Strength In Numbers
September 22, 2008 Contracts can have many negative connotations, whether talking about negotiations, fees or lawsuits. Greenhouse growers across the country are making contract growing into a positive, working cooperatively to deliver products to satisfy demand.
In our Under Contract series, we’ll investigate how growers are making contract growing work. Large greenhouses hire contracts to fill orders of products that they can’t quite reach and small greenhouses supply to large operations to get a piece of the mass merchandiser pie.
Has contract growing reached your operation? We’ll supply you with insights into how other growers are doing it. If you’re not on the contract scene yet, take a peek. Maybe you’ll read something that could work for you.
Group Cooperation
The Kalamazoo Valley Plant Grower’s (KVPG) Cooperative has been in operation for 38 years, beginning as a way for growers to standardize packaging, labeling and pricing of products. Today, it unites owners of greenhouse operations in the marketing, selling and distribution of their products.
The structure of the co-op’s agreements makes the supply and demand process a bit less stressful for the growers. The co-op forms seasonal commitments, not contracts. That means if a grower can’t produce a crop or has a problem with a crop, the co-op doesn’t take any action against the grower. The reverse is also true. If the weather prevents shipping, growers don’t hold the co-op responsible.
KVPG currently draws from 51 Michigan growers and one operation each from Indiana and Georgia. The co-op serves a 33 state region.
Coordinating the over 8.5 million square feet of growing area in the KVPG co-op is no small task. The co-op employs a full-time staff of 32, which includes accounting and sales departments and a full-time customer service department. KVPG’s Quality and Commitment Committee sorts out the details of who grows what.
“It reviews growers’ performance by crop and decides who is best suited to grow certain crops,” says Sharon Wolverton, KVPG’s accounting manager. “One of the advantages of the co-op is the ability to pick and choose a greenhouse to grow items that they are set up to grow better and more efficiently.”
Another department, called the Assignment Committment department, makes decisions on what is grown and how much is grown from a financial perspective.
“Everything we do here is based on dollar volume,” Wolverton says. “Each grower gets X amount of dollars. If we get an increase in sales the next year, the grower gets a proportionate amount of that increased dollar volume. Our Assignment Committment department here decides what items constitute that amount of dollars.”
The co-op also handles all brokering, transportation and trucking, with internal maintenance departments for trucks, trailers and liftgates. Dave Westrade of Westrade Greenhouses considers the co-op his marketing arm. The all-annual, 300,000-square-foot grower has been involved with the co-op since 1976, first for its buying power and pricing stability. More advantages are now being realized.
“They take care of the freight and merchandising,” he says. “It’s a huge advantage. We can concentrate on what we’re better at – growing.” Wolverton agrees. “Let the broker worry about invoicing, trucking, collections and bad debt,” she says.
The co-op still provides pots, flats, soil, tags and other products at competitive prices through its supply division. It’s a great perk for smaller growers involved with the co-op, but growers of all sizes are involved with the organization. The smallest company in the co-op has 1 acre of greenhouse space. The largest grower has 20 acres.
“The range of products grown varies, depending on the greenhouse,” Wolverton says. “Some greenhouses may only grow annual flats and baskets, while others may grow most of their crop in potted annuals and a few flats.”
That variety is a prime strength of the co-op and it’s a long way from where the organization began.
Winds Of Change
“When the co-op started out, the only items we grew and sold were flat baskets and seed geraniums,” says Wolverton. “In spring 2006, we grew over 130 different container and packaging configurations.”
The different greenhouses work together to come up with the plant combinations, sizes and growing conditions for a healthy, consistent look their customers expect. It’s a plant think tank that can only be created through collaboration. For the last three years, co-cop growers have been working on product specifications to help with consistency.
“Everybody’s got their own idea of what a product should look like and the most economical or best way to grow the product,” Westrade says. “Digital cameras have allowed sharing of product mixes in combinations, the sharing of recipes. If you go to one greenhouse and one guy grew his warmer and another grew his cooler, you can really see the difference. It’s a matter of having somebody putting the information together and carrying it through.”
Not only has the co-op’s product range changed, so has its customer base. When the co-op started selling, most of the businesses it dealt with were independent garden centers. In the early 1990s, a shift started taking place and sales to big box stores have continued to increase.
“I think it’s getting more difficult for the mom and pops to compete against those big boxes,” Wolverton notes. “They’re making them struggle.” The co-op allows a smaller grower to appear to be a large grower.
“If you’re going to service big box stores, you’ve got to have some mass, some volume,” Westrade says. “I’m not sure how a small grower would serve a big box without having that, unless you had a real niche to fill.”
Challenges
There are challenges in working with a co-op model. Being part of a growing group that does not have direct contact with the retailers they’re selling to cuts off a line of communication that growers often find useful.
“If my customer gets a product that they’re thrilled with, my salesman might hear it, but I don’t necessarily hear it,” Westrade says. “And if they get something that isn’t quite as big as they’re hoping, my salesman might get the grief, but I don’t. There’s a little bit of a buffer there and that’s not always good. Both ways, getting sunshine or some grief.”
Technology has been bridging the gap. Salesmen can just forward direct customer thoughts if they’re sent by e-mail, as well as e-mailing pictures. When dealing with so many growers, profitability can be a variable because each individual greenhouse has a different cost and expense per square foot of growing area.
Making everyone happy would seem to be a challenge also, but Wolverton says that the biggest complaint the co-op hears isn’t over the division of labor.
“Happiness depends on the weather, more than anything,” Wolverton says. “If the weather is good and product is moving, the growers are extremely happy.”
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