State Of The Industry: What Keeps You Up At Night?
A number of issues have growers tossing and turning in their sleep, but the economy is clearly more stressful than the rest.
December 29, 2010
A grower's list of concerns these days is a long one. From poor spring weather and disinterested consumers to increasing government regulations and succession plans, growers have more weight on their minds than ever.
But as stressful as rainy spring weekends and wondering whether your kids are willing to handle the load of your business, the issue keeping more growers up at night than any other is, perhaps no surprise, the economy.
"I sleep well but the economy is my number one concern," says Steve Free, Grass Creek Greenhouse. "In the past, I felt our industry was relatively recession proof, but growing federal debt and the current administration's intent to raise taxes troubles me."
In our annual State Of The Industry Survey, we asked growers to rate their level of concern about a list of 10 topics on a scale from 1 to 5, with 1 being not concerned at all and 5 being extremely concerned. More than half (53 percent) of the growers who responded indicate they are extremely concerned about the economy.
The weather and government regulation are topics that have at least 25 percent of growers extremely concerned. The seven other topics we listed - 1) grower consolidation; 2) access to credit; 3) production issues; 4) immigration issues; 5) succession planning; 6) a changing customer base; and 7) importing diseased cuttings - also are concerning, but nowhere near the level of the economy.
"The economy is important to all of us," says Brian Kanotz, Callaway Gardens. "The weather affects everything even in the greenhouses, so I am constantly watching it. Consolidation affects what I can purchase and from whom. This often requires me to change what I would normally purchase and avoid some growers."
Adds Richard Warner, Gray Squirrel Farm: "It's not all about access to credit. You need the sales, and consumers right now are buying only the necessary items and no more."
A Grower's Outlook
Kube Pak co-owner Bill Swanekamp agrees the economy is a challenging one. In fact, he says it's unprecedented because every other recession he's experienced has been more predictable. This one, however, is a new beast.
"I have been sitting at this desk for 40 years," Swanekamp says. "I have watched numerous recessions and downturns in the economy, and we've seen the economy come back each time. But it just seems to me this downturn is different from others. I think it's because of the collapse we had in the financial markets and the entire housing industry, with the loss of the manufacturing sector in our country."
Swanekamp believes the housing market could eventually get a boost, and that boost, in turn, could result in more business for growers. Still, growers expecting the glory days of the 1980s and '90s to return once this economic cloud fades are probably too wishful. For today's industry, Swanekamp says, is a different industry.
"In 1991, we had a huge glut of poinsettias on the market," he says. "Growers threw away a lot of poinsettias. The next year, we cut back and it worked itself out. It took a couple of years, but things got back to normal.
"I just don't see that happening this time."
Part of the reason why Swanekamp is unconvinced the industry will return to its "glory days" is because we're in an era in which growers are trading market share with competitors rather than building market share of their own. When one grower goes out of business, a dozen or so growers react to secure that business.On top of that, growers argue there has been too much production taking place over the last few years and nowhere to unload it.
Growers eventually learn from the market, though, and their recent experience with poinsettias is a classic example. According to Swanekamp, one major poinsettia producer told him the number of unrooted cuttings it produced is down 5 to 10 percent this year.
"That means that's how much less was produced," Swanekamp says. "That's a reflection of the market. Fifteen years ago, on Oct. 30, we would be pre-booked on our entire crop. This year, on Nov. 30, we still have 40 percent of our poinsettias. There is so much material out there. Retailers can just call up and say, 'I need these now.'"
More proof poinsettia growers are in a new era is the big-grower approach of simply striving to cover overhead costs. Making a profit with poinsettias isn't a goal for everyone, and it's that attitude that is driving growers away from the crop - at least the commodity, non-specialty items.
"Everybody's being enticed with discounts," Swanekamp says. "You see it at the consumer level, and it's a mentality that's drifted up the chain."
The keys for success with poinsettias now - and all crops, for that matter - are developing niche products and making a commitment to marketing.
"At least put a little money into marketing," Swanekamp says. "For us, the area we've put more money into is trade shows and visiting customers. For our trade show, it's primarily focused on our starter plants, plugs and rooted cuttings."