Green Industry Is Set For Continued Growth In 2016

Charlie Hall
Charlie Hall

The years leading up to the Great Recession were good ones. The green industry showed signs of strength and stability, much of it fueled by a booming housing market. Overall, economic contributions in 2007 were estimated to be $175.26 billion.

Then came the crash. Greenhouse and nursery growers who experienced remarkable growth in sales and profits for most of the decade prior to the recession now face painfully slow-growing demand, with prospective buyers willing to purchase product only on a just-in-time basis. Maintaining enough liquidity to handle daily operations still remains a key industry challenge. The decline in industry sales, accompanied by increased expenses to maintain greenhouse and nursery products, have combined to reduce firm-level cash reserves and forced many growers to attempt to source additional credit from lenders or suppliers.

2015 Best Year Since The Great Recession

While some economists are quick to point out that the U.S. economy is overdue for a recession this year, most economic indicators point to modest growth. In short, there is nothing holding the green industry back from having a great 2016. We’re going into this spring season better off than we have been. Even though last year started out with a negative gross domestic product (GDP), 2015 averaged out to be the best year since recovery from the Great Recession began. And while there is still a 1.9% gap between the U.S. potential and the actual GDP, it’s shrinking. That’s based in large part on the personal spending of consumers. In the fourth quarter, those expenditures were 65% of the GDP.

Gross private domestic investment, such as new inventory or equipment, has been on an upswing since the recovery began, which is a good sign of growing business prospects. When it comes to income, more and more people are joining or rejoining the workforce, regardless of how long they’ve been out of work, dropping the unemployment rate to 5.5%.

Americans are spending more today than they did prior to the recession. And beyond the increased consumer confidence, which means more spending, low gas prices should mean huge savings for contractors in terms of fuel and supply costs. The housing market is increasing, but it still hasn’t returned to pre-recession levels. That could change this coming year as excess stock continues to be taken off the market.

Overall, the green industry is doing better than it was, but it’s still a bit overleveraged. Banks are starting to loosen up credit, particularly in the housing sector, and low fuel prices will mean lower distribution costs. That, along with increased consumer confidence and lower unemployment rates, puts the industry in the best shape it’s been in for years. There are a lot of forces, but there’s nothing that’s going to rear its ugly head and cause us to really shrink back and see our economy suffer.

Industry Seeing Growth In Both Wholesale And Retail

The most recent National Green Industry Survey, which is conducted every five years, gathered annual information from all 50 states and represented the sixth such effort by the Green Industry Research Consortium, a multistate research committee made up of horticulturists and agricultural economists from selected land-grant universities. The results from this survey are illuminating, given that many of the structural changes in the industry since the Great Recession recovery are more fully identified.

Economic contributions of the green industry in the U.S. were estimated for 2013 using information on industry output, value added, employment, and domestic/international exports, retail sector lawn and garden product sales, and economic multipliers from IMPLAN (impact analysis planning) regional economic models for each state. Direct industry output for all sectors was estimated at $136.44 billion, and total output contributions, including indirect and induced regional economic multiplier effects of export sales, were $196.07 billion.

The total value-added contribution to gross domestic product (GDP) was $120.71 billion, including labor income contributions of $82.47 billion, other property income contributions of $28.91 billion, and business taxes paid to local, state, and federal governments of $9.30 billion. The industry had direct employment of 1,599,662 full-time and part-time jobs, and total employment contributions of 2,035,636 jobs in the broader economy.

The largest individual industry sectors in terms of employment and GDP contributions were landscaping and horticultural services (1,105,526 jobs, $54.70 billion), greenhouse, nursery, and floriculture production (240,809 jobs, $20.36 billion), and lawn and garden equipment and supplies stores (217,798 jobs, $12.87 billion).

Green industry contributions represented 0.72% of U.S. GDP and 1.11% of the total workforce employment. Since 2007-2008, contributions in 2013 increased by 4.4% for employment and 2.7% for GDP in inflation-adjusted terms. Growth in the industry was highest for wholesale and retail trade, while production and manufacturing declined.

Outlook For 2016

The current health of the economy is extremely mixed, with most of the leading indicators trending positive, but others improving very slowly. Mixed performance in the economy, coupled with extreme weather conditions across much of the country, make for a terribly challenging and uncertain environment, as we saw this past spring. I remain optimistic about the recovery, however, given the industry’s performance once spring thaws ensued.

I still have reason to believe that the most successful greenhouse and nursery firms in 2016 will be those that are well-positioned with their customers in the marketplace, not overleveraged, and clearly articulating their value proposition. We will likely see continued structural changes across the industry supply chain as we morph into the more compact and efficient industry of the next decade. This will not only mean further consolidation in the industry, but deeper, more strategic relationships among those left from the transition. The green industry in the next decade will not look the same as the last decade.

It is more critical than ever to convey value and relevancy in an authentic manner to end consumers, but the factors that will guarantee success in the future are going to change. Better brand management, more detailed SKU movement and replenishment analysis, greater efficiency in distribution and logistics, closer integration of genetic innovations and supply levels with consumer demand, and the assimilation of innovative marketing technologies (social media and otherwise) are the new key success factors of the future.

Notice that growing a quality plant isn’t listed; that’s because it’s a given. Growers will be required to produce quality to even play in the game. Growers who master these key success factors will be postured better for the potential economic shocks if they do occur and lay the groundwork for solid performance during any future economic downturns.

Demand For Products Will Grow As Housing Market Recovers

The data above confirms that the downturn in housing and its less-than-stellar recovery has had a profound impact on green industry product sales in recent years. Bedding plant growers have had an easier market in which to compete, as households have tended to downsize their plant purchases in an attempt to maximize their purchasing power; for example, smaller but more numerous plants at lower price points.

The only plant categories that experienced increases in the number of households buying them during this time were in the edibles category. However, given the housing market trends mentioned earlier, it is likely that green industry products and services will be facing an increase in demand in the next few years.

Topics: , ,

Leave a Reply

One comment on “Green Industry Is Set For Continued Growth In 2016

More From Business Management...

September 28, 2016

Pennsylvania Greenhouse Grower Applying For Cannabis License

Allen Wagner of Wagner’s Greenhouse in Grandview, PA, hopes to become one of 25 applicants — among as many as 150 — chosen for a grower-processor license.

Read More
The-Capitol

September 28, 2016

How The November Election Might Affect The Legalization Of Cannabis

National polls indicate Americans are largely divided on the topic, while this year’s presidential candidates generally feel it’s a state issue.

Read More
Vogel Alcove NGB Therapeutic Grant Winner

September 27, 2016

National Garden Bureau Announces Horticulture Therapy Garden Grant Winners

The NGB’s annual grant program, Growing for Futures, recently selected three therapeutic gardens that will receive grants totaling $5,000.

Read More
Latest Stories

September 28, 2016

Pennsylvania Greenhouse Grower Applying For Cannabis Li…

Allen Wagner of Wagner’s Greenhouse in Grandview, PA, hopes to become one of 25 applicants — among as many as 150 — chosen for a grower-processor license.

Read More
The-Capitol

September 28, 2016

How The November Election Might Affect The Legalization…

National polls indicate Americans are largely divided on the topic, while this year’s presidential candidates generally feel it’s a state issue.

Read More
Vogel Alcove NGB Therapeutic Grant Winner

September 27, 2016

National Garden Bureau Announces Horticulture Therapy G…

The NGB’s annual grant program, Growing for Futures, recently selected three therapeutic gardens that will receive grants totaling $5,000.

Read More
cuttings-facility

September 27, 2016

How Global Suppliers Of Unrooted Cuttings Are Working T…

The world’s top vegetative producers discuss how they continue to evolve to overcome challenges and embrace opportunities to help growers and the varieties supply chain.

Read More
Employees separate the plants by stem count, bud development and height. “This process allows us to respond more quickly to specific requests from customers,” Van Wingerden says

September 22, 2016

AmericanHort Hosting Webinar On Overtime Rule Complianc…

The webinar takes place on Thursday, Sept. 29. AmericanHort is also throwing its support behind the Overtime Reform and Enhancement Act.

Read More
customer-base

September 21, 2016

6 Creative Ways To Expand Your Business

Marketing experts offer tips to help you catch the attention of new customers and grow your business.

Read More
OSU ATI Greenhouse

September 21, 2016

Your Support Is Essential For Current And Future Studen…

September is back to school time, and that means renewed opportunity to support the young people who are electing to pursue careers in horticulture. I continue to hear from growers of all sizes, from all over the country, that there just are not enough qualified graduates of two- or four-year horticulture programs. We also need to be active in promoting careers in horticulture to those who are not aware of the opportunities available. There have been some great success stories in this area recently. At University of Florida (UF) last fall, Anna Ball and Dr. Marvin Miller of Ball Horticultural Co. joined UF’s Dr. David Clark in an introductory environmental horticulture couse that’s open to any major. After the class, the line of students waiting to talk with Ball, Miller, and Clark was out the door. It is so important, Ball says, for each of us, individually and collectively to […]

Read More
Pansy ‘Cool Wave Blue Skies’ (Wave)

September 20, 2016

PanAmerican Seed Settles Alleged Trade Sanction Violati…

PanAmerican Seed, a division of Ball Horticultural Co., has been charged with violating trade sanctions to Iran over a number of years. According to a release from the U.S. Treasury department, PanAmerican Seed made 48 indirect sales of seeds to two Iranian distributors. The company shipped the seed to consignees based in countries in Europe and the Middle East. PanAmerican Seed’s customers then arranged for the re-exportation of the seeds to Iran. The release states that the Office of Foreign Assets Control (OFAC) determined PanAmerican Seed did not voluntarily self-disclose the alleged violations to OFAC, constituting an egregious case. “We believe that the settlement was extreme; however the alternative was to litigate with the U.S. government, which would take months, if not years,” says Todd Billings, Chief Financial Officer for Ball Horticultural Co. When asked what Ball Horticultural Co. has done to ensure that violations to trade sanctions do not […]

Read More
young-plants

September 20, 2016

The Top Young Plant Growers, And Four Critical Challeng…

In Greenhouse Grower’s 2016 Top Young Plant Growers Survey, growers discuss the latest challenges and opportunities in fulfillment, shipping, labor, and crop protection.

Read More
Dual Income No Kids (DINK) Young Couple

September 16, 2016

What You Need To Know About DINKs

DINKs (Dual Income, No Kids) are quickly becoming one of the fastest-growing demographics that marketers are targeting.

Read More
MANTS

September 15, 2016

Registration Is Now Open For MANTS 2017 In Baltimore

The 2017 Mid-Atlantic Nursery Trade Show takes place Jan. 11-13 in Baltimore, MD, and will feature more than 1,000 exhibitors from the green industry.

Read More
farwest-2016-photobooth

September 14, 2016

Farwest 2016 Marked By Expert Discussions On Green Indu…

Attendance at the 2016 Farwest Show in Portland was up 6% from last year, as visitors sought to learn more about emergent market opportunities.

Read More
Workers at Golden State Bulb Growers clean Calla tubers and select the best quality bulbs, placing them on conveyors to be graded, counted and sorted in the new system

September 13, 2016

Newly Signed California Law Expands Overtime To Farmwor…

The new law, which will be phased in beginning in 2019, is the first of its kind in the nation to end the 80-year-old practice of applying separate labor rules to agricultural laborers.

Read More
RISE New Governing Board 2016

September 11, 2016

RISE Appoints New Leadership, Hands Out Awards During 2…

“Our members’ enthusiasm is high, and we had great engagement as we work together to set objectives for 2017 and beyond,” said Aaron Hobbs, RISE President. “Our work ensures a vibrant future for our industry, so we can continue to deliver cutting-edge solutions to solve people’s pest and plant health problems.”

Read More
Workers at The Farm at Green Village

September 10, 2016

Now Is The Best Time To Demand Federal H-2B Program Sup…

Congress is expected to pass a continuing resolution spending bill in the near future, and whether or not that measure includes an H-2B returning worker exemption could impact your labor supply for 2017.

Read More
Cavicchio Greenhouses

September 6, 2016

Cavicchio Greenhouses Wins Inaugural Sustainability Awa…

The Sudbury, MA, growing operation sustains more than 250 acres of annuals, perennials, and nursery stock, with a number of practices to mitigate its impact on the environment.

Read More
Charlie Hall Feature Image

September 6, 2016

10 Insights From Charlie Hall’s Green Industry Economic…

With the uncertain current economic climate, Texas A&M economist Charlie Hall says now may be the perfect time to invest — as long as you do it smartly.

Read More
Increased customer demand led Good Harvest Farms to add hydroponic lettuce in 2000

September 3, 2016

Are You A Leafy Greens Grower? If So, Take This Survey!

A team of researchers from several universities is looking for feedback from leafy greens and herb growers.

Read More
[gravityform id="35" title="false" description="false"]