Finding The New Normal
Challenging times call for new strategies. Running a business the way you always have can be a recipe for disaster.
August 10, 2011
There's a saying, “Insanity is doing the same thing over and over and expecting different results.” Well, I’d argue a lot of growers and retailers are doing the same things over and over and hoping for past results. The years and seasons go by, but the glory days just aren’t returning by using old strategies.
Look at what happened to Nurserymen’s Exchange in Half Moon Bay, Calif., which filed for Chapter 11 bankruptcy protection and was then purchased for only $4 million, just enough to cover debts. (See page 12.) Fortunately, the buyer – Rocket Farms’ parent company, Monterey Peninsula Horticulture – is doing well in the blooming potted segment and diversified in its crops and customer base.
For decades, Nurserymen’s was on top of the world as the leading blooming potted plant producer and rewholesaler serving supermarkets. The company was innovative in developing new products and presentations and established the Bloom-Rite brand. But large growers who have relied primarily on that market channel haven’t been faring as well.
Traditional supermarkets have been consolidating and losing ground as the place for the public to buy groceries. They are competing against Walmart, Target, discounters like Aldi and wholesale clubs like Costco. Even drugstores and convenience stores are expanding their food offerings. Growers who serve supermarkets say the floral buyers just aren’t buying the numbers of plants needed to make an impact with promotions. As a result, fewer plants get sold and it beomes a self-fulfilling vicious cycle.
I can’t help but wonder if Nurserymen’s failed to change the model that had served it so well for so long to respond to shifting retail markets. This shows any business is vulnerable if it loses its edge.
Finding The Path To Profitability
Growers came to the OFA Short Course looking for solutions this summer. Cost accounting and profitability sessions were very well attended. Peter Konjoian presented an excellent session, “Analyzing Opposing Profitabilty Strategies – Selling Out or Growing Long?” For 10 years he has been conducting research with wholesale and retail growers to determine which strategy is better. He created tables that show what happens to price and profit when growers meet 70 percent of demand or overproduce and meet 130 percent, as well as the whole spectrum in between.
Key Takeaways From Konjoian:
• Every plant not sold erases the profit from 2.5 plants sold.
• Don’t overproduce low-margin crops. Sell out of the takers and grow more of the makers.
• Grow less of what everyone else grows and more of what no one else grows.
• Don’t cling to crops too long. Stay ahead of the commodities curve and always be on the lookout for the next profitable crop.
During the OFA town meeting examining “Why Don’t Our Customers Love Us Anymore?” an industry consultant said part of the problem is we’re still just growing and selling plants. We’re not marketing the benefits of our product or what the customer wants to buy – beauty, convenience, wellness and ambience. We need to make plants fun instead of a hassle to take care of all summer.
One of the best and simplest ideas shared was why don’t we make spring our Christmas and provide that level of marketing and merchandising to get customers in the stores? To some extent the box stores are doing this with spring black Fridays. But the focus is on price, not the excitement that surrounds Christmas.
Last but not least, we need to look at other lifestyle industries that are engaging consumers – fashion, food, wine and music – and reinvent our category and be more innovative.