View: Industry Power Shift Approaching

Growers proved they weren’t immune from change and accountability when retailers began putting downward pressure on them in the 1990s. Now, marketing consultant Jerry Montgomery says another power shift is coming, and it involves growers making suppliers just as accountable. Below is Jerry’s commentary:

Our industry was in the era of “Grower In Charge” up until the 1990s. The retailers followed the growers during that era, and the growers made almost all of the decisions relative to green goods marketing at retail.

Growers selected the sizes, the varieties, the packaging and in many cases dictated the seasonality. Of this was also the period where the supply was less than the demand and the hay days of industry growth, where it was not unusual for the wholesale value of bedding plants to increase 8-10 percent annually.

In the early ’90s, as the national retailers were becoming the leaders in retailing green goods, the dynamics drastically changed and the retailers took control of the supply chain. As they flexed their muscles and changed they way growers go to market, industry margins began to shrink because the retailer gained an understanding of production profitability and wanted to participate in the form of lowers prices.

Not only did retailers put downward pressure on prices, but they demanded UPC labeling, consumer information on the product labeling and got new and different packaging. They also started asking for specific varieties. Now, the retailers are adopting products from intermediaries and telling their vendors how many they have to buy, eliminating any bargaining for the grower with their supply chain.

During the ’90s, some growers expanded but many more started to see dramatically reduced profits. By the early 2000s, grower loss was at an historic level. To survive, growers have to listen to the customer and embrace their demands. This did not sit well with many companies that were accustomed to and embraced the concept of “grower in charge.” This was and continues to the beginning of the end for many industry companies that have a long history of success but can’t bring themselves to embrace the changing market dynamics.

Until the mid-1990s there was little accountability for grower performance. The responsibility for retailing green goods and the associated costs, including discards, was the exclusive domain of the retailers.

As the retailers gained more bargaining power and at the same time started developing very sophisticated supply chain measuring tools and techniques, they made their vendors more and more accountable. “Pay by Scan is another example of how the major retailers are managing their supply chain by pushing more accountability and cost to the vendor base. Unfortunately, most growers don’t buy on the basis of “pay by scan.” They just sell–not a bad deal for their vendors. But just wait.

Retailers now judge their vendors not on who has the smoothest-talking sellers but on numbers–comp sales year over year, gross margin, GMROI and same store sales. If those numbers don’t correlate with the retailer’s plan, the grower is at risk of losing the customer.

Consider how the number of bedding plant vendors has changed at Walmart over the past three years. According to some well-informed industry watchers, Walmart has gone form more than 250 bedding plant vendors to a current level of 35 to 40. If you evaluated Lowe’s and Home Depot, the numbers would be similar to those of Walmart.

In the face of the changing market, there are high rates of failure but there are also a number of success stories. Check out the table (below) for the elements that, in my opinion, are the drivers that determine why some fail while others succeed.

Elements Successful Companies Struggling Companies
Customer focus Listen and respond, lead Hate the customers
Understand accountability Embrace being measured Always have excuses
Response to change Drive and embrace change Fight it
Measure the vendors Make them accountable Think it’s ridiculous
Measure themselves Standard practice Waste of time

Power Shift

In the future, large retailers will be more demanding and expect higher levels of performance from all of their vendors. This will ultimately put the supply chain in the hands of fewer growers, and those growers will have more bargaining power. When that happens they will buy on a “pay-by-scan” basis.

Looking at other parts of the supply chain, the game changes dramatically for the breeder/producer and the brokers. These sectors are not immune from the elements of change and accountability. No longer can either group sell based on mundane features; they must go to market with superior products that are competitively priced, and they must have a stellar track record of order fulfillment and on-time delivery.

Growers are and will continue to hold their vendors accountable for a lot more than just a pretty new color. Vendors are now accountable for making their customers money–not supplying goods. If you look at the most successful companies in any segment of this industry, it’s those that have passion for making their customer’s successful and doing it while making a profit.

The companies we see as the market leaders are not those who jump when the customer demands something but those who provide leadership by keeping their customers informed and up to date with the changing marketplace. They are the leaders because they understand how to successfully operate within the ranks of large retailers. They are the go-to companies.

Customer and vendor success are not mutually exclusive; they are synonymous with the companies in today’s world that embrace and drive change and love being accountable to their customer’s while making their vendors accountable to them. It’s the ideal formula for staying healthy and developing a competitive advantage.

Change and accountability have made a huge impact on the grower market, creating fewer but stronger companies and causing others to enter other sectors like contract growing.

The next sector to be affected by these elements will be the breeder/producer segment, as more of their customers will measure their performance–not just judge them by new genetics. We all know there are more genetics available than the market can possibly absorb. We are entering a period when this sector will undergo enormous changes. Some will emerge stronger than ever, but some of the old-line traditional companies will no longer exist.

All successful companies in the future will be run by smart business people who know how to manage all the business disciplines and embrace change and accountability.

About the author: Jerry Montgomery is a 40-year veteran of the floriculture industry and has worked for distributor companies, breeders and large growers specializing with a focus on sales and marketing. As an industry consultant, he works for large growers, distributors and breeder/producers. His focus is to understand the market dynamics from breeder to consumer through intense retail travel, visiting more than 2,000 stores since January 2008.

Leave a Reply

2 comments on “View: Industry Power Shift Approaching

  1. If the growers are all moving towards ‘pay by scan’ who then is going to hold the individual retail stores responisble for lack of watering, following marketing planograms and setups, as well as ordering too heavy or too light product ?

  2. If the growers are all moving towards ‘pay by scan’ who then is going to hold the individual retail stores responisble for lack of watering, following marketing planograms and setups, as well as ordering too heavy or too light product ?

More From State of the Industry...

May 22, 2015

Nexus Greenhouses Is Optimistic For Expansion Into New Markets

Cheryl Longtin and Mike Porter, who own Nexus Corporation, say they were excited to attend the grand opening of Gotham Greens’ new structure atop the new Whole Foods grocery store in the Gowanus neighborhood in Brooklyn, N.Y., when it opened in December 2013. The project is just one example of some of the new and expanding markets that Nexus Corporation has expanded into over the past few years. Jeff Warschauer, vice president of sales for Nexus, says the company has enjoyed getting to know and working with the founders of Gotham Greens, Viraj Puri and Eric Haley, and Jennifer Nelkin Frymark, the chief agriculture officer, on their innovative approach to business. “They are very excited and work hard internally – just great people,” he says. “From our perspective, it’s great to see that excitement and vision. The employees there are happy and there’s no turnover; they’re only adding new people […]

Read More
Farwest2015

May 20, 2015

2015 Farwest Show Announces Second Annual Equipment Innovation Day

The second annual Equipment Innovation Day will be Tuesday, Aug. 25, prior to the 2015 Farwest show, which will be August 27-29 in Portland, Ore. Equipment Innovation Day, which was enthusiastically received in 2014, offers a real-time opportunity to see new heavy and automated nursery equipment in action. The demonstrations take place in manufacturing and nursery settings, adding value to the showcase. Attendees will be able to talk with participating manufacturers and learn first-hand from innovative growers who use the equipment in daily operations. The day-long event will be held at the main manufacturing plant of GK Machines, Inc., Donald, Ore. Further demonstrations of field equipment will take place at the nearby nursery of A&R Spada Farms, LLC. Bus travel to and from the event is planned, starting at and returning to the Oregon Convention Center. Attendees are welcome to provide their own travel to and from the site. Preregistration is required. The cost […]

Read More
Bee On Flower

May 20, 2015

White House Task Force Releases Pollinator Health Strategy

An interagency Pollinator Health Task Force commissioned by President Obama released its “Strategy to Promote the Health of Honey Bees and Other Pollinators” on May 19. The strategy, released in accordance with the Presidential Memorandum issued last June, is accompanied by a Pollinator Research Action Plan, which outlines needs and priority actions to better understand pollinator losses and improve pollinator health. The recommended actions will be supported by a coordination of existing federal research efforts and accompanied by a request to Congress for additional resources to respond to losses in pollinator populations. Pages 47 through 52 specifically address pesticides and pollinators. The report calls out plant production, native plants, mosquito control and all urban uses in its Pollinator Action Plan. RISE (Responsible Industry for a Sound Environment) says it supports the goals of improving pollinator health and habitat contained in the White House Pollinator Task Force’s release of its National […]

Read More
Latest Stories
Farwest2015

May 20, 2015

2015 Farwest Show Announces Second Annual Equipment Inn…

The second annual Equipment Innovation Day will be Tuesday, Aug. 25, prior to the 2015 Farwest show, which will be August 27-29 in Portland, Ore. Equipment Innovation Day, which was enthusiastically received in 2014, offers a real-time opportunity to see new heavy and automated nursery equipment in action. The demonstrations take place in manufacturing and nursery settings, adding value to the showcase. Attendees will be able to talk with participating manufacturers and learn first-hand from innovative growers who use the equipment in daily operations. The day-long event will be held at the main manufacturing plant of GK Machines, Inc., Donald, Ore. Further demonstrations of field equipment will take place at the nearby nursery of A&R Spada Farms, LLC. Bus travel to and from the event is planned, starting at and returning to the Oregon Convention Center. Attendees are welcome to provide their own travel to and from the site. Preregistration is required. The cost […]

Read More
CCGGA-Scholarship-Winners

May 20, 2015

Central Coast Greenhouse Growers Association Awards 201…

The Central Coast Greenhouse Growers Association (CCGGA) is awarding 20 scholarships this year to high school and college students. CCGGA-member nurseries raised money for the scholarship fund and each donated a portion of the fundraising sales to the fund, which is open to students currently enrolled in college for the following year. The scholarship program is also available to students of employees who work at CCGGA-member nurseries One of the organization’s goals is to continue encouraging future generations to enter the horticulture field and to promote higher education within the families that work in the local nursery business. The 2015 CCGGA scholarship recipients are: Aloysia Shea – Nipomo High School Andrew McHaney – CSalinas High School Angel Flores – Righetti High School Beatriz Barajas – San Jose State University Carolanne Garibay – Monterey Peninsula College Cladia Lavina – Salinas High School Erica Marquez-Ibarra – San Jose State University Jorge Zarate […]

Read More

May 18, 2015

Download Greenhouse Grower’s 2015 Top 100 Growers…

Greenhouse Grower‘s Top 100 Growers Survey revealed that our projections in the 2015 State Of The Industry report were correct: Growers, at least the large ones, are expanding. Greenhouse Grower’s annual Top 100 List ranks the largest U.S. growers by total square feet of environmentally controlled greenhouse space, although this year, we have also listed shade and field acreage, to give perspective on how large these operations are beyond the greenhouse. In total, the 2015 list represents 228,906,001 environmentally controlled square feet of U.S. production, a 5 percent increase over 2014. All told, 26 growers reported that their operation grew between 2014 and 2015. Several growers reduced their production over the past year, as well, and while some operations’ downsized numbers were significant, most were slight and probably typical of the give-and-take in the horticulture industry. Greenhouse Grower‘s 2015 Top 100 Growers Whitepaper includes all the results of the survey, […]

Read More
USDA Logo

May 13, 2015

New Report Shows College Graduates With Agriculture Deg…

A new report from the USDA shows high demand for recent college graduates with agriculture degrees, with an estimated 57,900  high-skilled job openings annually in the food, agriculture, renewable natural resources and environment fields in the U.S. According to an employment outlook report released by the USDA’s National Institute of Food and Agriculture (NIFA) and Purdue University, there is an average of 35,400 new U.S. graduates with a bachelor’s degree or higher in agriculture related fields, 22,500 short of the jobs available annually. “There is incredible opportunity for highly-skilled jobs in agriculture,” says Agriculture Secretary Tom Vilsack. “Those receiving degrees in agricultural fields can expect to have ample career opportunities. Not only will those who study agriculture be likely to get well-paying jobs upon graduation, they will also have the satisfaction of working in a field that addresses some of the world’s most pressing challenges. These jobs will only become more […]

Read More
USDA Logo

May 6, 2015

USDA Awards $10 Million In Grants To Universities To Ad…

More than $10 million has been awarded to U.S. universities to address critical water problems, such as water quality and availability, in rural and agricultural watersheds across the country. The awards were made through the U.S. Department of Agriculture’s National Institute of Food and Agriculture (NIFA) Agriculture and Food Research Initiative (AFRI) Water for Agriculture challenge area and the National Integrated Water Quality Program (NIWQP). “Water is our most precious resource, one that is essential for both human survival and well-being and for our ability to grow our crops and livestock,” says Sonny Ramaswamy, NIFA director. “By funding research, Extension and education for citizens and the agriculture community, we are able to proactively create solutions to water-related issues like drought and its impact on food security.” The AFRI Water for Agriculture challenge area was first introduced in fiscal year (FY) 2014, and these grants represent the first year of funding for the program. Funded […]

Read More
fngla

May 6, 2015

Florida Nursery, Growers And Landscape Association Name…

Florida Nursery, Growers and Landscape Association (FNGLA) has awarded a group of individuals through its FNGLA Industry Awards Program for their contributions to the industry. This year’s winners will be honored during FNGLA’s Annual Convention in Coral Gables on June 13, as part of FNGLA’s Annual Meeting. FNGLA’s Industry Awards Program acknowledges both FNGLA and industry service, with varying criteria geared for each award. Nominations are accepted from the industry-at-large and winners are selected by a committee of industry peers. The Wendell Butler Award and the FNGLA Hall of Fame are recognized as the most prestigious awards given by FNGLA. The Wendell Butler Award is presented for service to FNGLA and the FNGLA Hall of Fame Award is a lifetime achievement award. Nominations are accepted from the industry at large. FNGLA Hall of Fame Inductee: Hugh Gramling, Tampa Bay Wholesale Growers (Plant City, Fla.), retired Wendell E. Butler Award: Theresa & Kevin Riley, […]

Read More
water

May 6, 2015

Record Low Snowpack Continues In The West

Across the Western U.S., snowpack has melted sooner than usual, according to data from the fourth 2015 forecast by the United States Department of Agriculture’s Natural Resources Conservation Service (NRCS). “Almost all of the West Coast continues to have a record low snowpack,” NRCS Hydrologist David Garen says. “March was warm and dry in most of the West; as a result, snow is melting earlier than usual.” Historically, April 1 is the peak snowpack. This year, the peak came earlier. There was little snow accumulation in March, and much of the existing snow has already melted. “The only holdouts are higher elevations in the Rockies,” Garen says. “Look at the map and you’ll see that almost everywhere else is red.” Red indicates less than half of the normal snowpack remains. A consequence of the early snowmelt is that Western states will have reduced streamflow later this spring and summer. In Western states where snowmelt […]

Read More
RedPeppers_RosanaPrada_Flickr

April 29, 2015

Nature Fresh Farms To Build 175-Acre Greenhouse Facilit…

Growing fresh vegetables in the Midwest is about to take a major turn in a new direction as Nature Fresh Farms has announced a large-scale investment in northwest Ohio. The company broke ground on April 10 to begin construction on a 175-acre greenhouse facility in Delta, Ohio. “This is an exciting time for Nature Fresh Farms as we expand our operations to include a U.S. growing facility,” said Nature Fresh Farms President Peter Quiring in a press release. “This development will allow us to better serve our Ohio customers with locally grown produce, year-round and continue to grow our U.S. operations.” Contingent upon acceptable levels of incentives from the State of Ohio and other government authorities, as well as utility rates agreeable to Nature Fresh, the company would be poised to ship its first case of vegetables in December 2015. The greenhouse project will be completed in several phases over the […]

Read More
RISE logo

April 29, 2015

RISE Delivers Petition Urging President Obama To Protec…

Responsible Industry for a Sound Environment (RISE) delivered a pollinator petition to the White House Council on Environmental Quality, urging President Obama to create more habitat and forage areas for pollinators, and to consider all sources of information on, and contributors to the pollinator health issue. Nearly 600 citizens from across the U.S. signed the petition. “Our petition shows President Obama that citizens want a balanced and substantive conversation to happen on the pollinator health issue,” says Aaron Hobbs, RISE president. “The pollinator issue is very complex and research points to multiple factors affecting pollinators, including pests and parasites, microbial diseases, nutrition problems, bee management practices and climate change.” According to Hobbs, the petition highlights some of the steps the industry is taking to support pollinators. This includes creating pollinator-friendly habitats and forage areas through integrated vegetation management in utility rights-of-way and large tracts of land. “We do applaud the White House for including in […]

Read More
HRI logo

April 8, 2015

Horticultural Research Institute Accepting Scholarship …

The Horticultural Research Institute (HRI) is offering seven scholarships for the 2015-2016 school year, totaling $20,000. Applications will be accepted through May 31.

Read More
protecting bees and pollinators video

March 31, 2015

New Video On Protecting Bees And Pollinators Educates H…

A new educational video that provides information on the horticultural industry’s essential role in bee and pollinator stewardship is one result of industry collaboration by the Horticultural Research Institute, AmericanHort, Society of American Florists and the American Floral Endowment. “Protecting Bees & Pollinators: What Horticulture Needs to Know,” narrates the current state of bee and pollinator health, provides information on factors that impact pollinators and the environment and underscores the beneficial role horticulture plays in providing healthy pollinator ecosystems.

Read More

March 25, 2015

NASS Reports U.S. Honey Production Was Up By 19 Percent…

Honey production in 2014 from producers with five or more colonies totaled 178 million pounds, up 19 percent from 2013, according to a March 20 report from the USDA's National Agricultural Statistics Service (NASS).

Read More
cultivate'15 logo

March 4, 2015

Cultivate’15: AmericanHort Announces What’s…

In an industry that has seen major changes occurring at a fast pace, many industry professionals leave Cultivate with their heads spinning and no clear idea of how to regroup and strategize. Cultivate’15 is “Changing the Game.” As this year’s focus, Changing the Game will call your attention to the ways in which our industry has changed and your opportunities to compete successfully.

Read More
Greenhouse Grower State of the Industry

February 2, 2015

Download Greenhouse Grower’s 2015 State Of The In…

The Greenhouse Grower 2015 State Of The Industry Whitepaper includes all the results of the survey, including comparisons on 2014 sales to past years, details on how 2015 production volume and prices will compare to 2014, crops that growers will increase and decrease production on, where growers stand on using neonicotinoids on crops, how many growers will pursue growing medical marijuana and more.

Read More

January 27, 2015

Benchmarks: Let’s Change Our Story

It's a new year. Time for our industry to change how consumers perceive plants by creating a new reality where plants are valued for more than their physical beauty.

Read More

January 21, 2015

AFE Wins Platinum MarCom Award For “Murder, Sex a…

The American Floral Endowment (AFE) took home its fourth award for the animated awareness video "Murder, Sex and Greed." The organization also recently announced that there are two new members on its board of trustees.

Read More
Greenhouse Grower State of the Industry

January 19, 2015

2015 State Of The Industry: Current Green Industry Tren…

Demand for green industry products and services is forecasted to increase in coming years as the housing market rebounds.

Read More
DNA-logo

January 14, 2015

Terra Nigra Joins DNA Green Group

DNA Green Group will be expanding its range of cut flowers by incorporating Terra Nigra, a company specializing in breeding and propagation of gerberas and roses.

Read More