Green Industry Is Set For Continued Growth In 2016

Charlie Hall
Charlie Hall

The years leading up to the Great Recession were good ones. The green industry showed signs of strength and stability, much of it fueled by a booming housing market. Overall, economic contributions in 2007 were estimated to be $175.26 billion.

Then came the crash. Greenhouse and nursery growers who experienced remarkable growth in sales and profits for most of the decade prior to the recession now face painfully slow-growing demand, with prospective buyers willing to purchase product only on a just-in-time basis. Maintaining enough liquidity to handle daily operations still remains a key industry challenge. The decline in industry sales, accompanied by increased expenses to maintain greenhouse and nursery products, have combined to reduce firm-level cash reserves and forced many growers to attempt to source additional credit from lenders or suppliers.

2015 Best Year Since The Great Recession

While some economists are quick to point out that the U.S. economy is overdue for a recession this year, most economic indicators point to modest growth. In short, there is nothing holding the green industry back from having a great 2016. We’re going into this spring season better off than we have been. Even though last year started out with a negative gross domestic product (GDP), 2015 averaged out to be the best year since recovery from the Great Recession began. And while there is still a 1.9% gap between the U.S. potential and the actual GDP, it’s shrinking. That’s based in large part on the personal spending of consumers. In the fourth quarter, those expenditures were 65% of the GDP.

Gross private domestic investment, such as new inventory or equipment, has been on an upswing since the recovery began, which is a good sign of growing business prospects. When it comes to income, more and more people are joining or rejoining the workforce, regardless of how long they’ve been out of work, dropping the unemployment rate to 5.5%.

Americans are spending more today than they did prior to the recession. And beyond the increased consumer confidence, which means more spending, low gas prices should mean huge savings for contractors in terms of fuel and supply costs. The housing market is increasing, but it still hasn’t returned to pre-recession levels. That could change this coming year as excess stock continues to be taken off the market.

Overall, the green industry is doing better than it was, but it’s still a bit overleveraged. Banks are starting to loosen up credit, particularly in the housing sector, and low fuel prices will mean lower distribution costs. That, along with increased consumer confidence and lower unemployment rates, puts the industry in the best shape it’s been in for years. There are a lot of forces, but there’s nothing that’s going to rear its ugly head and cause us to really shrink back and see our economy suffer.

Industry Seeing Growth In Both Wholesale And Retail

The most recent National Green Industry Survey, which is conducted every five years, gathered annual information from all 50 states and represented the sixth such effort by the Green Industry Research Consortium, a multistate research committee made up of horticulturists and agricultural economists from selected land-grant universities. The results from this survey are illuminating, given that many of the structural changes in the industry since the Great Recession recovery are more fully identified.

Economic contributions of the green industry in the U.S. were estimated for 2013 using information on industry output, value added, employment, and domestic/international exports, retail sector lawn and garden product sales, and economic multipliers from IMPLAN (impact analysis planning) regional economic models for each state. Direct industry output for all sectors was estimated at $136.44 billion, and total output contributions, including indirect and induced regional economic multiplier effects of export sales, were $196.07 billion.

The total value-added contribution to gross domestic product (GDP) was $120.71 billion, including labor income contributions of $82.47 billion, other property income contributions of $28.91 billion, and business taxes paid to local, state, and federal governments of $9.30 billion. The industry had direct employment of 1,599,662 full-time and part-time jobs, and total employment contributions of 2,035,636 jobs in the broader economy.

The largest individual industry sectors in terms of employment and GDP contributions were landscaping and horticultural services (1,105,526 jobs, $54.70 billion), greenhouse, nursery, and floriculture production (240,809 jobs, $20.36 billion), and lawn and garden equipment and supplies stores (217,798 jobs, $12.87 billion).

Green industry contributions represented 0.72% of U.S. GDP and 1.11% of the total workforce employment. Since 2007-2008, contributions in 2013 increased by 4.4% for employment and 2.7% for GDP in inflation-adjusted terms. Growth in the industry was highest for wholesale and retail trade, while production and manufacturing declined.

Outlook For 2016

The current health of the economy is extremely mixed, with most of the leading indicators trending positive, but others improving very slowly. Mixed performance in the economy, coupled with extreme weather conditions across much of the country, make for a terribly challenging and uncertain environment, as we saw this past spring. I remain optimistic about the recovery, however, given the industry’s performance once spring thaws ensued.

I still have reason to believe that the most successful greenhouse and nursery firms in 2016 will be those that are well-positioned with their customers in the marketplace, not overleveraged, and clearly articulating their value proposition. We will likely see continued structural changes across the industry supply chain as we morph into the more compact and efficient industry of the next decade. This will not only mean further consolidation in the industry, but deeper, more strategic relationships among those left from the transition. The green industry in the next decade will not look the same as the last decade.

It is more critical than ever to convey value and relevancy in an authentic manner to end consumers, but the factors that will guarantee success in the future are going to change. Better brand management, more detailed SKU movement and replenishment analysis, greater efficiency in distribution and logistics, closer integration of genetic innovations and supply levels with consumer demand, and the assimilation of innovative marketing technologies (social media and otherwise) are the new key success factors of the future.

Notice that growing a quality plant isn’t listed; that’s because it’s a given. Growers will be required to produce quality to even play in the game. Growers who master these key success factors will be postured better for the potential economic shocks if they do occur and lay the groundwork for solid performance during any future economic downturns.

Demand For Products Will Grow As Housing Market Recovers

The data above confirms that the downturn in housing and its less-than-stellar recovery has had a profound impact on green industry product sales in recent years. Bedding plant growers have had an easier market in which to compete, as households have tended to downsize their plant purchases in an attempt to maximize their purchasing power; for example, smaller but more numerous plants at lower price points.

The only plant categories that experienced increases in the number of households buying them during this time were in the edibles category. However, given the housing market trends mentioned earlier, it is likely that green industry products and services will be facing an increase in demand in the next few years.

Topics: , ,

Leave a Reply

One comment on “Green Industry Is Set For Continued Growth In 2016

More From Management...

December 9, 2017

Southern California Wildfires Narrowly Miss Most Grower Operations

Here’s an update on horticulture businesses in the areas affected by the California wildfires.

Read More
Weigela Czechmark (Spring Meadow Nursery)

December 8, 2017

Spring Meadow’s New Logo Highlights Focus on New, Colorful Shrubs

In a move that highlights its commitment to developing new, colorful flowering shrubs, Spring Meadow Nursery has unveiled a new logo.

Read More
HortScholars

December 8, 2017

HortScholars Program Now Accepting Applications for 2018

Do you know any college students currently in a horticulture-related program? This unique program gives them a chance to connect with industry leaders and make new connections at Cultivate.

Read More
Latest Stories

December 9, 2017

Southern California Wildfires Narrowly Miss Most Grower…

Here’s an update on horticulture businesses in the areas affected by the California wildfires.

Read More
Weigela Czechmark (Spring Meadow Nursery)

December 8, 2017

Spring Meadow’s New Logo Highlights Focus on New, Color…

In a move that highlights its commitment to developing new, colorful flowering shrubs, Spring Meadow Nursery has unveiled a new logo.

Read More
HortScholars

December 8, 2017

HortScholars Program Now Accepting Applications for 201…

Do you know any college students currently in a horticulture-related program? This unique program gives them a chance to connect with industry leaders and make new connections at Cultivate.

Read More
Kellee O'Reilly

December 5, 2017

We Are Not Immune: An Open Letter to the Green Industry…

We’re an industry rooted in family values, farming, agriculture, passion for nature, and faith. We are also an industry made up predominantly of men in positions of leadership. During an interesting watershed moment that is happening culturally at present, it's important for the green industry to address its own issues.

Read More
GROW-Summit-2017-Group-Photo

December 5, 2017

GROW Summit 2017 Tackles Marketing and Business Managem…

This year’s think-tank style event brought together leaders from across the green industry to deliberate on topics such as disruptive marketing, cost accounting, and Millennials, to name a few.

Read More

December 5, 2017

Skagit Horticulture Builds New, Inclusive Business With…

By merging two large-scale producers, Skagit Gardens and Northwest Horticulture, the new company has realized its strengths through focused divisions that emphasize efficiency and success.

Read More
Young-Grower

December 4, 2017

New Report Shows Older Growers Outnumber Younger Grower…

A survey conducted earlier this year by the National Young Farmers Coalition highlights the far-reaching set of challenges faced by today’s young growers, including rising debt and a struggle to find quality employees.

Read More

December 4, 2017

Raker-Roberta’s Young Plants Debuts as Roberta’s Finali…

On December 1, Eric Wallien of Roberta’s Inc. in Waldron, IN, officially purchased C. Raker & Sons in Litchfield, MI. The new identity of the company is now Raker-Roberta’s Young Plants, according to a Dec. 1 letter to Raker’s customers, suppliers, and business partners from Vice President Susie Raker-Zimmerman. “There have been minimal changes in management and we will be providing the same products and services on which we have built our reputation in the industry,” Raker-Zimmerman said in the letter, which also announced the name change and new logo. The sale of C. Raker & Sons was announced in September . A series of events affecting Raker’s financial situation caused the need for the operation to find an alternate solution. Roberta’s had been a customer of Raker’s since 2011, and the fourth generation, family owned grower-retailer was a fan of Raker’s commitment to quality. The agreement to purchase C. […]

Read More
Worker-Protection-Standards

November 30, 2017

How the New Worker Protection Standard Rules Will Affec…

Keep your employees safe by keeping current with the new Worker Protection Standards for 2018. Here’s a quick summary of the changes coming your way.

Read More
Weigela ‘Maroon Swoon’ (Van Belle Nursery)

November 28, 2017

Van Belle Nursery Among Finalists for International Gro…

The International Association of Horticultural Producers announced nine finalists for its 2018 International Grower of the Year Awards, which will be presented at IPM Essen in January 2018.

Read More
Photo-with-Endless-Summer-Hydrangea

November 27, 2017

Why It’s Important to Get to Know Consumers at th…

One way to learn about consumer behavior is to get boots on the ground and engage with them.

Read More
Jim-Steger-and-Scott-Sterling-J-Berry

November 25, 2017

J. Berry Nursery Strengthens Expertise in Product Devel…

The company recently hired Scott Sterling as Supply Chain Manager and Jim Steger as Production Resource Planner.

Read More
ASCFG-Gretel-and-Steve-Adams-Sunny-Meadow-Flower-Farm-feature

November 22, 2017

Growers Showing Renewed Interest in Specialty Cut Flowe…

At the brink of its 30th anniversary, the Association of Specialty Cut Flower Growers is connecting a diverse and growing group of members dedicated to producing and marketing cut flowers.

Read More
Griffin Pennsylvania Expo

November 22, 2017

Griffin Sets Dates for 2018 Grower & Retailer Expos

The company will host two Expos next year — one each in Massachusetts and Pennsylvania — and each will be a two-day event.

Read More
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