State Of The Industry: Survival Of The Fittest

State Of The Industry: Survival Of The Fittest

Do you expect your greenhouse operation to survive 2010? Odds are your answer is yes, judging from the responses we got from growers who took our survey on the state of the industry in November.

In fact, the overwhelming majority of growers (92 percent) anticipate their operation being around in 2011. Eight percent of growers, however, aren’t sure they’ll be around in another 12 months, and more growers are getting vocal about their uncertainty or displeasure over the state of our industry–and the direction we’re headed.

“There is too much competition driving the price down,” says Alice Longfellow, owner of Longfellow’s Garden Center, a small grower-retailer in Missouri. “There is a small selling window and if weather delays that, everyone panics and cuts their prices. Box stores are not doing anyone any favors.”

Despite the price cutting Longfellow describes, the overwhelming majority of growers have not lowered their prices in 2010 to compete with the box stores. Only 3 percent of growers report lowering prices for 2010, and 74 percent report keeping their 2010 prices about the same as 2009 prices. The other 23 percent of growers say they’re raising their prices this year.

Erik Jacobsen, owner of Parkway Gardens, a small Canadian grower-retailer, is one grower who’s raised his prices for 2010. The way Jacobsen sees it, there are too many input costs in production to do anything but raise prices these days.

“We have to be one of the most inflationary industries in a deflationary economic environment,” he says. “All our input costs–labor, energy, containers, steel, plastic–are increasing dramatically, while consumers expect price stability or reductions during the recession. This has the effect of squeezing our margins even tighter. This is a dangerous time for our industry, especially for small and medium enterprises.”

Stress-Inducing Inputs

Pricing is just one concern growers have entering Spring 2010. Weather is always top of mind for growers–and that’s no different this year. So aside from the weather, we wanted to know which challenges are the biggest growers are facing. Twenty-two percent say competition, another 22 percent say labor costs and yet another 22 percent say energy costs.

Input costs are the biggest challenge besides weather for 18 percent of growers, and the input cost weighing most heavily on growers is energy. Nearly half of all growers listed energy as the input that places the biggest burden on their business. Increasing costs of pots and trays is also becoming an issue, as 11 percent of growers listed it as the most burdensome input. Pots and trays were followed by soil and amendments (9 percent), fertilizers (8 percent), chemicals (7 percent), labels and tags (3 percent) and water (2 percent).

Even with energy as the most burdensome input, the majority of growers say it’s the input on which they cut back most in 2009. Growers attribute an assortment of ideas for the cash savings, including extensive greenhouse winterization, the application of new heating methods and the installation of new, more efficient boilers.

Production & Sales

Around this time last year, we asked growers how they expected their 2009 sales to compare to their 2008 sales. Growers were optimistic then, with the majority (26 percent) expecting sales to increase less than 5 percent over 2008.

This year, we asked the same question–instead pitting 2010 sales expectations against 2009 sales–and growers are even more optimistic now than they were one year ago. The majority of growers (26 percent) now expect sales increases between 5 and 10 percent, and 66 percent of growers expect some kind of sales increase. Last year, only 56 percent expected their sales to increase.

“Everything is cyclical,” says Pat Berry, owner of Vickery Wholesale Greenhouse in Texas. “I believe business will turn around some in 2010 and more in 2011. There may be fewer players, which will make it easier on the survivors.”

Tying right in with increased 2010 sales expectations is increased 2010 production. Forty-five percent of growers say they plan to increase production this year, and more than half of those anticipate sales increases of at least 5 percent.

So expectations and production are up in 2010. How about crops growers are optimistic about? We asked growers which crop they’re most high on for 2010, and herbs and vegetables (28 percent) and ornamental bedding plants (23 percent) generated the most support.

We also asked which crops growers are most pessimistic about, and trees (21 percent), woody ornamentals (15 percent), fresh cut flowers (13 percent) and flowering potted plants (12 percent) are generating the most concerns. Few growers are pessimistic about herbs and veggies (2 percent) and plugs and propagation material (2 percent).

“Being involved with crops that produce food, I’ve been made aware of the use of greenhouses overseas for growing food,” says Michael Wellik, owner of The Strawberry Store. “I think the industry needs to redirect its efforts to switch away slowly from growing ornamentals to growing food. My newest philosophy is don’t grow it if you can’t eat it.”

A complete shift away from ornamentals is a bit extreme, but Wellik is right when he says food crops are an opportunity. Many growers benefited from the veggie boom last year, and many who benefited increased their vegetable production this year believing they’ll capitalize on the crop again.

The Reality Is …

Those are the positives about the state of all things commercial greenhouse floriculture. But the state of our industry today, according to growers and others, isn’t all that rosy. As Marc Clark, executive vice president of Rocket Farms put it: The big growers are getting bigger, the mid-sized growers are struggling and the small growers will survive–if they have a good niche.

Clark’s industry description is a good one, but others express bigger concerns about the state of the industry.

“[Our industry] is in poor shape,” says Kurt Messick, vice president of sales for the California broker, Messick Company. “This is led by the structural change to marketing plants to big box stores. There are so few, but with such buying power, growers have little or no control over their own businesses. So many of the small independent retailers have gone out of business that there is too much power in the hands of so few, and they are using this power to dictate prices.

“Many don’t honor commitments, and this leaves all the risk on the growers with no margin to compensate for this extreme risk. This is (and has been) a recipe for disaster.”

Ric Stevens of Nash Greenhouses in Michigan agrees consolidation has stepped up a notch recently, and it’s hurting those small and mid-sized operations.
“There has been a lot of consolidation in the last 12 months,” Stevens says. “I think you will see a lot more of the smaller greenhouses go by the wayside. You have to know the costs of everything you do.”

Leave a Reply

16 comments on “State Of The Industry: Survival Of The Fittest

  1. I think any supplier greenhouse or otherwise should black list any grower who sells to the big box stores! For the health of the overall industry we cannot allow the likes of the Big box chains to take control. And that is certainly what is happening! If our industry leaders are smart they will distance themselves from the big chains. We as an industry need to persue other avenues for marketing our products!

  2. Anonymous, you are dead wrong.

    As an independent grower I have many disagreements with the chain growers, however, to “black list” all chain growers because of a few bad boys is not the way to fix the problem. Lets hear some real suggestions and not this garbage.

  3. Sorry but I agree with Anonymous. The pharmacutical companies sued the big box chains for under pricing their drugs and WON! Your box chains do not rely on the revenue of their pansy’s. They are undercutting the fair value of hard work and dedication to the smaller retailers by charging such a low price for their products. How many greenhouses have gone out of business because they are not paid for the pack of pansy’s until it scans. They don’t maintain the product all they do is buy it in at a price dictated by Walmart and your responsible for the rest. How do you compete and make enough money to justify your effort, money invested and time when you have to lower your prices just to compete with them.
    I see that you are a grower Kevin that gives you the abbility to make some money on walmart, but be careful, they pay for only what they sell and you are responsible for watering, and care of your plants. They can put you under in a heart beat!!!!!!

  4. e asked the same question – instead pitting 2010 sales expectations against 2009 sales – and growers are even more optimistic now than they were one year ago. The majority of growers (26 percent) now expect sales increases between 5 and 10 percent, and 66 percent of growers expect some kind of sales increase. Last year, only 56 percent expected their sales to increase.
    “Everything is cyclical,” says Pat Berry, owner of Vickery Wholesale Greenhouse in Texas. “I believe business will turn around some in 2010 and more in 2011. There may be fewer players, which will make it easier on the survivors.”
    free 3ds
    Tying right in with increased 2010 sales expectations is increased 2010 production. Forty-five percent of growers say they plan to increase production this year, and more than half of those anticipate sales increases of at least 5 percent.

  5. Every college works hard to tell you that they are the best, but how can you really know? The truth is, there is no simple way to find the best online colleges and universities. You can go by name and reputation, but that does not mean as much nowadays as a college that spends time developing classes that prepare students for real life. security+ braindumps

  6. I believe business will turn around some in 2010 and more in 2011. There may be fewer players, which will make it easier on the survivors.” free 3ds Tying right in with increased 2010 sales expectations is increased 2010 production. Forty-five percent of growers say they plan to increase production this year [http://abi.com|njo]

  7. I think any supplier greenhouse or otherwise should black list any grower who sells to the big box stores! For the health of the overall industry we cannot allow the likes of the Big box chains to take control. And that is certainly what is happening! If our industry leaders are smart they will distance themselves from the big chains. We as an industry need to persue other avenues for marketing our products!

  8. Anonymous, you are dead wrong.

    As an independent grower I have many disagreements with the chain growers, however, to “black list” all chain growers because of a few bad boys is not the way to fix the problem. Lets hear some real suggestions and not this garbage.

  9. Sorry but I agree with Anonymous. The pharmacutical companies sued the big box chains for under pricing their drugs and WON! Your box chains do not rely on the revenue of their pansy’s. They are undercutting the fair value of hard work and dedication to the smaller retailers by charging such a low price for their products. How many greenhouses have gone out of business because they are not paid for the pack of pansy’s until it scans. They don’t maintain the product all they do is buy it in at a price dictated by Walmart and your responsible for the rest. How do you compete and make enough money to justify your effort, money invested and time when you have to lower your prices just to compete with them.
    I see that you are a grower Kevin that gives you the abbility to make some money on walmart, but be careful, they pay for only what they sell and you are responsible for watering, and care of your plants. They can put you under in a heart beat!!!!!!

  10. e asked the same question – instead pitting 2010 sales expectations against 2009 sales – and growers are even more optimistic now than they were one year ago. The majority of growers (26 percent) now expect sales increases between 5 and 10 percent, and 66 percent of growers expect some kind of sales increase. Last year, only 56 percent expected their sales to increase.
    “Everything is cyclical,” says Pat Berry, owner of Vickery Wholesale Greenhouse in Texas. “I believe business will turn around some in 2010 and more in 2011. There may be fewer players, which will make it easier on the survivors.”
    free 3ds
    Tying right in with increased 2010 sales expectations is increased 2010 production. Forty-five percent of growers say they plan to increase production this year, and more than half of those anticipate sales increases of at least 5 percent.

  11. Every college works hard to tell you that they are the best, but how can you really know? The truth is, there is no simple way to find the best online colleges and universities. You can go by name and reputation, but that does not mean as much nowadays as a college that spends time developing classes that prepare students for real life. security+ braindumps

  12. I believe business will turn around some in 2010 and more in 2011. There may be fewer players, which will make it easier on the survivors.” free 3ds Tying right in with increased 2010 sales expectations is increased 2010 production. Forty-five percent of growers say they plan to increase production this year [http://abi.com|njo]

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