Top 100 Growers: The Dark Side Of Contract Growing
Sedan Floral, the 101st-largest operation in the United States, has some experience contract growing. But its CEO is unlikely to try contract growing again - and for good reason.
April 29, 2011
If another grower put a legal-binding contract on Jonathan Cude's desk to produce $1 million worth of bedding plants - a contract that held both parties legally accountable - Cude would sign the contract in a heartbeat.
The problem, though, is few - if any - growers draft legally-binding contracts to hold each other accountable in contract growing. Cude, the CEO of Sedan Floral in Sedan, Kan., participated in a contract-growing relationship once about five years ago. Based on the way that relationship played out, plus the contract-growing horror stories Cude continually hears to this day, he has no interest in partnering with other growers to produce crops through contracts.
"The grower we were working with described the program to us, we created a contract that spelled out those obligations to put the grower on the hook and the guy refused to sign it," says Cude, whose operation just missed the Top 100 Growers cut this year and takes our 101st position. "He was like, 'Oh no, you can trust us.' Well, come on. You think Wells Fargo trusts Bank of America?
"When you go into it like that, you already know the other side's trying to weasel out on some obligation or payment."
Still, a number of growers continue to contract grow despite a lack of legal-binding contracts. Handshakes and verbal agreements have become the accepted forms of doing business in many cases, but from Cude's perspective those pleasantries don't always translate into results for the contract grower.
In Cude's own experience, the operation he served did not completely fulfill its end of the bargain. Cude also knows other growers who've been burned by the principal growers serving box stores, and their misfortunes have turned him in the other direction.
One operation Cude cites is a smaller one that contract grows for several other growers. Just about every year, Cude says, that grower is getting burned in a different way. While one grower stiffs the contract grower on the product, another grower stiffs the contract grower on pay while a third uses a program's details against the contract grower.
"I think the guys in the position to deal with Walmart looking for contractors are fully aware of what they're doing," Cude says. "They know they're in a position of power with some of these little guys, so the last thing they want is any kind of binding agreement. Can you think of a better way to get rid of your competition?"
Growth, of course, is a goal for many growers, and aligning with the box stores is perceived to be the number one way to grow. So if growth means having to serve a box store's principal growers, contract growers will do what they believe they have to.
Contract growing isn't the only path to growth, though. Sedan Floral used to devote about 65 percent of its business to Kmart and another 30 percent to a regional chain store. The opportunities for Sedan Floral with those companies vanished almost simultaneously, Cude says, and he's entirely committed to independent garden centers and independently owned chain stores like True Value.
"I've been really quiet about our growth, but it's happening, it's real and we're moving forward at a very rapid rate," Cude says. "And it has nothing to do with any single box store."
Sedan Floral's growth has nothing to do with contract growing, either, but that's not to say contract growing can't work. Even Cude admits growers should take each contract-growing horror story they hear with a grain of salt. If anything, those stories should trigger caution signs and force growers to think harder before making any commitments.
"I hear a lot of cynical comments about contract growing when I'm at OFA (Short Course) or talking to vendors," Cude says. "They always have little quips to say about contracting. I have yet to hear the stories like, 'You wouldn't believe this. You missed out. So and so contracted and put $250,000 in his pocket.'"