Taiwan Today

The orchid has always had a unique place in ethnic Chinese culture. In addition to its wide diversity of intriguing shapes and fascinating color combinations, the flower has been extolled in the works of Chinese literati as a symbol of the moral excellence of a man or the beauty of a woman, and some types of orchids have long been used in Chinese herbal medicine. For many centuries, however, growing orchids was an activity limited to a small group of dedicated hobbyists. That situation persisted in Taiwan until around two decades ago, when the joint efforts of the government, researchers and farmers turned the old hobby into a big business. Statistics from the Council of Agriculture (COA) show that in 2009, Taiwan’s orchid export value reached US$86.8 million, accounting for 78 percent of the country’s total flower exports. If that value is translated into quantity, it can be seen that Taiwan produced approximately a third of the world’s orchids last year.

One of the main orchids Taiwan now produces is the Oncidium, or dancing-lady orchid, which was introduced to Taiwan about two decades ago. Since 2002, the species has become Taiwan’s top-selling cut flower, with those that are exported going exclusively to Japan. More than 20 million dancing-lady orchids are shipped there each year, supplying 85 percent of the demand in the Japanese market.

Dancing Ladies, Yellow Skirts

While the dancing ladies dressed in yellow skirts created an export value of US$6 million, or 7 percent of Taiwan’s total orchid exports in 2009, they were actually a distant second to sales of the moth orchid, which accounted for US$65 million in value, or 75 percent of Taiwan’s total exports of the plant. Hsieh Ting-fang, director of the Floriculture Research Center (FRC) under the COA’s Agricultural Research Institute, notes that Taiwan’s competitive edge in moth orchid production lies in its mastery of the flower’s germplasm, or collection of genetic resources. Although only two of the world’s approximately 60 species of moth orchids are native to Taiwan, local breeders have collected nearly all of the species from around the planet and have hybridized more than 2,000 varieties. “As an industry, orchid culture is young in Taiwan and is on a much smaller scale compared with countries such as the Netherlands,” Hsieh says. “But while large floriculture enterprises there are providing the European market with very few varieties of moth orchids, Taiwan’s farmers are capable of providing any variety that has—or hasn’t yet—existed to the rest of the world.”

Huang Jian-ming is the manager of Chian Xen Biotechnology Inc., which breeds and grows moth orchids. The company was founded by Huang’s father and the younger Huang still recalls when his father first started growing moth orchids three decades ago. “They had this group of people who met every few days to share opinions on varieties, techniques and everything about the orchid,” Huang says. “There wasn’t any reward when someone developed a unique variety except for the praise and envy of other members, which apparently was enough to keep them obsessed.” Huang’s father is still in charge of breeding new varieties at Chian Xen, and one of his varieties won the gold medal in the moth orchid category at the 2010 Taiwan International Orchid Show held this past March in Tainan County, southern Taiwan. “There seems to be a gene chart the older generation of breeders keeps in their heads,” Huang says. “Just by looking at the ‘parents,’ they can pretty much know what kind of ‘children’ there will be.”

Inflated Market

FRC horticulturist Tsai Wei-ting notes that the main technique in cultivating new orchid varieties is crossbreeding, which is a technique that almost anyone can pick up in a few minutes, so hobby growers have been crossbreeding for a long time. As Taiwan’s hobby growers began showing off their unique crossbred varieties in the early 1980s, a domestic market was formed among them and expanded slowly with the inclusion of new enthusiasts. In that market, a unique potted orchid could sell for an amount equivalent to that for an apartment in downtown Taipei.

The abnormally high domestic market for orchids came to an end in the mid-1980s, when the COA started to promote commercial production of the moth orchid and the Taiwan Sugar Corp. (Taisugar) began to engage in moth orchid production. Drawing on its resources as a state-run enterprise, Taisugar was able to invest in large plots of land and hire a labor force sufficient to put the orchid into mass production. Taisugar aimed for the export market, as the domestic market was—and still is—too small. With Taisugar’s long history of plant research reaching back to the mid-19th century, several varieties of its moth orchids have won international orchid contests, helping the company establish a reputation as a supplier of high-end unique moth orchids. Currently, Taisugar has set up production facilities in Canada, the United States and Costa Rica. Around 90 percent of the products grown in its greenhouses in Taiwan are exported to Japan, Canada, the United States and European countries.

While the large quantity of orchids that Taisugar began to produce meant that the value of a unique potted orchid dropped from a few million New Taiwan dollars to a few hundred, local growers also saw opportunities in Taisugar’s success in cultivating the export market. Tsai Wei-ting explains that orchids can be mass-produced through tissue culture, in which individual plant cells are used to regenerate a whole plant. Tissue culture is also an easy technique to learn and enabled many local growers to duplicate their unique varieties in large quantities. Successfully tapping the export market, however, was more complicated than just producing batches of unique orchids.

To begin with, producing orchids for export requires the investment of considerable capital. It takes 30 months for the plant to grow from the tissue culture stage into a large seedling and another six to blossom. “In one way, the long growing process protects the growers, as it takes at least three years for copies of a popular variety to reach the market, and by that time the ‘trend’ has already changed,” says Ahby Tseng, a marketing specialist for the Taiwan Orchid Growers Association (TOGA). “But this also means that farmers need to have the financial resources to last long enough to see a return, and they’ve got to hope that nothing goes wrong—like a downturn in the market, disease, a natural disaster—during all those months.”

Taiwanese farmers have hit upon a way of minimizing such risks, however, by adopting the “relay-cropping” approach, under which the work and expense of growing orchids is divided into several stages, with different orchid gardens performing different stages. Each relay-cropping operation purchases “semi-finished products” from growers in the preceding stage, performs its function and then sells the results to operators in the next stage. In this way, growers can see a return on their investment in six months and the chances of things going wrong are reduced.

The central and local governments have also helped to reduce growers’ investment. Tainan County, for example, was the first to see the potential of the industry, as well as the financial challenges growers faced. In 2004, Tainan County Magistrate Su Huan-chih managed to secure sufficient funding—mostly from the central government—to set up the Taiwan Orchid Plantation (TOP), a project aimed at organizing individual growers in order to create a “cluster effect,” or complete supply chain, for the orchid industry. There are now 41 orchid growing operations, including the three largest in Taiwan, that operate greenhouses in the park. Steven Yang, who runs Show-win Orchid Garden at TOP, notes that although individual companies needed to invest in building their own greenhouses, the initial investment was much smaller than building a greenhouse elsewhere in Taiwan, as farmers can rent the land from TOP cheaply and get low-interest bank loans for their operations in the park. “That is especially vital to small operations like mine,” he says. “And in addition to the smaller investment, it’s easy to work as part of a cluster, because all the experts, connections and supplies are nearby.”

In June 2009, a public tender was held that saw management of TOP transferred to Taiwan Orchid Professionals, a privately owned company. The new management company has further reduced the investment needed to set up an operation in TOP by building and then renting greenhouses to farmers. Nadison Hsu, president of Taiwan Orchid Professionals, explains that because they were limited by their small size in the past, individual local growers often had to turn down larger orders. The new business model, however, has boosted annual production volume by around 500,000 plants, making big orders much easier to fill. “The farmers don’t need to worry about selling their products, because I buy them at guaranteed prices,” Hsu says. “In the meantime, I get to reach an economy of scale that lets me take larger orders and lower my costs, so it’s a win-win situation.”

In addition to the lower capital investment, orchid gardens have also found new business opportunities through TOP, which since 2005 has served as the site of the annual Taiwan International Orchid Show. Now one of the world’s largest orchid shows, the exhibition attracts buyers from around the globe. According to TOGA, the organizer of the show, this year’s event attracted buyers from 32 countries who combined to place NT$5 billion (US$156 million) in orders with local gardens.

While the marketing professionals based at TOP have been developing new strategies, academics in university horticulture departments and scientists in government research institutions have helped the orchid industry by sharing their research results. The FRC’s Hsieh Ting-fang notes that as local orchid growers have become very accomplished at “modifying” the shapes, sizes and colors of flowers, research organizations have turned their efforts to improving disease tolerance, ease of cultivation and flowering duration, as well as control of the growing environment.

The FRC, for example, started to work on applying the radio frequency identification (RFID) system to production and greenhouse management in 2007. Tsai Wei-ting explains that it is basically an information technology system that automates greenhouse management by recording the location of each plant, as well as by controlling the amount of sunshine, temperature and humidity in a greenhouse for optimum growth. “In Taiwan, dozens or even hundreds of varieties are grown in the same greenhouse,” she says. “RFID’s locating function alone saves a lot of trouble and labor in greenhouse management.” The system, according to Tsai, has been adopted by several of the island’s larger orchid gardens.

Naked Roots

There have been some challenges, however, that the orchid export industry has struggled to overcome. Shipping live plants has always been a problem. Since air cargo is too expensive and packaging blossoming plants is difficult, Taiwan has mostly exported large seedlings. Originally, the seedlings had to enter the United States—Taiwan’s largest market—with “naked roots,” meaning that the growth media, or waterweed in the moth orchid’s case, had to be removed. “Being locked in dark containers for a month on the sea was hard on the plants, and being locked in there without the growth media was torture,” TOGA’s Ahby Tseng says. “Lucky exporters would see half of the seedlings make it there alive, though not many of them still looked healthy.”

Thanks to the efforts of the COA, the problem was finally solved. After 10 years of negotiations, the US government agreed to allow Taiwanese orchid seedlings to enter the country with their growth media intact, provided they are grown in bacteria-free greenhouses built to US specifications. Since 2005, Taiwan has been the only country permitted to do so. Currently, about half of the moth orchids US consumers buy are grown—grown through the seedling stage, that is—in Taiwan.

The search continues for solutions to other challenges. Nadison Hsu notes that the price of a potted, blossoming orchid is five times that of a large seedling. In other words, it takes Taiwanese growers 30 months to earn one-fifth of the total price the flowering plant eventually sells for, while it takes foreign companies just six months to collect the other four-fifths. Except for a few large companies that can afford to build their own overseas facilities to “force the flowers,” or cause seedlings to blossom by subjecting them to the proper environmental conditions, most Taiwanese companies have to settle for exporting seedlings. “Everyone in the trade knows the big bucks go with the flowers,” he says. “The question is how to put that money in our own pocket.”

One of Hsu’s approaches is to create added-value orchid-based products. He has worked with companies in other trades, for example, to develop tableware, clothes and stationery with moth orchid designs. One of his bestsellers is a series of body care products made from orchids. Hsu markets them in Japan by packing a bottle of lotion or other product with a stem of orchid blossoms. The high added-value of the body care products can cover the cost of packaging and air cargo and still generate a good profit.

Hsu has also developed a line of golden orchid products that includes everything from accessories such as pendants to whole potted moth orchids. Rather than crafting gold to make it look like an orchid, he actually gold-plates real plants or parts of them.

But the most direct way of increasing the profit margin, as Hsu sees it, is to establish a brand name. He notes that Taiwan’s orchids have won numerous international awards. At the Chelsea Flower Show in the United Kingdom in May this year, for example, Taiwanese orchids won a silver medal and some of the island’s new varieties even received praise from Queen Elizabeth II. Most foreign consumers, however, are unaware that their orchids actually originate in Taiwan, as the blossoming plants are sold under the brand names of foreign companies.

Hsu thinks that rather than relying on the current business model, Taiwan’s orchid producers should establish a brand name by working with other countries to set up production bases there. To this end, he signed a memorandum of understanding earlier this year with the government of Malaysia and a contract with a Vancouver company to build such facilities. The latter will be a production base targeting the market in the western United States, while the former will allow Taiwan’s growers to explore the Middle East market. “Taiwan will supply the techniques,” Hsu says, “and every orchid from these overseas facilities will bear the brand name ‘TOP.’”

Educated Guesses

An established brand name also has the potential to shape the market. The FRC’s Tsai Wei-ting explains that market preferences can be a tricky thing. While the Japanese have always liked orchids with big white flowers, the preferences of other markets can change rapidly. When the economy is bad, for example, buyers tend to purchase smaller flowers. But since cultivating a new variety may take years or even decades, most of Taiwan’s breeders are actually guessing about future market preferences, though they are educated guesses, based on Taiwan’s extensive experience in the market.

Nadison Hsu, however, thinks that guesses, even educated ones, can go wrong, and that any form of guessing should be avoided. “We can lead the market trend if we have a brand name that is big enough,” he says. “Just like famous fashion designers that basically tell people what to wear this season—and people actually listen—we can tell the market what orchids to buy this year.”

Those outside the local industry may feel that dictating market trends sounds a little too ambitious for Taiwan’s small orchid gardens, but when one considers the accomplishments of a group of people who have managed to turn a hobby into a global industry, it starts to make a great deal of sense.

Write to Jim Hwang at jim@mail.gio.gov.tw