Costa Farms Will Maintain Operations “the Costa Way” With Acquisition, Says CEO Joche Smith

The current leadership of Costa Farms (left to right) are Jose “Joche” Smith, Maria Costa-Smith, and Jose Costa.

Costa Farms has entered an agreement with the Markel Corporation in which Markel will acquire a majority interest in Costa Farms and its related operating companies, excluding the Costa family’s separate venture into the cannabis industry. The deal, expected to close in the third quarter of 2017, is a unique partnership in which Costa Farms will maintain its current leadership and operate with the flexibility of the partnership and additional “permanent capital” provided by Markel, with little involvement by the investment company.

Markel Corporation is a diverse financial holding company that serves a variety of niche markets. While the company’s principal business markets and underwrites specialty insurance products, its subsidiary, Markel Ventures, makes long-term investments in high-quality companies that operate outside the insurance marketplace. It is currently partnered with 16 different companies in a variety of disciplines. With its background in insurance, the corporation has plenty of cash, and investing in companies with a higher rate of return is more profitable than accumulating interest in the bank.

Costa Farms CEO Joche Smith explains that the partnership with Markel was attractive to Costa Farms because of the flexibility and autonomy it offers to its partner businesses, as well as the long-term investment of capital. Unlike private equity firms, which generally invest for a period of a few years, get involved in the business, and then sell, Markel has a completely different model, Smith says.

“We talked to some of the CEOs of the Markel Ventures businesses, and the feedback was phenomenal and consistent. They told us, ‘We run the business the way we run the business – we’re working with great partners who are just not involved in the operation,’” he says. “Markel has never sold a company, so the fact that they’re what they call a ‘permanent capital solution’ is what made it a very attractive partner for us, and we can count on that partnership being there well past when I’m gone.”

But that’s not a worry anytime soon, he says.

“We’ve been in business for more than 50 years, and the family is going to continue to lead the business. That’s what I think everybody needs to know,” Smith says. “I’m 50 years old, I like what I do, I love my team, and we’re going to keep doing what we’re doing, and that’s not going to change.”

costa-farms-corp-solar-pv-panels-1-feature
In a move toward more sustainable efficiency, Costa Farms invested in solar panels on several of its buildings in the past few years.

Hands-Off Partnership Ideal for Growth

So what was the need for Costa Farms to seek outside investors, and why now? Smith says there were a couple of reasons. One is that the third-generation company is starting to see the fourth generation getting involved, and with an expanding shareholder group, things could get complicated.

“This is a way that we thought we’d be able to protect the company and the whole team here for decades,” Smith says.

The other main reason is to provide the operation with capital to continue to grow. Costa Farms has been through a period of rapid expansion, especially over the last five years. In March 2017, Costa Farms announced its acquisition of Delray Plants, which provided the grower a unique opportunity to expand its indoor houseplant lines and retail footprint, as well as develop the company’s e-commerce presence, among other benefits. The operation purchased Layman Wholesale Nurseries in Trenton, SC, in 2012, which allowed Costa to enter the perennials business. In spring 2014, it acquired the business, assets, and brands of Hermann Engelmann Greenhouses, Inc. of Apopka, FL, most notably known for the Exotic Angel brand of small houseplants. Costa Farms also purchased the facilities of an orchid and bromeliad producer in Homestead, FL, in 2015, moving its Desert Gems cacti and succulent production to those greenhouses.

“We want to have a more deliberate acquisition strategy going forward, and Markel is an ideal partner, and gives us even more flexibility,” Smith says.

Future acquisitions will likely be focused more on other growing facilities, and less on vertical integration, Smith predicts. The Costa Farms suite of businesses includes its own trucking company, PM Transport; Total Growth Solutions, an entity that produces high-quality young plants for other finished growers; a retail merchandising arm, Gardenvision; Costa Far East, a global sourcing operation for its own inputs; and Global Grower Resources, a company that helps other growers source production materials globally.

“We have done some vertical integration in the past, and we’ll continue to do some of that, but the primary focus here is still other growing facilities in different parts of the country, with similar product lines – indoor plants, annuals, perennials, and things like that,” he says.

Costa Farms
Costa Farms was named the International Grower of the year in 2016 at the International Association of Horticultural Producers awards gala at IPM Essen in Germany.

Costa Farms Offers Attractive Portfolio for Investment, Markel Says

When it comes to Markel’s interest in horticulture, it was probably more about the company and team than the space specifically, Smith says. But the Costa Farms track record speaks for itself.

Ranked number 2 among Greenhouse Grower‘s Top 100 Growers in 2017, Costa Farms’ listed operating area for 2017 includes 18,787,416 environmentally controlled square feet, 1,241 acres of shade greenhouses, and 990 acres of field production. Founded in 1961 by Jose Costa, Costa Farms is a third-generation, family-owned business that globally stretches more than 4,000 acres and employs nearly 5,000 people. Along with thriving indoor, bedding plant, and perennials divisions, Costa Farms operates merchandising and young-plant production divisions as part of its infrastructure, with operations domestically in South and Central Florida, North Carolina and South Carolina, and abroad in the Dominican Republic and the Far East.

Through its businesses, Costa Farms generates about $500 million in revenue and sells approximately 150 million ornamental plants annually, in about 1,500 varieties, to retailers including Lowe’s, The Home Depot, Ikea, Walmart, and wholesale clubs, according to a July 27 article attributing those numbers to Smith in the Miami Herald.

Costa Farms was named the International Grower of the Year in 2016 at the International Association of Horticultural Producers awards gala at IPM Essen in Germany. The Florida-based grower was chosen from a group that included eight other international companies.

“The Costa family and their team have spent generations building a company that beautifies people’s lives and homes with millions of plants and garden flowers each year,” says Tom Gayner, Co-CEO of Markel Corporation. “We love what they do and the way they go about doing it, and when they approached us looking for a partner to support the continued growth of this incredible company for future generations, we couldn’t have been more excited.”

Topics: ,

Leave a Reply

More From Management...
Berger-Equipment

November 17, 2017

How You Can Help Berger in Donating to Hurricane Harvey Victims (While Learning More About Plant Production)

Between Nov. 23-27, Berger will donate $1 for every download of its free technical plant production guides to hurricane relief efforts.

Read More
Damarys-Mora-Crawford-Costa-Farms

November 16, 2017

Costa Farms’ New Marketing Director Eager to Tap Into Changing Consumer Needs

In her new position, Damarys Mora Crawford will lead Costa Farms’ marketing team and create and execute strategic marketing initiatives to support continued sales growth for the company’s retail customers.

Read More
Cordyline Candy Cane (Excelsa Gardens, Inc.)

November 14, 2017

Garden-Retailers Pick Their Favorite Products From The Landscape Show

Grower-retailers have once again named their favorite new products, this time as part of the Cool Product Awards at The Landscape Show 2017 in Orlando, FL. Awards were presented to 12 companies, representing 14 products.

Read More
Latest Stories
Berger-Equipment

November 17, 2017

How You Can Help Berger in Donating to Hurricane Harvey…

Between Nov. 23-27, Berger will donate $1 for every download of its free technical plant production guides to hurricane relief efforts.

Read More
Damarys-Mora-Crawford-Costa-Farms

November 16, 2017

Costa Farms’ New Marketing Director Eager to Tap Into C…

In her new position, Damarys Mora Crawford will lead Costa Farms’ marketing team and create and execute strategic marketing initiatives to support continued sales growth for the company’s retail customers.

Read More
Cordyline Candy Cane (Excelsa Gardens, Inc.)

November 14, 2017

Garden-Retailers Pick Their Favorite Products From The …

Grower-retailers have once again named their favorite new products, this time as part of the Cool Product Awards at The Landscape Show 2017 in Orlando, FL. Awards were presented to 12 companies, representing 14 products.

Read More
Seed-Your-Future-feature

November 9, 2017

Dümmen Orange Throws Support Behind Seed Your Future In…

Dümmen Orange has announced it will pledge $450,000 over the next three years to Seed Your Future, the non-profit organization whose mission is to promote horticulture in the U.S. and inspire people to pursue careers working with plants.

Read More
Speedling-Environmental-Award

November 9, 2017

Speedling Wins Environmental Leadership Award From Flor…

Speedling has eight nurseries throughout the country and two in Florida, where moisture levels are carefully analyzed to improve performance and consistency of transplant operations.

Read More
Arden-Bull-Feature

November 8, 2017

Veteran Ornamental Crop Protection Leader Arden Bull Re…

Arden’s career spanned 47 years in specialty crop protection, including leading ornamental sales at Nufarm Americas for the past 12 years.

Read More
Cannabis at Solstice feature

November 5, 2017

The Intricate Journey of Cannabis From Black Market to …

As cannabis moves out of the shadows and into the limelight, an industry replete with untapped potential also faces the burden of new complications.

Read More
Monarch School of New England

November 3, 2017

National Garden Bureau, Sakata Seed America Award Grant…

The three winners were selected after a two-week online voting process, and will receive grants totaling $5,000.

Read More
Biocontrols in a Greenhouse

November 3, 2017

Take Greenhouse Grower’s 2018 State of the Indust…

Growers and others associated with the greenhouse business often ask the Greenhouse Grower editorial staff where we get ideas for stories. The Answer: You! That's why we're asking you to please take some time to answer our annual State of the Industry survey.

Read More
Chinook Sunrise Rose at Vineland

November 2, 2017

Vineland Research Centre Highlights Latest Greenhouse R…

The Vineland Research and Innovation Centre in Ontario, Canada, is a hotbed of new research in greenhouse production. Recently, the Centre released its latest Innovations Report, an annual publication that highlights some of the major projects taking place at the Centre.

Read More

November 1, 2017

Technology Is Changing the Game for Growers

Technology is sexy. There’s a fervor associated with buying the latest go-go-gadget — and a fear of missing out if we don’t. We all want that latest, most advanced smartphone, home assistant, or wearable tech, no matter the cost. And jobs associated with technology? Google, Microsoft, Apple, Amazon, Facebook, Twitter — offer some of the most competitive and coveted positions on the planet. Just look at the stir Amazon made when it announced it would build a $50 billion second headquarters, with cities from all over North America clamoring to be the one chosen, considering the significant economic potential. Technology and tech jobs are it — and it’s no wonder growers don’t feel jobs in horticulture can compete. But what if they can? If tech jobs are the future and the future of horticulture depends on technology, then we have a real opportunity to seize. Millennials who have grown up […]

Read More
Smith Gardens Tornado Damage

October 31, 2017

Smith Gardens Suffers Tornado Damage, Still Plans to Sh…

While most of the damage was structural and only 2% of the crops were lost from the October 12 twister, the company says there is still plenty of cleanup planned.

Read More
Ernest Wertheim

October 31, 2017

Here’s Your Chance to Hear From Industry Legend Ernest …

During Cultivate’17, AmericanHort recorded a video interview with Ernest Wertheim, a passionate horticulture industry advocate and business owner for more than 75 years.

Read More
Living Umbrellas

October 25, 2017

Why Living Umbrellas May Have a Bright Future

Sometimes innovation strikes by chance. Such was the case with David Tilley, developer of the “Living Umbrella.”

Read More
cuttings-facility

October 23, 2017

New Pilot Project for Offshore Unrooted Plant Cutting C…

Four breeders — Ball Horticultural Co., Dümmen Orange, Proven Winners, and Syngenta Flowers — will participate in the initial pilot, which will include greenhouse growing operations in six Latin American countries.

Read More
Capitol Hill_ feature

October 19, 2017

AmericanHort’s Main Priorities After Impact Washi…

Now that Impact Washington is over, AmericanHort, with industry support, is looking to continue its focus on tax reform, labor reform, and research and innovation.

Read More
Petal It Forward 2017

October 17, 2017

Petal It Forward Event a Hit for Both Industry Members …

Check out how this year’s Petal It Forward event brought smiling faces to people across the country, including one personal story.

Read More
Karen Reardon, RISE

October 15, 2017

Karen Reardon of RISE Honored by CropLife America

CropLife America presented Reardon with its highest staff award for her successful effort to defend against the ban of pesticide use on private property in Maryland.

Read More