www.government.nl/ministri es/ministry-of-economic-affairs

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The full body of the study, which was commissioned to Kantor by the Embassy of the Kingdom of the Netherlands in Greece, can be found at: Dutch Embassy in Greece http://greece.nlembassy.org/ Ministry of Economic Affairs of the Netherlands https://www.government.nl/ministri es/ministry-of-economic-affairs

Thank you