State Of The Industry: Life After Walmart

State Of The Industry: Life After Walmart

When Walmart hit the garden center scene a couple decades ago, a few growers saw an opportunity for growth and pounced on it. Then, as Walmart’s garden center business began to boom, more growers jumped on the bandwagon, creating a Walmart network over the years that included a few hundred growers.

Over the last couple years, though, Walmart’s grower network has dwindled to fewer than 40 select growers. Complexity and costs in the supply chain led to consolidation, which came as a surprise to many of the growers who built their businesses over the years with Walmart.

Recovery hasn’t been a smooth road for the growers pushed out of Walmart’s network, but there are opportunities to be had. And in some cases, those opportunities still involve Walmart. Case in point: Dan & Jerry’s Greenhouses in Monticello, Minn.

“We are actually doing a small amount of contract growing with Walmart to keep our foot in the door,” says Dan Totushek, owner and CEO of Dan & Jerry’s. “We’re growing some patio pots for Walmart–for another grower. We’re not dealing with Walmart directly at all.”

At one time, Totushek says Dan & Jerry’s dedicated 40 percent of its business to Walmart. But that percentage made Totushek uncomfortable, so Dan & Jerry’s reduced its Walmart production over time.

Last spring, Dan & Jerry’s dedicated 10 percent of its production to Walmart. And it was Dan & Jerry’s last spring as a Walmart vendor.

“I’d have to say it was a bit disappointing,” Totushek says, referring to when he was told Dan & Jerry’s would no longer be serving Walmart directly. “But by the time last spring rolled around, we were doing a small number of stores. Walmart’s goal was to cut to a few growers nationwide. That was their plan, and to be a part of it you had to be a vendor for a big chunk of stores. That was outside of our comfort zone.”

Another former Walmart vendor, which asked to remain anonymous for this story, was also caught by surprise when told it would no longer serve as a vendor.

“We thought everything was going fine,” the grower says. “We’d have our annual meetings with Walmart and we would get graded on how well our product sold and the profit margin you brought in for them–kind of a financial scorecard. We were told we needed to get our financial performance up because others were outperforming us.

We had a list of goals to meet for the next spring. We thought we were doing pretty well with them after that, but we got a phone call and were told our score wasn’t up to par with other growers. And they were cutting back vendors.

“We would always go to annual vendor meetings at Walmart, and the big growers would all go off separately. The bigger grower group would go off with them in a separate meeting after the meetings, and you didn’t think too much about it at that time. But [consolidation] might have been years in the making.”

Phasing Out

Rockwell Farms, an operation located in Rockwell, N.C., is in a different position with Walmart than Dan & Jerry’s was last year. About 18 months ago, Walmart told Rockwell it planned to consolidate its grower network and that part of the plan included phasing Rockwell out over a couple years.

Tom Abramowski, president of Rockwell Farms, says he understands Walmart’s decision. And like Dan & Jerry’s, Rockwell is finding opportunities to work indirectly with Walmart as a contract grower.

“Walmart has been very, very good in the way they’ve treated us,” Abramowski says. “They told us it was going to be a two- or three-year consolidation and we’d be doing business with them in that timeframe to allow us to investigate new opportunities–and Walmart has been doing that.”
Contract opportunities aren’t a given for growers booted from Walmart’s grower network, but they’ve at least served as a temporary solution for growers looking to create business elsewhere. Totushek believes contract growing is a good thing for growers who prefer to cut overhead costs or let others worry about marketing.

Still, Totushek sees downsides to contract growing with Walmart.

“You have to wonder about the security and longevity of it,” he says. “How long is it going to last? When we build market, we want to build as secure a market as we can. We want to build long-term relationships. The fear, with me, is contract growing for a Walmart vendor would be on a year-to-year basis. When you’re contract growing, the grower you’re working with could add space. Anything can happen. Walmart might decrease (business) with that vendor.”
If anything, lost business with Walmart acts as a reminder that growers should diversify their customer base–just like Dan & Jerry’s has.

“We like to be diversified now just in case something happens with one customer,” one former Walmart vendor says. “Then, you’re not devastated if something should happen. Right now, we’re trying to diversify our customer base. Spring is your best time to make money, so you try to diversify as much in spring and come up with new and exciting ideas in the off time.

“Everyone grows a garden mum, but how can you diversify that garden mum? Everyone grows poinsettias, but how do you diversify?”
Totushek agrees customer diversity is a must in today’s business landscape. He says Dan & Jerry’s had the opportunity years ago to enhance its business with Walmart. That’s when Dan & Jerry’s dedicated 40 percent of its business to Walmart. But the operation declined the offer to increase its business because it wanted a more diversified customer base.

“We do a lot of local farm stores now,” Totushek says. “Mill’s Fleet Farm is one of our primary customers. It’s one we started pay-by-scan with six years ago–about the same time we started backing down from Walmart a little bit. We started pay-by-scan in a way that we managed the inventory for them. We had a lot of the decisions as far as what went in [Mill’s Fleet Farm] and what didn’t. The pay-by-scan part of our business has been growing not only with Mill’s, but with other farm store customers.”

Compared to five or six years ago when Dan & Jerry’s was heavily involved with Walmart, Totushek says vendors have more inventory management and decision-making power. Walmart is still tight on price–and that probably won’t change–but the retailer was always helpful reducing Dan & Jerry’s shrink. And the reality, he says, is many growers still are Walmart vendors–they’re simply working with other growers rather than with the retailer directly.

“I don’t know if the current setup is all a bad thing,” Totushek says. “It goes back to more regional control. If a grower is in charge of a certain region, he’s got a whole lot of stores and other growers growing for him. He has a better handle on that region than one central buying office does. Time will tell how all this pans out for the big growers who are with them and how committed Walmart will be in the long term.

“But if Walmart did start cutting down one of those big growers, once you got all your eggs in one business, it would hurt if you lose that business.”
If growers have lost Walmart business–or they do in the future–Abramowski says it’s not the end of the world. There are opportunities out there he says. Growers just have to recognize them.

“It’s a way to reinvent yourself,” Abramowski says. “The best part about being in America is you have the opportunity to reinvent yourself and find new business. The opportunities are there.

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