As part of our State Of The Industry report, we asked industry leaders to answer questions about the state of all things greenhouse floriculture. Dominik Neisser, the grower at EuroAmerican Propagators, shares his take on the state of the industry this week.
How would you describe the state of the greenhouse floriculture industry today?
I think we got a good share of the nationwide crisis. Because our product is a luxury product, people remove flowers from their shopping list when money gets low. The result of that will be a market that has more product than demand, which will push down prices.
As a greenhouse operator you need to carefully watch the costs and eliminate any kind of waste of spending so your lower income will still be higher than the overall costs. Good quality and fair prices is not just a good sales argument anymore; it is essential to survive in the industry and clean up.
Even when recession turns into normal business again, the flower industry will have to wait until consumers fulfilled other demands they had to put aside for a while. First, the car will be renewed. Traveling and furniture will be [priorities]. I saw it happen during the crisis in 2002 in Europe, with the greenhouse operation hanging in there hoping the business comes back.
Has our industry entered a new era or paradigm shift? Please explain why or why not.
Yes, we are in a different era right now. The last years have been beneficial for the floriculture industry. People beefed up their front yards to raise the house evaluation. Many apartment renters became homeowners and invested in their property (well sponsored by the bank). Overall, there was more spending than earning, and flowers have been part of that wild party.
The price was a secondary criteria when customers shopped in the garden centers. It’s been more than a year now since we returned to “reality,” and consumers realize their flower budget is lower than the years before. Cheaper varieties will be accepted more often and the price is a more watched criteria. But greenhouse operations invested and build up production space based on the better times before. Investments have been done and credits need to be paid back to the bank. That’s why the overproduction of flowers will not be adjusted in short time. Everybody is trying to keep their share of the market and competition will be much harder and rougher.
Has there been a changing of the guard in industry leadership? Please explain your answer.
I do not think yet. When they talked about financial problems of the big home improvement stores, there where signs of a big change. But it looks like they will survive the next months and most nursery products will still produced from their big suppliers.
Breeding and licenses are still ruled by the companies like Syngenta, Ball and others. The few changes that happened last year really do not affect the leadership because the big players bought each other and did not let anybody else join the club.
What are the greatest challenges growers are facing today?
Competition. Desperate sellers will extend their sales territories and try to convince established markets to buy their products. With that, wholesalers will have more offers on their desk and pick the best product and the best price. This can raise of the quality standard and lower sales prices.
Nurseries also have to create very careful business relationships. Missed calls or skipped visits could lead to fewer orders because there are more competitors out there knocking on customer doors. Marketing investments need to be higher to still be visible on the market.
With all the extra effort and higher quality standards, growers need to be very good in math. Besides fulfilling the high demands of the market, they have to still overlook costs and compare them constantly with the income. They have to know their costs and give the best prognoses of the income. To do the math before was important to maximize the profit. Today it is essential to survive the business year. Who did not watch costs before just lost money that year. Nowadays, there will be a call from the bank and trouble is on the way.
Choosing the right plants in the production program is another challenge that is critical these days. Consumers will change their plant choices and growers need to hit this moving target.
What are the greatest opportunities for growers to build their business?
The unsecure market gives small growers and greenhouse operations new chances. Wholesale companies are looking for better, different and cheaper products more than before.
With the right marketing and an aggressive sales strategy, there can be newfound markets. With an innovative product produced in good quality to a fair price, the stores can offer an alternative to the overall mass product.
This year, vegetable plant sales went up in a lot of garden centers. Who would have thought that two years ago? Small businesses that do not have to go over a long chain of command to introduce new products can take advantage of an overfilled market that looks desperate for something different fast.
Consumers have a lower budget for flowers, but they may also have more time to compare products and look for new shopping possibilities: the Internet, farmers markets, the little store on the corner. You have to watch the market and find out where the business is going.
It is also the perfect time for investments. Interests are low, construction companies are not overfilled with orders and give good prices. There are also a lot of used products out there that can give chances for a cheap investment that pay off faster than before.