Big Opportunity In Edibles
In an environment of shrinking margins and flat demand, herbs and vegetables are offering higher gross margins.
October 26, 2010
Between the economic downturn facing the country and the desire of the consumer to obtain fresh produce that has not been tainted with chemicals, the edibles category has become the fastest growing sector of the green goods industry.
According to the National Gardening Association (NGA), 31 percent of all U.S. households (36 million) participated in some form of edibles gardening in 2008. And 43 million households planned to do some kind of edibles gardening in 2009 - a whopping 19 percent increase. No other sector of green goods can claim anything close to these numbers. In fact, some would argue most categories are flat to declining. And it seems logical the 2010 edibles figures, along with the figures to come, will continue to show strong growth.
Although these numbers are impressive, it was apparent this spring there were a limited number of bedding plant growers participating in the growth of edibles. The dominant provider of vegetables to the national retailers is Bonnie Plant Farm, which serves all three national retailers coast to coast with minimal involvement from local growers. There are, however, some new programs and players entering the category, and this will bring more innovation and creativity to this fast-growing category.
Big Edibles Picture
While Bonnie Plants dominates, there are new entries like the Lowe's "Grow Your Own" brand that is arguably the most extensive edible program. Plus, there's Burpee Home Gardens. You would expect with Burpee's consumer awareness and brand recognition, it will become a significant factor in the category.
There are also a few regional programs that are interesting and have a lot of potential. Chef Jeff's, a regional brand sold only to independent garden centers, has some of the best packaging and POS materials, plus a good consumer website at ChefJeff.com.
In the Northwest, Smith Gardens developed two vegetable and herb brands that are organically grown: earthe and growe. Both have excellent packaging, labeling and POS materials.
Another organic branded program is Organiks from the Plug Connection in California. It seems to be more prevalent on the West Coast, although it has been seen at Pike Nursery locations in the Atlanta market.
New for the 2011 season is a Proven Selections program called Tasty Treats, a line of vegetables and herbs in a 288 plug tray sold as a 252 tray. The program has an extensive line of high-quality POS materials. The line is positioned as the best performing varieties that are the tastiest. Expect to see a lot of activity if highly promoted by the Proven Winners group.
More Than Herbs & Veggies
The edibles category is rapidly evolving into a broad spectrum that includes dwarf fruit trees, berries and items like onion sets, potato eyes and dormant strawberries. An area of edibles that seems to be somewhat untapped is the container sector and, according to NGA, 48 percent of all households have reported growing edibles in containers.
There seems to be a growing interest in berries, with many more blueberries, blackberries and raspberries appearing on retail shelves the last two seasons. One notable company that is a leading breeder of berries is Fall Creek Nursery. It's developing dwarf berry plants that can flourish in a container or in the ground with attractive flowers, foliage and colorful canes.
Where's The Money?
With annuals and perennials suffering from little to no growth, the edible category presents many opportunities for sales growth and is a highly profitable sector with increasing demand. When reviewing the current retail price points, it becomes clear there is little resistance to premium prices from the consumer as evidenced by the number of 1-gallon vegetables sold at $5 to $7 at the national retailers - and even higher at independent garden centers.
Consumers who live in urban areas often purchase one to three plants because of space limitations and seem to have little concern for the price point. After all, they will spend more on the container, soil, trellis and fertilizer.
Container gardening is a large sector in the edibles category, with 48 percent of consumers reporting they participated in container gardening of edibles. We all get excited about creating flowering container gardens and spend a lot of time trying to create the right recipes, but there seems to be little emphasis on creating compelling edibles containers.
There are many opportunities relative to creating compelling and profitable edibles containers, and it does not have to be a complicated process. Take for instance a 10-inch patio pot with one tomato and trailing annuals around the perimeter. This combination of edibles and annuals could help make very enticing displays at the point of purchase. What about adding marigolds that are perceived to be insect deterrents? Or planting a hanging basket with dwarf tomatoes and edge it with verbena?
Floranova has developed this incredible line of dwarf vegetables under the brand Vegetalis. Its vegetables are ideal for hanging baskets, mixed patio pots or used as individual varieties in small patio containers. With these types of varieties, low-cost, high-margin containers could easily be created. Imagine the sell-through potential with some really cool dwarf vegetables in a 7- or 8-inch container under $10 retail. There are some real opportunities in both patio edibles and mixing flowers and edibles.
In an environment of shrinking margins and flat demand, the edibles category is an area of growth and a category of some of the highest gross margins in a grower's product portfolio. Considering the cost of perishable inputs, what other category has lower input costs?
Consider the difference between a 4.5-inch vegetative annual from an unrooted cutting (URC) with a grower cost of 25 cents with an average selling price of $3.98 retail. Compare that to a 4.5-inch vegetable from seed with a 3-cent grower cost and a $3.48 cost at retail, assuming the same grow times for each. A 10-inch patio pot with four URCs costing $1 compared to the same container with one tomato seed costing 3 cents clearly shows vegetables present great opportunities for increased margins.
The vegetables category is growing fast and brings in new gardeners. Now is the time to take advantage of the opportunities while giving consumers what they want.
Jerry Montgomery operates Montgomery Consulting Services and can be reached at 407-808-4077 or email@example.com.