Business Partnerships for Global Goals COVID-19 Vulnerable Supply Chain Facility Business Partnerships as a Force for Good Learning Series
How sea freight offers the Kenyan flower industry an opportunity for greener trade growth and increased employment
Case Study
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September 2021
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Contents Message from the Project Director, Business Partnerships for Global Goals
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1. Executive Summary 1 2. Background 2 3. The Challenge 2 What happened in the Kenyan flower sector when COVID-19 hit? 4. The Opportunity
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5. Achievements 3 Trained farms to adapt to sea freight requirements 3 Delivered equivalent quality to air freight 4 Proven commercial viability and cost savings 4 Piloted a green solution 5 Created ownership and inspired industry-wide collaboration 5 Safeguarded businesses and jobs 6 6. Recommendations for the future of Sea Freight
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Message from the Project Director, Business Partnerships for Global Goals Kenya is typically the third or fourth largest exporter of cut flowers in the world. 48.6% of the Kenyan flowers landed in the Netherlands, followed by 14.7% reaching the UK in 2018 (OEC 2018). The Kenyan flower industry is one of the country’s largest employers, generating over $1 billion in annual revenue and employing over 150,000 workers, the majority of whom are women. COVID-19 was not only a health shock but also a major disruption to the global trade and economy. The flower sector was hit hard. The measures adopted globally to curb the pandemic led to demand reduction, impacting trade, pushing thousands of Kenyan flower sector workers out of job. This was exacerbated by the lack of available air freight capacity, which dropped by up to 40%, remains low and continues to be increasingly costly. In order to test and scale responsible and inclusive business initiatives in partnership with the private sector with a focus on improving lives, incomes and access to jobs as well as markets for the poorest and most marginalised people, Business Partnerships for Global Goals programme, funded by the Foreign, Commonwealth and Development Office (FCDO) UK set up the Vulnerable Supply Chains Facility. One of the projects co-financed by the FCDO and private sector partners set out to test alternative, greener and more cost-effective trade routes for exporting flowers from Kenya to UK and Europe. After 12 months and 13 shipments, 5 million stems were sea freighted from Kenya, which helped show case how sea freight could be a viable option being cost effective, environmentally friendly and helps retain jobs for the workers. The workers have learnt new skills in the process. The wider industry has adopted the model, shipping one container per week since May 2021, without FCDO co-financing. Some of our horticulture producer partners have expressed interest in lessons learned as they see a huge opportunity to adopt this model for sea freighting vegetables and fresh produce from East Africa. I am delighted to share the experiences of this successful project in this case study which is published as part of our Business Partnerships as a Force for Good Learning Series. This case study collates and documents the pilot, the results from the trials, stakeholder inputs as well as the potential for growth and job creation for the Kenyan women and men. This case study is complemented by a separately published business case which sets out the technical, environmental, social and economic case of adopting sea freight for exporting flowers leading to sustainable development impact. I would like to thank all our partners including Ian Michell (Flamingo), Jeroen van der Hulst (FlowerWatch) and Ian Finlayson (PSI) as well as representatives of the Flower Hub, IPL, XPOL for their continued commitment to the project. I also thank Raania Rizvi, Kate Cooper, Rdana Crhova, Rob Hale, Rachael Flaherty from FCDO and Dharmini Shah from Department for International Trade for their steer and support. Special thanks to Jane Marriott (British High Commissioner to Kenya) for her interest in the project. Lessons learned from this project can pave the way for greener and more cost-effective trade routes for not only Kenyan flowers but also other products enabling trade led growth for the most vulnerable women and men across Kenya and Africa.
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1. Executive Summary The Vulnerable Supply Chain Facility (VSCF) supported a 12-month project to test the viability of sea freight transportation of Kenyan flowers to the UK and Europe. The project aimed to help the Kenyan flower industry recover from the devastating loss of air freight transportation of flowers to Europe during COVID-19 and protect the livelihoods of flower farm workers, farmers, and suppliers. The project successfully trained 18 farms to adapt to sea freight requirements enabling thirteen containers filled with flowers to be shipped from Kenya to Europe. Tests demonstrated that sea freight could deliver comparable quality to air freighted flowers and further analysis showed that it was cheaper and a reduces carbon emissions by 84 - 95%.1 The Kenya flower industry has already shown strong signs that it will continue to drive the uptake of sea freight: a group of flower exporters is now organising weekly container shipments. The principle challenges to scaling up sea freight are logistical – it will take time to improve the necessary cold chain infrastructure and regularity of containers available. Over 200 farm representatives attended a virtual training session on sea freight in April 2021 and half of them stated that they intend to use sea freight in the next 12 months. The opportunity to use sea freight alongside air freight increases the flexibility and resilience of Kenyan flower farms, which in turn protects jobs and livelihoods for workers and farmers in the industry. An economic analysis of the potential economic benefits from using sea freight estimates savings of $35.5m and $89.5m over five years for conservative and optimistic scenarios.2 A corresponding increase in jobs of approximately 2,500 and 5,000 respectively over five years is forecast based on sea freighting flowers enabling greater volumes of exports and therefore faster expansion of Kenyan flower production.
“We want to be as ethical in our business as we can. We are therefore responding to the needs and ambition of consumers and our responsibilities to our environment and workers. Our growers are very excited about sea freight and believe it is the innovation needed for our business going forward. The crisis has exposed our ‘soft underbelly’; businesses are still vulnerable, and a number of workers have not returned to their jobs. We need to get back to 100% exports and full employment on our farms. We propose to be the No.1 cut flower producer in the world. We are aiming at export 50% through sea freight to help us do this." Clement Tulezi, Chief Executive Officer, Kenya Flower Council Flower worker preparing flowers for export Photo credit: Karen Smith, BP4GG
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Comparison of transport from roses from Kenya to the Netherlands by air and sea freight, Dr Adrian Williams, Cranfield University, May 2021. The business case for exporting cut flowers by sea freight from Kenya to UK/Europe, Business Partnerships for Global Goals, September 2021.
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2. Background The Business Partnerships for Global Goals (BP4GG) programme funded by the UK Foreign, Commonwealth and Development Office and managed by Mott MacDonald, invested in partnerships with businesses to test and scale shared value initiatives that support achieving the Sustainable Development Goals. The Programme pivoted its activities to respond to the challenges posed by COVID-19 on garment and agricultural sector workers and established the Vulnerable Supply Chains Facility (VCSF). The VSCF was designed to act as a rapid COVID-19 response facility partnering with 20 UK and international retailers and brands, and seven not-for-profit organisations, supporting over 100 suppliers in Africa and Asia. The purpose was to provide an immediate response to the economic, social, and health impact of the Pandemic for 1 million women and men and their families.
3. The Challenge What happened in the Kenyan flower sector when COVID-19 hit? The COVID-19 pandemic hit global supply chains hard affecting millions of workers across the globe. The flower industry is one of Kenya’s largest employers, generating over $1bn in annual revenue and employing over 200,000 workers, the majority of whom are women.3,4 The pandemic triggered a 25-40% reduction in air freight, rendering farms unable to transport their flowers to Europe. Flowers were harvested and thrown away, with a devastating impact on farms and workers, some lost their jobs or were told to go home/take annual leave. Kenyan flower farms continue to suffer from prohibitively high levels of air freight costs, increasing by more than 200% for some farms, leaving farmers needing an urgent solution for cost-effective transport to UK and European markets to protect businesses and keep workers in jobs.5
4. The Opportunity The 2013 publication by FlowerWatch funded by VGB showed that, in comparison to air freight, sea freight delivered carbon savings when transporting roses from Kenya to the Netherlands, but the ready availability of air freight, poor cold chain management and lack of shipping connections thwarted industry-wide implementation.6,7 At the start of the pandemic, poor availability and high costs of air freight led Flamingo International, in partnership with Practical Solutions International and FlowerWatch, to develop a project under the VSCF to reassess the benefits of sea freight. The project trialled sea freighting flowers from Mombasa Port to Europe between September 2020 and May 2021. The ambition was for flowers to arrive fit for market after transport times of approximately 30 days with a greener footprint than air freight 8. The sea freight team developed protocols for preparing flowers and set KPIs to ensure flowers could be sent via shipping containers and reach European markets. Farms were assessed for suitability and provided with recommendations to adjust times, temperatures, handling, processing, and packaging for sea freight transportation. The team brought together people across the flower industry, navigating across a complex supply chain. Importers, packers, transporters, shipping companies, consolidators and buyers collaborated to test the viability of sea freight as a low-cost supply chain solution to get flowers to the UK and European markets. Kenya’s Blooming Flower Industry - Africa Business Pages (africa-business.com) ⁴ Kenya Flower Council, kenyaflowercouncil.org ⁵ Costs increased by 200% from $1.8 per kg to $4 per kg. Shalimar Farm, Naivasha, Kenya. ⁶ A network of technical association of energy plant operators ⁷ The Kenya Dutch Sea Freight for Supply Chain for Roses 2013 study ⁸ The journey time during the trials varied between 28 at the shortest and up to 43 days due to shipping delays. The shorter journey times in general had superior quality, but rejection rates were still low at 45 days.
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5. Achievements The purpose of the sea freight flowers project was to test the viability of shipping flowers to the UK and Europe as a preferable alternative to traditional air freight. Within 12 months the project successfully:
Trained farms to adapt to sea freight requirements 18 farms were trained in new protocols, for example dipping flower heads and using new packaging. The farms quickly adapted to the new procedures and the modifications allowed for 10% more stems in a box, and 40% less packaging, thereby reducing the weight and cost of transit.
Flower heads dipped in a solution to control fungal decay
Flowers spend four hours in a post-harvest solution
Flowers are kept in a cold room overnight before being graded, packed and cooled
Packed in boxes developed for sea freight
Temperature logger used to track fluctuations during transportation
The various measures and steps taken to prepare flowers for sea freight transportation Photo credit: Karen Smith, BP4GG
In April 2021, over 200 farm representatives attended a virtual training session on sea freight hosted by the project implementation team. Feedback from the event was overwhelmingly positive with attendees commenting on the timeliness of sea freight as a viable option in the wake of the pandemic, and over half of them stating that they intend to use sea freight in the next 12 months.
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Delivered equivalent quality to air freight In 12 months, 13 shipments containing over five million stems were successfully shipped and tested for quality against air freight.
Sea Freight Shipments (50 tests/434 vases)
Air Freight (14 tests/210 vases)
Poor 11,9% Average 11,43%
Poor 16,36%
Very poor 8,7% Excellent 10,95%
Average 9,91%
Very poor 9,91%
Excellent 1,84%
Good 57,75% Good 61,98%
Proven commercial viability and cost savings The availability of air freight is projected to remain low due to the significant reduction in passenger aircraft and is currently 40-50% less than pre COVID-19 levels and prices remain over 20% higher.9 Farms have also experienced other increases in the cost of doing business: maintaining health and safety measures such as increased workstation spacing, for example, which reduces the volume of flowers that can be processed. One of the biggest opportunities for farms and exporters to increase profits and protect jobs is the potential sea freight offers to harvest and transport flowers while they are ‘cheap’, 4-5 weeks before major events such as Valentine’s Day, and for them to arrive when prices are high. For example, several times in peak periods in 2021 prices reached 3-5 times the usual price per stem.10 An economic analysis of the direct savings arising from the cost differential between transporting flowers by air and sea freight from Kenya to Europe is equivalent to 1 Euro cents per stem. This equates to direct savings of approximately $35.5m to $89.5m over 5 years for conservative and optimistic scenarios respectively.11 Farms can also expect to increase commercial value by ensuring the quality of flowers on arrival - a risk traditionally adopted by importers on air freighted goods. Sea freight offers farms the option of taking ownership of the quality of flowers travelling via sea freight, increasing their risk and their reward. The successful demonstration of the sea freight trial has given farms confidence to adopt the risk and reap the commercial rewards, future proofing farm businesses and creating “Up to 70% of our volumes could be sea expansion opportunties to benefit Kenyan workers.12 freighted if this becomes possible in future, If these benefits are shared equitably between growers with air freight used ‘as an emergency option’.” Carla Ulyate, Nini Farm, Kenya and importers, both can win from the opportunity.
As of July 2021. Low price to high price windows can provide $10-$21m in 5 years. Economic Analysis of exporting cut flowers by sea freight from Kenya to UK/Europe, Business Partnerships for Growth, September 2021. 11 The business case for transporting cut flowers by sea freight from Kenya to UK/Europe, Business Partnerships for Global Goals, July 2021. 12 Andrew Hardy, Shalimar flower farms and East Africa Growers Association. 9
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Piloted a green solution Shipping goods from Kenya to European shores emits less than 1/10th of CO2 carbon emissions of air freight 13. Sea freight offers an opportunity to maximise these emissions reduction benefits:
“A chance to reduce reliance on air freight to ‘green supply chains’…sea freight is seen as a winwin for de-risking supply chains and reducing carbon emissions” Sarah Oliver, IPL (global logistics company supplying Asda) UK and European consumers are increasingly demanding green products and eco-friendly practices in supply chains, which in turn has led many retailers to aspire to ‘net-zero emissions’ targets.14 This trend provides an opportunity for sea freight to act as the environmentally preferred choice for flower transportation.
“Currently air freight consumes 82% of our carbon footprint. As a company we have committed to be carbon neutral this year and support our suppliers to do the same by 2025. Sea freight offers a green solution to mitigate our carbon emissions as a company as well as ensuring the quality of our flowers." Ian Michell, Flamingo Horticulture Ltd (sourcing company)
Created ownership and inspired industry-wide collaboration The project faced several challenges including container unavailability, delays at Mombasa port, cyberattacks and the March 2021 Suez Canal blockage crisis. Despite these challenges, the project inspired unprecedented industry collaboration among competitors. Their shared commitment to testing sea freight as a viable alternative to air transportation has been critical to facilitating the pilot. As the project and its funding concludes, farms and exporters are continuing to pay directly for sea freight. The success of the trial project inspired key players in the supply chain (including XPOL and IPL/Asda) to work together and combine their Kenyan flower orders and secure one container a week to ship to European markets. Faster shipping routes are also being explored by exporters direct to the UK, from Mombasa port via Jeddah to Southampton. This route can be completed in 23-24 days - a considerable reduction in transportation time and maximising the quality of Kenyan flowers for the UK market..
“The transport cost of sea freight is currently too high. However, we have invested in how to do sea freight better by the end of the year [2021] and we want to learn. We need to be sure not to jeopardise the final consumer experience - it needs to work. Our competitors are doing huge volumes through sea freight. It is the future.” Tom Vermeer, Managing Director, XPO Logistics
Comparison of transport of heavy roses from Kenya to the Netherlands by air (52.518kg g CO2 Eq.) and sea and land freight (4.896kg CO2 Eq.), Dr Adrian Williams, Cranfield University, May 2021. Net zero refers to achieving a balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere. There are two different routes to achieving net zero, which work in tandem: reducing existing emissions and actively removing greenhouse gases.
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Safeguarded businesses and jobs The initial shock of the pandemic had a terrible impact upon flower farms and their workers. The move to sea freight has helped to secure thousands of jobs, by assisting flower farms to survive the disastrous consequences of the pandemic.15 A survey of participating flower farms found 80% felt sea freight would provide greater resilience to their businesses post COVID-19.16 This in turn will provide increased job security for existing flower farm workers and the potential to hire more labour should their businesses continue to thrive. The Kenya Flower Council predicts new employment opportunities for thousands of flower farm workers as a direct result of adopting sea freight measures. This new employment will be generated at the farm level from increase in production area, expansion of existing operations and from new entrants to the sector and includes the Kenya supply chain from farm through to export.17 Flower farms indicated that they would increase their use of sea freight if demand increased and the transportation process was streamlined. Long term order planning and guarantee of seamless connectivity to the market to avoid any delays is critical to strengthen and future proof the viability of sea freight.
6. Recommendations for the future of Sea Freight Horticulture is Kenya’s largest employer and third biggest foreign exchange earner after remittances and tourism, with the bulk of those earnings coming from flowers, ensuring long term sustainability and competitiveness in the flower industry is critical to the Kenyan economy and flower farm jobs.18 The cost of transport to UK and Europe is the most significant expense faced by growers in Kenya. If successfully developed, sea freight can make the Kenya – UK and Europe supply chain more competitive and improve profitability, thereby securing Kenyan jobs. The pilot project has demonstrated the viability of sea freight as the transportation of choice for flowers from Kenya to UK and European markets. If this impetus is maintained, sea freight volumes could be expanded to drive more regular and consistent shipments as successful as established refrigerated container shipments such as those operating from Colombia and Ecuador. The Government of Kenya can play a critical leadership role in supporting the infrastructure of sea freight as a sustainable and cost-effective means of transportation for the Kenyan horticulture industry. This can be expanded beyond fresh cut flowers to other perishable crops which Kenya can produce in abundance such as blueberries, avocados and bananas. To do this, effective sea freight transportation has to be made available by: •
Accelerating volumes: At current levels, if 20% of air freight was transferred to sea it would result in over 100 containers a week. An industry and government target to ship 50% of 2020 export volumes by 2030 would galvanise the sector and future proof the horticultural industry.18
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Business efficiencies across Government: Government agencies such as freight forwarders, shipping lines, Kenya Revenue Authority, Plant Health Inspectorate Service and Mombasa port authorities are supported to improve efficiencies in processing perishable produce for sea freight. This should include completing all relevant checks at the refrigerated container point of closure (Nairobi or Naivasha), avoiding re-opening the containers to ensure effective cold chain management. Supporting Kenya exporting agencies to digitise their procedures is one means of achieving this
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Cold chain capacity on Nairobi-Mombasa Standard Gauge Railway (SGR): The SGR is more cost effective than costly in-land road transportation in Kenya and can offer a more efficient means of transporting perishable items. This will require export processing at in-land loading points as well as cold chain management capacity on the trains to Mombasa port.
18 farms with c. 18,000 farm workers participated in the project. BP4GG Sea Freight project flower farm anonymous survey, 7 participating farms, September 2021. The business case for exporting cut flowers by sea freight from Kenya to UK/Europe, Business Partnerships for Growth, September 2021. 18 Pulse live.co.ke 15 16 17
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Position Kenya as a regional sea freight hub: There is regional interest from Uganda and Tanzania in using Mombasa port as a perishable handling hub for sea freight. The cost savings of sea freight also opens the possibility for Kenyan farms to export to Middle and Far Eastern destinations facilitate by short sea freight transit times.
The UK Government has a pivotal role to play supporting the Kenyan Government to prioritise sea freight as a cost-effective and lower carbon means of transporting flowers: •
Support scale and expansion: Trademark East Africa (TMEA), the not-for-profit Aid for Trade organisation, is close to committing to scaling the sea freight project in Kenya and expanding the pilot into the Ethiopian flower market. As a donor to TMEA, The UK government can support the initiative and engage the Kenyan government with project implementation.
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Collaborate with industry to deliver UK net zero emissions by 2050: UK supermarkets have committed to achieve ambitious net-zero emission targets by 2040 in line with UK government policy. As transportation is one of the highest emitting sectors in the UK, sea freight offers retailers a carbon efficient alternative towards successful achievement of the net-zero target. The British Retail Consortium leading the charge on this initiative have requested close collaboration with UK government to ensure these targets can be met.
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Leading global dialogue to reduce shipping emissions: Shipping is considerably better for the environment than air freight, but it still has a carbon footprint that can be improved. The International Maritime Organisation (IMO) has proposed a global commitment to reduce shipping emissions by at least 50% by 2050 compared to 2008. The UK government can support the IMO and take global leadership to enshrine the commitment into international law. COP26 is an excellent opportunity for the UK government to lead the global dialogue on reducing carbon emissions.
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VSCF Vision “To enable vulnerable people and supply chains to recover from and remain resilient to the economic and social impacts of COVID-19, by leveraging the reach and influence of responsible businesses through partnerships.”
VSCF Mission “To enable recovery and resilience from the COVID-19 pandemic by forming strategic partnerships with global businesses. Working within supply chains in Africa and Asia, we will test and scale approaches to provide additional health and safety support, increase incomes, safeguard jobs, and ensure continuing access to markets. We will support vulnerable people within supply chains to recover from COVID-19, and support responsible businesses to build on these experiences to become more sustainable.”
Business Partnerships for Global Goals is a UKAid funded programme implemented by Mott MacDonald, with support from Accenture Development Partnerships and IIED. We partner with UK and international retail brands, not-for-profit organisations, farms, and factories to provide economic, social, and health benefits to around 1 million vulnerable women and men impacted by COVID-19 in Africa and Asia. Mott MacDonald Limited. Registered in England and Wales no. 1243967.
