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How Honduras developed exports of artificial flowers.

HOW HONDURAS DEVELOPED EXPORTS OF ARTIFICIAL FLOWERS

Artificial flower exports produced by 360 women in seven rural communities in southern Honduras came to US$120,000 in 1988 and $300,000 in 1989. They are expected to reach the $500,000 mark this year and surpass $1 million in 1991. In addition to contributing to overall foreign exchange earnings, these exports have supported the country's rural development activities, in particular its efforts to generate employment in rural areas and to use the potential that exists among women in this sector. The way in which these exports were developed, including the problems encountered and how they were overcome, may provide ideas for other developing countries considering export-oriented rural development activities.

A new product

Honduran exports are mainly rural based. Traditional exports are coffee, bananas, sugar and beef. Among the nontraditional exports developed in recent years have been handmade, artificial flowers, which were introduced in the country in 1975 when a handicrafts specialist working for the Ministry of Labor taught several groups of Honduran women to manufacture them. The flowers had the advantage of using raw materials readily available in the countryside: vegetable glue, crepe paper, fish scales, thorns, seeds, flower sepals and locally manufactured tie wire. They also were an attractive product from the overall development point of view because they involved rural women who could do this work in their homes. Although some groups of women in urban centres were among those who initially learned the craft, those groups ceased to exist after a year or two.

By 1978 only a few rural groups in the villages in the Sabanagrande area (about 50 miles from the capital) continued producing artificial flowers. (The Sabanagrande area is in the arid southern region of the country, where agriculture is on a subsistence level.) They sold them in the streets and in a local marketplace, as well as in downtown Tegucigalpa. To bring their flowers to the market in Tegucigalpa the women had to take a five-hour van ride (leaving at 4:00 a.m.). They then had to sell their flowers by 1:00 p.m., the last ones at any price, in order to catch the van back to their villages the same day.

Some attempts were made to export these flowers. A local businessman, working with 50 women from two of the villages, started an export venture to the United States that led to sales approaching $20,000 in 1979. However as he did not exercise sufficient quality control, the flowers became infested with insects and, in some cases, came apart at the joints when they reached the U.S. retail stores. The export effort was soon discontinued, and the producing groups began to disband.

Developing exports

The production skills remained, however, and the Government decided to take steps to develop the flowers into viable export products as one means to provide employment to rural women in the area and stem the migratory pressures towards the cities. The Ministry of Economic Affairs and Trade asked ITC to include these flowers as one of three product groups in a new export development project to be carried out in the country, financed by the Government of Switzerland.

One of the initial activities to develop these exports was to analyze the supply and demand situation. According to a 1984 survey undertaken by the General Directorate of Foreign Trade in conjunction with an ITC product development adviser, 190 women in the area were still able to produce the artificial flowers, and a few were continuing to do so for sales on the local market.

To assess demand among foreign buyers, an ITC marketing consultant and a Honduran official carried out a market survey in the eastern part of the United States. The study showed that the product life cycle of the flowers as they were currently designed had come to an end-small orders could be obtained, but only at very low prices. Product adaptation was therefore required.

To help relaunch the product, a designer was hired to carry out extensive product adaptation to comply with tastes in the U.S. market. An entirely new line of artificial flowers made from corn husks was created. Market tests showed that substantial demand existed for these flowers combined into wreaths and garlands, which fit into the "Southwest style" in vogue in the United States. The design was produced to go along with a trend in that market for wooden furniture with a whitewash finish. The texture of corn husks, their feel and even the pattern fit perfectly with that fashion.

Into the marketing operation

What was now needed was a channel for marketing the flowers. The project staff approached a local export firm that had been successfully selling pottery and earthenware, metal products, leather accessories and straw products to the U.S. market. The firm agreed to begin adding the redesigned flowers to its export line.

In the 1987 trade shows in the United States, the firm met buyers from giftware showrooms, wholesalers and large retailers. About 30 buyers expressed an interest in the artificial flowers and placed orders for around $120,000 (FOB value) to be delivered in 1988. The marketing effort was therefore off to a good start, provided that the orders could be filled according to schedule.

Training in producing the new line took place under the supervision of a woman from Sabanagrande. To fill the orders in an efficient manner, it was necessary to organize the women into groups again. This task was coordinated by the Chief of the Promotion Department in the General Directorate of Foreign Trade, who joined the project as its adviser on joint export groups.

Coping with difficulties

Just as exporting was beginning to get a solid footing, a setback occurred in the supply of raw materials for the flowers. The May to December period is usually the rainy season in Honduras, but in 1986 a severe drought hit the southern part of the country during those months. This reduced the artisans' supply of corn husks for the flowers. To make matters worse, in June 1987 torrential rains flooded the fields around the villages, and a locust plague occurred, which further reduced the small corn crop.

The Ministry of Natural Resources and the firm involved in exporting the flowers scoured the country to find hand-processed corn for husks to make the flowers. (Mechanical separation of the ear of corn from the husk damages the latter and renders it useless as raw material for handicrafts.) It is not surprising that suitable husks were found only in villages that were nearly inaccessible, where modern equipment had not yet been introduced. Once sources were located, the export firm set up a network to collect the husks.

Problem of storage

Another problem also had to be overcome for exports to operate smoothly, that of storing the raw materials and finished flowers. The houses of the groups' presidents, or those of a group member located near a road, were initially used as storage areas. But some of these families had to keep stocks of the artificial flowers for periods as long as a week at a time. This was a considerable inconvenience, particularly since many of the families concerned were quite large.

This problem is now being solved by the construction of gathering centres. Contributions from various organizations, as well as from a local manufacturer in one case, have been used to build these centres. One was recently inaugurated, and the others are in different stages of construction.

The concept of central gathering locales has proven vital to the success of the export operation. By receiving the husks and other inputs together at the centre, the groups standardize their raw materials. The exporter advances money to the women in the form of corn husks, and the women pay back with a part of their production. They receive the rest of the payment in cash. The gathering centre is also the collection place for the finished products. The exporter's truck passes by each centre at a prearranged time, picks up the items after careful quality control, pays for them and sometimes places new orders for the following weeks.

In addition, the gathering centre is used as a place for training, where the designers create new lines and train the artisans the required skills. Topics such as small business accounting are taught in these locations as well.

Transport

Another aspect of the export operation that had to be looked into was transport. Although air transport is a quick way to get the products to the U.S. market, and also an inexpensive way, since handicrafts qualify for the lower commodity rate, the cargo space available is limited by the number of cargo planes and by competing shipments of other types of goods that pay higher air cargo rates. Overland transport to the U.S. market is out of the question because of restrictions on the passage of foreign trucks in countries en route to the market. Sea transport via container is thus the main alternative. However, since the flowers are a light-weight, high-volume item, a small amount takes up the entire container and transport becomes expensive.

The solution was to find an exporter of some other product who was having problems with the transport's other dimension: weight. An ideal case was found, that of a manufacturer of marble furniture who could fill up only a small portion of the space in a transport container because of the weight limit per container load on the country's paved roads. If the two exports were combined in one container, the marble furniture company could use one quarter of the container's space and 90% of its weight allowance, while the flower exporter could use three-fourths of the space and 10% of the weight, with both of them making savings. Negotiations are now underway to finalize these arrangements.

Refining distribution

Exports of the flowers have continued to grow since the first orders of the redesigned product were placed in 1987. An increasing number of retailers in the U.S. market have begun to request the flowers, partially as a result of interest generated through participation in the annual New York Gift Show. Prestigious companies in the market have even printed their own catalogues showing the Sabanagrande products. Nevertheless, although the number of foreign buyers has been growing, the size of the operations of the newer clients has tended to be smaller than that of the initial customers. Some of the new buyers are not importers and are interested only in buying from a supplier in the United States who could guarantee delivery.

The export firm therefore decided to follow up one of the project's recommendations regarding channels of distribution - it has now begun to enter the U.S. market direct through an associate company in Miami that is run by one of its own former employees. From this location, airfreight containers from Honduras are broken down into smaller orders for the independent retailers. The larger chains in the U.S. market continue to receive their product direct from Honduras.

Future plans

The next export markets that will be approached will be in Europe. Approximately 400 to 500 more women will be incorporated into the production activity for this purpose. This will increase output capacity to a level targeted at around $1.3 million for 1992. A Honduran designer was recently hired under the project to make seasonal adaptations to the original flower designs. Her work will support the other designer who has been involved in the project in the next revamping of the line, as preparation for market expansion and diversification. When expanded as planned over the next year or two, the export activity is expected to generate a steady income for 800 to 900 women representing families totalling about 5,000 people.

Factors in the success

Three main elements have been decisive in the success of this project: design, cooperation and patience.

Design, as an element of product adaptation, was introduced in the early stages of the project, which is important in such an export market development exercise. A designer who was in close contact with the market was able to spot the proper "niche" for the products. He then trained the artisans to make the newly designed product with as little waste of the raw materials as possible.

Cooperation, another important element, has also been an important factor for success. This has taken place at all levels - with other international organizations, Government ministries, local village officials and the business community in the country. These have all provided support to the project in various ways.

Patience is a third key factor. The project took a long time to show concrete results. It started in 1984, but the first steady exports were not secured until 1987. Patience has been particularly evident on the part of the artisans who, for 13 years, waited to see the fruits of their labour. Although further efforts are needed before the export operation will reach its full momentum, the export results to date show that their patience paid off.

PHOTO : Above, women producing the artificial flowers. Below, examples of the finished product.

PHOTO : Gathering centres have been vital to success. Above, inauguration of one of the centres.
COPYRIGHT 1990 International Trade Centre UNCTAD/GATT
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Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Author:Caldera, Norman J.
Publication:International Trade Forum
Date:Jan 1, 1990
Words:2210
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