Ruling By Region
Growers who are achieving market dominance are focused on regional strategies.
June 19, 2008
After following the grower consolidation movement the last 10 years, I am convinced that we will not see a dominant national player. The latest headlines surrounding California-based conglomerates Color Spot Nursery and Hines Horticulture reinforce that.
At one point, Hines Horticulture was poised to be the dominant national player with production facilities on the West Coast and East Coast in New York, South Carolina and Florida. While its western production was more nursery oriented, the eastern acquisitions were bedding and blooming potted plants, creating a foundation for a color division.
Just observing the big-box action and growers supplying nursery and greenhouse crops, the bedding plant growers are much more dedicated to servicing their products at retail. There is a greater intensity with seasonal bedding than nursery, especially on the replenishment side. Bedding growers have their own people in the stores. Nursery growers tend to use third-party merchandisers. Part of this is due to nursery products traveling greater distances and bedding being more local.
Miami-based Lovell Farms, which was purchased by Hines in 2000, was best known for its service and "guaranteed sales," a precursor to pay by scan. The operation's relationship was so tight with Home Depot, no other grower could break in. Somehow after Hines bought Lovell, that all changed and the Home Depot business opened up to local and more aggressive growers.
Service is most successful when growers feel they own their region and dominate each store themselves. Logistically, this requires strong regional strategies. The farther you have to deliver to service a bigger market radius, the more expensive and less effective this strategy will be.
Another problem unique to our industry is rooted in the plants themselves. Once the product is produced, it must leave the system. It can't be stored in inventory or processed like fruits and vegetables. Once that plant is ready, it has to leave. Production backups are more problematic if you are not influencing sell-through at retail.
Hines has since retreated from the east, which is full of very strong regional players, and appears to be gravitating more to the nursery side again. It is differentiating itself with key designer product lines in clematis and hydrangea, both consumer favorites. Patio Tropics have been another popular line. I predict a downsized Hines with a more diversified customer base will be successful.
As a publicly traded company, Hines also is struggling with getting its stock prices up and listed again while rebuilding equity in the business.
In contrast, Color Spot was the service pioneer in California with guaranteed sales and a focus on bedding plants. While at one point Color Spot extended its reach all the way up to the Northwest through a series of acquisitions, the company is now firmly planted in California and Texas.
It operates as two distinct divisions, west and southwest. The two divisions operate separately in terms of planning, production and distribution and have their own set of customers, store locations and representatives. Buying the largest competitor in Texas, Powell Plant Farm, makes sense.
"We feel our customers and business model are regionally based," says Color Spot's President Jerry Halamuda. "We find that when you know your seasonality, production culture, distribution matrix and personnel and you are 'touching' them everyday, then you are focused on success."