Ramping Up Rose Sales
Grower Pat McDonnell shares how his business is evolving to serve the box stores.
June 11, 2008
McDonnell has six acres of greenhouses and 150 acres of outdoor production on a 225-acre site in Cameron, N.C., near Pinehurst but lives in Raleigh. His first exposure to horticulture was through a friend of his father who grew nursery stock and was involved in landscaping. As a teenager, McDonnell also worked for a greenhouse vegetable operation in the Old Brooklyn part of Cleveland, Ohio.
After graduating from college, he began his career in the crop protection side of agriculture working for Diamond Shamrock in Cleveland, which was later purchased by Ciba Geigy and then Novartis, which became Syngenta. Over the tenure of his career, he helped growers produce roses and azaleas, fruit, vegetables and soybeans. The corporate mergers presented the right time and opportunity to start his own venture as a nursery grower.
McDonnell's first foray into serving the box stores was growing Jackson & Perkins roses and other shrubs for Lowe's in Kentucky and Tennessee in 2003. "We couldn't do it in North Carolina or South Carolina, which are closer to home, because the market was being served by another grower in Florida, which also grows poinsettias and mums along with roses," he explains. "Then we got Virginia and kept stretching to Southern Ohio/Cincinnati and Southern Illinois, but staying within the Zones 6-7 market. We agreed to grow 250,000 Jackson & Perkins roses. Then in 2005 we were asked to grow for the Northeast."
Although this growth was great, price controls made it difficult to make money. "We were getting other business from Lowe's in shrubs because we were not making money on roses," he says. "But unlike shrubs, roses are more like annuals and more perishable. If you grow 500,000 roses, you've got to move them somewhere. You can't carry them over."
In 2006, McDonnell received a call from Home Depot, asking him to supply roses in the same geographic footprint for the next year. "Although Lowe's is a great company, we couldn't do both and we made the business decision to go with Home Depot," he says.
Partnering For Profit
In 2007 and this year, McDonnell has been working with Bell Nursery in the Mid-Atlantic region. Based in Burtonsville, Md., Bell is famous for its service model and taking care of all the live goods at Home Depot.
"We were introduced to Pat (McDonnell) by the Home Depot merchant we work with, Mike Duvall," says Gary Mangum, owner of Bell Nursery. "McDonnell was growing specific plant material for Mike's stores, and when we transitioned to handling the business in 2007, Mike wanted to make sure the growers he had in place did not lose out on the business and had an opportunity to grow in the marketplace."
McDonnell Horticulture provides Bell Nursery with select portions of its overall rose program, working on a contract basis for specific SKUs. "The arrangement we have with McDonnell is similar to how we work with others in the tree and shrub category," Mangum says. "In all cases, we took what we learned in 2007 and have altered planning to the extent needed to further grow sales and deliver the best plant possible to the customer."
McDonnell says he has been especially impressed with Bell's strategies to counter the commodities trap so many growers find themselves in. "Traditionally, the box stores have wanted commodity items to blow through the stores and growers wouldn't make money," McDonnell says. "For 2-gallon roses, we'd grow them for $5 and they'd retail for $6. Bell doesn't like that approach. The customer is not price sensitive, so why sell a $5 rose and not make money when we can sell a $7 or $8 rose? We used to grow 80,000 1-gallon azaleas for $1.50 that would sell for $2. Bell would rather sell a 3-gallon azalea for $15."
Together, Bell and McDonnell have been working on growing the quality required to command a higher price point. "In the past, McDonnell had focused more energy on growing to meet specific retail price points that he felt were important," Mangum says. "His growing times and in some cases initial input stock have shifted to give us a bulkier plant with plenty of energy to produce desirable flowers. We are confident that we will see stronger sales in 2008, and Home Depot is definitely offering price points that the consumer will appreciate. The commodity items are very important for many reasons. We definitely can't ever walk away from that, but with the help of Home Depot merchants, we can expand offerings available to the consumer."
On the input side, McDonnell has partnered with Canadian grower Westbrook Greenhouses, which specializes in miniature roses. "They sell us liners. It's a beautiful deal for them because I take them during their down cycle," McDonnell says. "It's about $1 million worth of business."
Sharing Risks And Rewards
On the retail side, with the increasing importance of pay-by-scan at Home Depot, Bell has implemented shared risk pricing with its contracted growers. "Bell owns the inventory and we share the risk with them," McDonnell explains. "This way we have as much to gain or to lose and an incentive to provide the right product at the right time. You don't go into the produce department and see a rotten head of lettuce, so why do it in a garden center? We believe this is the model of the future."
Mangum says sharing risk ensures Bell gets the best quality product possible with every delivery. He's also a firm believer in ownership on the service side. "I know that the third-party models in place work well and provide the stores with a fantastic resource, but I do feel that our model provides the strongest incentive to grow sales. If it doesn't sell, we don't get paid," Mangum says. "Everything we do, starting with the enforcement of retail-ready quality standards is directly related to our ownership interest."
Always a pragmatic optimist, Mangum says he believes there is a very bright future for growers who choose to work together. "The most important part of the scenario for each of us is the focus we need to always provide the consumer with the best value that we can," he says. "In addition to price, innovation and dedication to that consumer's success is what will help us all move ahead over the long term."