GG’s Industry Outlook 2006 Un-pinched

As usual, there’s a lot less space in Greenhouse Grower magazine than on our Web site, so we’ve taken the opportunity to provide an uncut version of the responses to our Industry Outlook survey, seen below.

Click here for an audio version of GG contributing editor Allan Armitage’s views on the year to come.

What forecasts you see for the American floriculture market in general for 2007?

I feel the outlook for floriculture in the U.S. remains strong.  With the recent downturn in the housing market, I believe more Americans will invest more in their current homes. Annuals, perennials, flowering shrubs and trees provide lots of bang for the buck!  Gary Mangum, Bell Nursery

My forecasts are for continued consolidation of the industry, more smaller growers looking to alternative or specialty crops and increased cooperation among smaller growers. I think this will help small- and medium-sized operations maintain profitability (or at least I hope so). Erik Runkle, Michigan State University (MSU)

Growth will come from hanging baskets and containers as well as premium potted annuals, and we will continue to see the vertical integration in the industry led by more service, merchandising, marketing and product development being co-developed by the growers and retailers (rather than the retailers only).  Growers need to be more aware of pot styles and colors as they develop their lineups, and be more keenly aware of how stores are laid out and how fast they turn product to build their production plan in a way that flows with how stores sell their product. Abe VanWingerden, Metrolina Greenhouses

I see a continuation of the box stores and the independents competing for homeowner dollars.  No matter what we predict for overall sales in 2007, it will still be dependent on the weather. Doug Cole, DS Cole Growers

I believe we may see some struggling suppliers fall by the wayside as they continue to get squeezed in the mass market arena. The relationships with the independents will be solidified as suppliers continue to deal with increased demands from the mass marketplace. Vinny Naab, Naab Horticultural Marketing, LLC

Cautious optimism for small increases in sales and hopefully stable profits. The industry and economy aren’t positioned to expect big growth.  Bridget Behe, MSU

The total number of growers will continue to shrink, but the largest of growers will continue to get bigger. Contract growing and other types of business alliances will increase.  John Holmes, Laura Kunkle, Steve Carver, OFA

I really believe the people-plant connection is built into us humans and will have growth potential in 2007 and forever. There’s much more to this than just getting rid of pallets and cinder block. It’s in the attitude about it. Sid Raisch, Horticultural Advantage

What market segments might experience growth? How about decline? And why?

I see the greatest growth potential in anything service-related (“do it for me”) and made-to-order. Today’s retirees quite a bit of discretionary money to spend and want to have a beautiful home but would often rather spend their time otherwise. The other potential customer base is dual-income families with children in school, who are too busy but also have the money to beautify their home. Customers who spend money on “do-it-for-me” also value having something unique, so things like a custom-planted container garden is perfect for them. I think painted poinsettias will continue to gain market share over the next few years. They appeal to the younger generation and also fit into the made-to-order market. Kerstin Ouellet, Pen & Petal

I doubt most Boomers will keep their McMansions long into retirement, so a key to our industry’s growth will be adapting to meet their new lifestyle. If this means two smaller properties, one or both managed by a property manager (as in a planned community), a great deal will change for our industry. Bridget Behe

Annuals and perennials, vegetables and herbs will continue to see growth as well. Trees and shrubs may not, as the category clearly benefits the most from new home starts. Gary Mangum

I see weakness in the potted floral crop sector, bedding plants as stable and the perennial sector continuing to see an upside in sales. Floral sales are not thriving due to a lack of dynamic marketing and merchandising.  Vinny Naab

Areas of increase: Woody Ornamentals (shrubs) and potted plants due to increased interest and marketing initiatives.  Areas to remain level to only slight increases: Annuals–level   Perennials- slight increases- these areas will remain relatively unchanged due to market saturation and the number of growers producing these items. Paul Pilon, Perennial Solutions

Growth areas are going to be services, whether it be container gardening, landscaping services, DIFM vs. DIY, etc. New varieties in the shrub market will continue to fuel growth and I think the green roof concept may get some legs over next few years. Areas of decline would be commodity plants and acceptance of bad quality. Jeremy Deppe, Spring Meadow Nurseries

Professional landscape services are up and there is growth in the major retail area. A renewed interest in potted plants and continued interest in container gardening can help capture new consumers who may not have large gardens, but still buy plants. Jeff Gibson, Ball Hort

Because outdoor living has reached the mainstream, most people already have their decks, patios and gardens in place. Thus, spending on these items will likely be for upgrades like fancy outdoor cushions, candles, garden art, container plants, etc. Susan McCoy, Garden Media Group

The segment with the best growth opportunity will be growers that can tap into the DIFM trends either through their own landscape divisions, or those that can partner with someone with that accessibility. John Holmes et al

Contract growing is definitely a trend that I see increasing, especially with growers that are feeding VMI programs.  Vinny Naab

Cool tropicals like orchids up–”old lady plants” down–pre-done planters and large baskets up, and anything that reduces time and adds immediate pleasure up. Laurie Scullin

What pressures do you see impacting growers in 2007?

If there were easy profits to be made, they have long since been made.  Energy costs for heating and transportation will be key pressures in the near term. Some regions already deal with water regulations—for other regions, legislation is coming. Bridget Behe

Energy costs, labor (or lack of it) and the lack of educational programs in horticulture. Jeff Warschauer

The balance between supply and demand appears to be our biggest dilemma.  We used to be able to control the market, the quality and the price and get away with it.  Whatever the grower needed was taken care of by an automatic price increase.  Now we are being squeezed, and need look at all aspects of our business to see how we can remain profitable with flat demand and flat prices. Doug Cole

We have this every year, in one from or another. Energy has been at the top of our mind for the last little while, but others have all been problems for years. The REAL issue is that growers are not getting prices up, and that has nothing to do with their costs. Laurie Scullin

Pricing, pricing, pricing. That is the greatest pressure we face; the inability to raise our prices. Bill Swanekamp, Kube-Pak

Clearly, labor availability is a concern for the green industry.  All segments are impacted by available labor, cost not being an issue. I’m so sick of hearing about our industry’s need for “cheap labor”. Our industry needs people that are excited about what we do, and want to stay and grow with the business. Quality labor becomes even more important as more companies focus on further supporting sell through at the retail level through grower driven merchandising. Gary Mangum

Labor pressures seem to be only worsening for the green industry, partly driven by increasing immigration enforcement and partly a result of workers being drawn into more lucrative jobs in other sectors, such as construction. On that front, a slowing housing market may take some pressure off in the year ahead, but in the green industry, the more year-round the job, the better positioned the employer to attract and retain workers. Growers also continue to struggle with servicing their accounts profitably, as issues such as pay-by-scan aligned with other rising costs continue to pressure pricing models. Marvin Miller, Ball Hort

Rising fuel costs, regulatory issues such as chemical application and controls, and VMI (vendor managed inventory) will continue to put additional price pressures on growers. Jeff Gibson

Environmental regulations on what can and can’t be used during the growing process will likely be a pressure for many growers. Susan McCoy

The increased minimum wage will certainly affect growers, but in the long run it should have a positive impact on the economy. Kerstin Ouellet

How can growers raise prices?

We don’t do enough listening and watching of our customers to know what is and isn’t working for them. We are challenged to provide value when we don’t really understand what they do with our products once they get home. There is value in pre-constructed containers for individuals who have more money than time, there is value in delivering and planting items, and there is value in creating a memorable experience by building the backdrop for a beautiful wedding or party. Bridget Behe

We as an industry need to make every effort to grow and ship excellent material, every time. We need to invest in the future by working with the breeders to select the best performing plants for the consumer–not just the greenhouse bench. And finally, we need to work with our retail partners to present the material in a way that’s attractive to the consumer.  The better job we do, the more “lifetime” relationships we will create.  When folks have a great experience they tell others–they do the same thing with even more vigor when they have a bad experience. Gary Mangum

Get in the practice of pricing for value, not just cost. We have undervalued the product by thinking it was always about price for the customer. Once supply is in line, the efforts to increase demand will be that much more fruitful. John Holmes et al

Prices are mostly a matter of a decision of how much ink to put on a piece of paper. We have to think ourselves out of the current price and into the new one. Sid Raisch

In my opinion our industry needs to work together better in an effort to increase consumer spending on floriculture products. We typically look only to our immediate customers (suppliers look at wholesale growers, wholesale growers to retailers, retailers to consumers etc.). We should think of our industry more as a partnership where all parties involved work toward the goal of increasing consumer spending. Kerstin Ouellet

Look inside the box store. You walk through a beautiful display of bathroom items, all put together like a bathroom, not just an aisle with plumbing parts–and they offer to install, deliver, seminar you etc. while we still offer “plumbing parts.” Laurie Scullin

What trends do you think will have a market impact?

New uses for products, such as green roofs, with an emphasis on the environment will likely increase. Lifestyle impacts our industry most, so we need to be where people relax, entertain, and decorate. Bridget Behe

The smaller wholesale growers will be looking for niche markets where they will produce high-value crops that don’t warrant high volume. Doug Cole

As the chains get more savvy with their marketing and POP they will continue to gain market share. Bill Swanekamp

Bigger retailers being more demanding, and smaller retailers being more demanding too–a trend? Laurie Scullin

The aspect of instant gratification with larger plants that’s not often talked about is consumer success. Bigger is better for instant impact, but it’s also better for consumer success. More growers will grow what they grow best, and see their products made available to the end consumer by working closely with larger grower partners that have working relationships, and fully understand the needs of the specific retail segment. Gary Magnum

If the trend is for individuals to work less in the garden, shrubs fit the bill. The new varieties that are being introduced into the marketplace are focusing on new exciting colors, easy to grow varieties, multiple seasons of interest, have impulse appeal, have good insect/disease resistance and are dwarf/compact, and will dominate the shrub segment in the coming years. Jeremy Deppe

Sustainability is a hot topic in so many industries these days–it’s not so much a trend as a new way of thinking.  Our industry has to explore ways not only to be part of the sustainable movement but to do so in a profitable way. Bill Doeckel, Ball Hort

One interesting thing I can see happening in the future is the movement toward box stores reducing the number of independent vendors they receive products from and relying on a single regional supplier for each particular geographic area.  The regional supplier will provide a brand name of green products to the chain and be responsible for sourcing all of the products being produced and sold.  They will hire growers to contract grow certain items- woodies, perennials, annuals, etc. This will create ‘regional co-ops’ that will allow growers to specialize in certain commodities, allow small growers to ship to the big boxes (through the regional supplier), and will continue to put the control of quality and merchandising on the growers (regional) and in the future allow growers to have more control over their own pricing. Paul Pilon

Contract growing will continue to impact overall industry growth–the most active building of greenhouse structures is currently going on in the retail sector, not necessarily wholesale. On the consumer side, we will see growth with fewer, but larger, more expensive per unit item purchases. Retailers and growers will need to respond accordingly through better presentation, packaging and product assortment. Jeff Gibson

Frequent delivery schedules is the most critical need. Sid Raisch

The environmental movement will impact the green industry trade the most. Susan McCoy

Contract growing could create more efficiency and help with overproduction. The growth of mega retailers will continue the push towards more contract growing, the growth of mega growers, and attrition of smaller growers who have not or cannot change to meet the needs of their end consumer or their clients. John Holmes et al

Contract growing and consolidation. In heavily populated areas enough volume is present to allow folks to compete and be independent. Jeff Warschauer

How can we grow demand with consumers?

We need to build relevance to younger consumers using technology as a window into their lifestyle. We need to maintain relevance to Boomers through retirement. We can’t afford to lose either as a potential target market. Bridget Behe

Our industry can grow demand by better product packaging and retail merchandising. Vincent Naab

The independent retailer needs to think about presentation, price, merchandising programs and all those good things.  More than anything, (the independents) need to realize that they are not only competing with the box stores, but with Starbucks, Olive Garden and The Pottery Barn. Doug Cole

We need to look at what other industries are doing. Where is our iPod?  Where is the MySpace for plants? Laurie Scullin

Too much branding within a single location or across a geographic area loses the value of image. All brands seem to blend together, loss value, and confuse the consumer. For example, having a Proven Winners, Gardening for Dummies, Miracle Gro, Stepables, etc. at a single site or at multiple sites within a geographic area (city) the value of branding is greatly diminished.  When the market is saturated with too many brands it is no better off than if there where no brands present and we were back to selling black flats and pots. Too much is not a good thing. Paul Pilon

Better POPs. Bill Swanekamp

There are whole generations of consumers that are reaching the age where gardening has the potential to be relevant. They’re buying their first homes or moving into their first apartments, and they need flowers and plants as an antidote to their high-tech world. Young people think and buy differently, and our industry has to figure out how to appeal to them.  Anna Ball, Ball Hort

We need to help consumers be better gardeners, and we need help them to be more confident in gardening. Susan McCoy

There needs to be an effort to move the consumer’s perspective from plants being a discretionary purchase to one of necessity based on improved home values, mental and physical health benefits. John Holmes et al

We need to give consumers more ideas on why and how to use our products and position floriculture products against other non-necessity items such as non-floral gifts, wine, etc. Our industry focuses on competition within the industry (i.e. box stores as competitors to independents; or brand vs. brand) and in the process forgets to focus on non-floral competition. The wine industry managed to position wine as the perfect hostess/host gift, whereas flowers are often not even considered. Kerstin Ouellet

What are your thoughts on collective promotion?

All my life, I have been motivated by the thought that through our products, our industry feeds the soul. Now it has been proven that flowers and plants not only feed the soul but also increase productivity, make people healthier, keep the air cleaner and reduce crime!  As an industry, we need to figure out ways to get these messages out. Doing so will not only benefit our society but also the floriculture industry–and could help us attract new consumers. Anna Ball

Success or survival of one company in the channel of distribution has implications for partner businesses (and) collective dollars can do more good synergistically than dollars invested by themselves. Bridget Behe

Voluntary is good, but I don’t see it working to the extent necessary in this industry. It’s very difficult to get the broad support needed on a fully voluntary basis. Gary Magnum

Collective promotion is very valuable and should be mandatory. The model is there and it has been proven to work. Jeremy Deppe

Programs such as America in Bloom are having an impact, one city at a time, especially when industry members partner with the municipality, commercial and civic interests; with such exposure and a little marketing imagination, growers, landscapers and garden centers have reported increased sales from residential involvement in the AIB efforts. Marvin Miller

If 10,000 growers and garden centers provided an average contribution of $100 to AIB, it would increase the budget by 600 percent! With its limited resources, in just five years AIB has engaged over 130 communities and touched 20 million people with its program and message. In October 2006, consumer media outlets picked-up stories on AIB that represented nearly $100,000 in exposure to combined circulations of over 173 million! That is a tremendous impact with little dollars. With a 600 percent increase, the impact would grow exponentially. John Holmes et al

A few points to a mandatory program would never be missed, and the nature of our supply chain is such that this is probably the best way to drive demand. There is a lot of fragmentation with growers, brokers, distributors and direct sellers and getting cooperation from so many independent thinkers is difficult. Buyers who give the participating growers preference and let the others know why they are getting less would entice support for a voluntary program. Sid Raisch

I am not in favor of mandatory promotions. On the other hand, if the membership of a group or organization votes to support or implement a promotional program, then all members should be required to participate. Kerstin Ouellet

What do you see as the most successful promotional programs to date? Why?

Flower Possibilities is a good example of voluntary collective promotion that is having an impact. Effective promotions need a means of evaluation and time to work. Just as we need to show our consumers that we provide them with real value, so too does a collective promotion effort need to show value to the investors. But much like plants, promotions don’t produce an impact overnight.  We need to give both some time and resources to grow into something beautiful. Bridget Behe

Proven Winners and Jackson and Perkins- it takes many years to establish a new ‘brand’ and these programs have the name recognition that comes with time. Paul Pilon

I think the WAVE petunia program by Ball Hort still ranks as the top success story in recent history. Also Proven Winners is doing a very good job of capturing the consumer’s interest in their product mix and retailers seem to be successful with the program. Both companies have more effectively closed the triangular loop between breeder, grower and retailer. Vinny Naab

A few years ago, SAF had really clever posters with bouquets of three different sizes pictured, and the headline asked, “Exactly how mad is she?” I thought that was funny and clever, and exactly the kind of promotion our products need. It positions flowers against non-floral products, and promotes the use of flowers in different situations. This kind of promotion of floriculture products needs to go into all kinds of consumer media, and we can only get there if we work as a unified group. One grower or retailer simply can’t do it. Kerstin Ouellet

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