State Of The Industry: 2011 Economic Outlook

State Of The Industry: 2011 Economic Outlook

The recovery remained lackluster in the third and fourth quarters of 2010, with GDP (gross domestic product) growth coming in at around 2.0 percent. We should, however, start to see the economy begin to reaccelerate in 2011.

Consumer spending is expected to regain momentum as long as the increases in employment that are expected actually come into fruition. Housing should start to respond to record-low rates and exports and equipment spending are expected to remain strong. On net, real GDP is forecast to rise 2.5 percent in the first quarter and move back into the 3 percent range in the second quarter. Again, as I have said before, this will be a slow recovery but hopefully a smarter recovery this time around.

Two Lifestyles During Recession

One very interesting outcome of the Great Recession is that it has divided America into two groups that are roughly the same size yet experience very different economic downturns. For the narrow majority of Americans (55 percent) who are referred to as “those who lost ground,” the recession brought a mix of hardships, such as unemployment, missed mortgage or rent payments, shrinking paychecks and shattered household budgets, according to a recent survey by the Pew Research Center. But for the other 45 percent of the country (“those who held their own”), the recession was largely free of such difficulties.

Among “those who lost ground” and disproportionately experienced economic hardships during the recession, more than half (54 percent) say they are just getting by or fall short of meeting their monthly expenses. More than four in 10 say the recession forced them to make “major” changes in the way they live.

In contrast, eight in 10 of “those who held their own” during the recession say that they’re “living comfortably” or that they have money left over each month after paying their bills. But unlike their less fortunate counterparts, not a single one says the recession has forced major lifestyle changes.

Differences Between The Groups

It’s not surprising some people were harder hit by the recession than others, or that people who, for instance, suffered a spell of unemployment also had trouble making their rent or mortgage payments. What is striking, however, is the fact that the groups are roughly the same size, yet the differences between them are so great.

For example, nearly one in five (19 percent) of “those who lost ground” during the recession say they had to increase their credit card debt to pay their bills, compared with 4 percent of “those who held their own.” Nearly three quarters (74 percent) of those who suffered the most during the recession say they had to cancel or cut back on vacation travel, compared with 36 percent of “those who held their own.”

“Those who lost ground” are twice as likely as “those who held their own” to have cut back on the amount they saved during the recession (61 percent versus 30 percent) and are significantly more likely to say they cut back on spending (74 percent versus 47 percent). When both groups were asked whether their total amount of personal debt in the form of credit card bills, mortgage loans and other types of loans increased or decreased during the recession, “those who lost ground” were more than four times as likely to say they owed more during the recession than before the downturn began (19 percent versus 4 percent).

More than half (53 percent) of homeowners “who lost ground” during the recession say the value of their home declined in the past 2½ years, compared with 43 percent of “those who held their own.” While only 13 percent of all homeowners say their home increased in value, “those who held their own” are slightly more likely to report that their house is now worth more than it was before the recession (15 percent versus 10 percent).

Implications For Your Business

All of these statistics serve to validate what we in the green industry have been surmising for a while: For some, not much has improved since June 2009 (the month the National Bureau of Economic Research officially declared the end of the recession). For others, life hasn’t changed that much. Interestingly, their level of income has not been a perfect predictor of which group folks fell into, either.

As we consider the plight of consumers in the future, to me it matters less about how much more they save or how their purchasing behavior changes. We already know some of them will be more frugal and some will be more risk averse, but they all will incur greater search and acquisitions costs. That is, they will spend more time evaluating big-ticket purchases and be more carefully weighing product features and benefits before they purchase.

To me, the real question is whether our industry will maintain its relevance in the minds of consumers. Thus, mindshare is more important than market share to the long-run profitability of our industry.

Without a doubt, the entire green industry in 2009 and 2010 continued to exhibit patterns of a maturing industry, with a slowing growth in demand generating more head-to-head competition for market share; a greater emphasis on reducing costs and enhancing service offerings; a reduction in industry profitability as reflected by tighter margins; and a number of mergers and acquisitions among former competitors, driving the weakest firms out of the industry and producing even greater industry consolidation, in general.

The economy certainly took its toll on the greenhouse sector in 2010 (in spite of the recovery being underway), although its effects were not felt evenly among growers. For example, bedding plant growers had a fairly good spring (until bad weather hit in several key areas of the country and slowed sales down), but potted plant and foliage growers still had a tough year, for the most part. Several well-known firms that offered high-quality products and services are no longer in the industry.

Those firms that have competed successfully in the midst of the economic downturn were those that: 1) shaved even more costs out of their value chain (maybe through implementing lean flow principles); 2) tweaked their existing value proposition in order to further differentiate themselves in the marketplace; and 3) had access to adequate levels of working capital to ride out the economic storm. I’d say this would continue to be a good strategy to carry on into 2011, as well.

Leave a Reply

More From Finance/Operations...
PP&L CAST 2015 intros

April 22, 2015

6 Breeding Companies Serve Up New Varieties At Pacific Plug & Liner

Pacific Plug & Liner’s theme this year, Labyrinth, a conservatory of the world’s most captivating plants, was perfectly topped off (pun intended) with fascinators for the women and newsboy caps for the men. The PP&L team dressed their part to act out the gothic “conservatory of the world’s most captivating plants.” Truly, the displays looked like they practically popped out of a catalog, and the costumes were a nice touch. Retailers take heed, the fully merchandised displays at Pacific Plug & Liner are worthy of emulating. We’ll let the pictures tell the story of all the fabulous variety introductions presented at  Pacific Plug & Liner’s 2015 California Spring Trials, where Cultivaris, Cohen Nurseries, Histil Nurseries, Jaldety Nurseries, Southern Living/Sunset Collection and Pacific Plug & Liner all highlighted their 2016 introductions.  

Read More
Speedling 2015 CAST intros

April 22, 2015

Speedling Inc. Presents New Varieties From ABZ Seeds, Hem Genetics, Thompson & Morgan, Vista Farms & PSI

You name it, we saw it at Speedling's California Spring Trials location in San Juan Bautista, where five companies showed off their new introductions for 2016.

Read More
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
Latest Stories
PittMoss on Shark Tank

April 22, 2015

PittMoss Wins On Shark Tank

Mont Handley, president and CEO of PittMoss, appeared on ABC’s Shark Tank on April 17 to try to get the “sharks” to invest in his peat moss alternative. Three investors from the TV show contributed $600,000 to PittMoss for a 35 percent stake in the company. Check out this clip from ABC’s website in which Mark Cuban, Kevin O’Leary and Robert Herjavec discuss getting on board with the product. PittMoss is an alternative to sphagnum peat moss, made up of a mix of proprietary additives and recycled paper rescued from landfill space. Handley founded the Pittsburgh-based company in 1994. What started as a small experiment grew into a full-fledged business with the help of funding provided by an EPA SBIR grant and Pittsburgh’s Idea Foundry. Today, PittMoss is available to commercial greenhouses and nurseries from Michigan to Maine to North Carolina, with plans to grow. To learn more, visit PittMoss’ website, or check it […]

Read More
Syngenta logo

April 15, 2015

Syngenta Names Chris Freeman Senior Key Account Manager…

Chris Freeman is the new senior key account manager for Syngenta Flowers, Home & Garden's Commercial Sales business in the Americas, effective March 2015. Freeman, who joined Syngenta in 2006, carries more than 25 years of experience in the agriculture and floriculture business.

Read More
Lake Buchanan_LCRA

April 10, 2015

USDA Designates Areas Of West And Southwest As Drought …

The ongoing drought has resulted in disaster area designations in counties across nine Western and Southwestern states, including Texas, where some reservoirs are at or near historically low levels.

Read More

April 9, 2015

Altman Plants’ Online Cactus Shop Shows Strong Sa…

Altman Plants recently opened its new Cactus Shop, an online retail store that sells a variety of cactus and succulents. The store is a take-off of Altman’s original wholesale business, as the company started as a mail order catalog.

Read More
Dummen

April 8, 2015

Dümmen Group Welcomes Jim Devereux And Andrew Konicki T…

Dümmen group recently announced the addition of Jim Devereux and Andrew Konicki to its team. They are the newest members of the Key Account and Broker Support team for Dümmen, and will be responsible for building, developing and maintaining current broker and grower customer relationships.

Read More
Gov._Jerry_Brown_California

April 8, 2015

California Institutes First Ever Statewide Mandatory Wa…

California Gov. Jerry Brown announced April 1 that, for the first time in state history, action will be taken to implement mandatory water restrictions, with the ultimate goal of reducing water usage by 25 percent. As Californians are pushed to conserve more, growers will need to think about how demand for products will be affected.

Read More
DNA-logo

March 31, 2015

DNA Green Group Will Acquire Rijnplant

DNA Green Group and Riknplant have finalized DNA Green Group's acquisition of Rijnplant, meaning that the breeding and propagation activities in pot and cut anthurium, bougainvillea and heliconia will transfer to DNA Green Group.

Read More
AFE scholarship_Ryan Dickson

March 25, 2015

AFE Educational Grant And Scholarship Application Deadl…

Apply now for American Floral Endowment (AFE) scholarships or educational grants. Applications can be found online. For educational grants for 2015-2016, applications must be submitted no later than June 1. Scholarship applications are due May 1. AFE will award $40,000 in scholarships for 2015.

Read More

March 23, 2015

UF/IFAS Appoints Joseph Albano As Director Of Mid-Flori…

The University of Florida's Institute of Food and Agricultural Sciences (UF/IFAS) has a new directors for its Mid-Florida Research and Education Center (REC) on Apopka, Fla. The role has been filled by Joseph Albano, a research horticulturist from the U.S. Department of Agriculture with more than 25 years of experience.

Read More

March 17, 2015

Pike Nurseries Implements Employee Stock Ownership Plan

Independent garden retailer Pike Nurseries has announced it will become an employee-owned company. Pike Nurseries management has combined with its sister corporation in California, Armstrong Garden Centers, to operate under an established Employee Stock Ownership Plan (ESOP).

Read More
GrowIt! App Wins Gold At Design100 2014 US Mobile & App Design Awards

March 10, 2015

GrowIt! Mobile App Now Available For Android

The mobile app GrowIt! Garden Socially can now be used by gardeners with Android-based smartphones. Now available on the Google Play Market, GrowIt! helps users find plants to fit their lifestyle and connect them with other local gardeners.

Read More

March 4, 2015

Second Annual GreenhouseConnect Will Bring Growers and …

Following a successful inaugural event in Tampa last fall, Greenhouse Grower has announced the dates of its second annual GreenhouseConnect: October 26-29, 2015. Representatives of an expected two dozen leading greenhouse operations from across the U.S. will join senior-level suppliers at Rancho Bernardo Inn in San Diego for several days of one-on-one strategic meetings, a growers-only roundtable, informational sessions and a variety of networking events.

Read More

March 4, 2015

Maryland Green Industry Associations Unite

The Maryland Nursery and Landscape Association recently announced that it is expanding its reach to include the greenhouse industry, meaning it has become The Maryland Nursery, Landscape and Greenhouse Association (MNLGA). The change comes as a result of the planned dissolution of the former Maryland Greenhouse Growers Association and the invitation for those members to join the existing and renamed association.

Read More
IPPS Sharing Plant Production Knowledge Globally Logo

February 25, 2015

International Plant Propagators Western Region Sets Ann…

The annual meet for the International Plant Propagators' Society (IPPS) Western Region has been set for this September. It will take place September 23 to 26 in Modesto, Calif., and will include learning sessions, tours to local nurseries, a research poster display and poster presentations, various networking opportunities and an awards banquet to close the event.

Read More
myers industries Lawn and Garden Logo

February 24, 2015

Myers Industries, Inc. Lawn And Garden Business Sold, N…

The management of Myers Lawn and Garden Group, along with Wingate Partners V, L.P. have recently acquired the Myers Industries, Inc. Lawn and Garden business. The new company is named The HC Companies, and will continue as a North American leading provider of horticulture containers supplying the greenhouse, nursery and retail markets.

Read More
american-hort-logo

February 17, 2015

AmericanHort Announces New Board Members

AmericanHort recently announced the election of new officers and members to the board of directors. Each will assume their positions on the board during Cultivate’15, July 11 to 14 in Columbus, Ohio.

Read More
All American Selections

February 17, 2015

All-America Selections Elects New Officers, Names New J…

While meeting during the Flower and Vegetable Seed Conference in Tampa, Fla., hosted by the American Seed Trade Association, All-America Selections elected new officers for a two-year term. Read on to learn about the new officers, as well as all of the new judges that were added in 2014.

Read More
Greenhouse Grower.com on your desktop, on your phone, on your tablet

February 11, 2015

GreenhouseGrower.com Relaunches With Responsive Design …

Greenhouse Grower magazine, the nation’s leader in profits, production and education for greenhouse growers, announces the launch of its completely redesigned website, GreenhouseGrower.com. The new design is the product of direct user feedback and GreenhouseGrower.com analytics, and includes responsive design for ease of mobile use.

Read More