Supply regulation
From Tuesday 24 March 2020 a temporarily new supply regulation was in force for the clock supply. Based on the volumes for 2019, this regulation provides clarity about the maximum daily volume that may be supplied to the clock. Supply regulation to be phased out as from Wednesday 29 April 2020.
Based on current insights, we have concluded that Royal FloraHolland will start phasing out the supply regulation as of next week. We introduced the supply regulation for the clock last month as an emergency measure, to be able to continue our business operations and limit the flow on the clock.
Phase out supply regulation
We see that the number of unsold flowers and plants has slowly decreased, partly thanks to the supply regulation. However, there are still major differences between markets and product groups. We realise that we are certainly not back to pre-crisis levels, but we see that several product groups are recovering. RFH must therefore start to phase out the supply regulation as from Wednesday 29 April 2020. The background and details of the further phasing out are discussed below.
Why phase out the supply regulation?
We operate within the Competition Act, which is based on European regulations. Restricting supply is only permitted in exceptional situations, because of the disruptive effect on the market. As an emergency measure, we have temporarily introduced a supply regulation to limit the extreme percentage of unsold flowers and plants. As we see the percentage of unsold products is decreasing for a number of products, we will phase out the emergency measures step by step.
How will the supply regulation be phased out?
Stopping the supply regulation will be considered per product group. We will continuously gather information about the market situation of a product from the FPC's (via the chairman), the auctioneers and from the market. To determine whether we can continue the supply regulation for a particular product within the applicable regulations:
- We compare the current volumes, both through the clock and through direct sales, with the volumes sold through the relevant channels in a comparable period last year. The closer the volumes sold are to last year's volumes, the more reason there is to phase out the supply regulation. In that case we assume that an extreme percentage of unsold flowers and plant will not happen.
- In addition, we look at the percentage of unsold products of a product group in recent weeks compared to the same period last year. The higher that percentage, the more reason there is to keep the supply regulation for a longer period. If we expect extreme quantities of unsold products, we can temporarily continue or reintroduce the supply regulation for that specific product group.
We adopt a step by step approach for phasing out the supply regulation, taking the circumstances of a product group into account as far as possible.
The aim is to phase out the supply regulation within the coming 5 weeks, depending on market conditions. As of Wednesday April 29th, the scheme already expires for Alstroemeria, Amaryllis, Balcony & Terrace Plants, Tree Nursery Products, Seasonal Flowers, Summer Flowers and Tulips.
The FPC's will be informed via the chairman of the decisions in this respect, including an explanation of the background of the decision.
Auctioneers responsible
We always keep a close eye on market developments. Decisions on the criteria for discontinuing supply regulation have been taken by the CMT. As indicated, we inform the FPC's via the chairman. The auctioneers remain responsible for the implementation of the regulation.
We are aware that stopping supply regulation on the short term, can lead to an imbalance in supply and demand for a product group. RFH will continue to carefully monitor market developments. If extreme situations reoccur, RFH may decide to temporarily introduce the supply regulation again for certain product groups. We ask for your understanding. We will do our utmost to get through this difficult time together as well as possible.
