Surviving The Storm (Or Lack Thereof)
June 13, 2008 In the face of things, Norcross, Ga., and Glendora, Calif., might seem to have little in common. But as the drought continues to drag on throughout the Southeast, increasingly scarce water supplies are leading garden centers in northern Georgia to have to deal with some of the same issues faced by retailers in Southern California–with disastrous results.
In a move that resonated across the country, Pike Family Nurseries, one of the nation’s largest independently owned garden center chain, with corporate offices in Norcross, Ga., filed for Chapter 11 bankruptcy protection in November as a result of the drought. Pike’s decision was a significant development in a situation that has grown increasingly worse for garden centers in Georgia, and has many businesses scrambling to figure out how to survive. While Pike’s leaders recognize the severity of the impending crisis the business faces, they remain optimistic because of steps they have taken toward securing the company’s future.
On the opposite side of the country, Southern California has fared relatively well over the past year, but industry officials recognize that water conservation is key to their welfare, as the area receives a minimal amount of rainfall during an average season.
Despite dealing with two separate climates that present very different challenges, the strategies proposed by Wayne Juers, vice president of learning at Pike Family Nurseries, and Mike Kunce, president and CEO of Armstrong Garden Centers, Glendora, Calif., both feature teamwork and an out-of-the-box way of approaching business as the two major components.
State Of Distress
Pike Family Nurseries’ financial problems started in April with the late freeze and peaked in August, when the severe water shortage in the state compelled legislators to issue a level four drought response, which establishes a total outdoor watering ban. To deal with this drastic measure, Pike cut any unnecessary spending from its budget and attempted to educate consumers about various water conservation practices. Juers says that people were willing to try these measures at first, but by October, sales at Pike had dropped 35 percent.
“The situation has become extreme, to the point where in Atlanta, it is now in vogue to drive a dirty car. We were not sure where we would be financially by spring,” he says.
The accounting staff at Pike took several factors into consideration including debts owed by the company to suppliers and the welfare of its employees. Ultimately, the team decided its best option was to file for Chapter 11, which freezes a company’s debt until the company can figure out how to pay it. Chapter 11 allows Pike to re-structure the company.
“This prevents us from having to file Chapter 7. I feel certain we will come out of this crisis relatively quickly. The good news is, when this drought is over, business can only get better,” Juers says.
In the meantime, the staff at Pike is doing everything within its power to cope with the present situation. The company is backing a water management plan for Georgia that goes to the state’s legislature this month and that Juers hopes will go into effect in mid to late March, the end of the legislative session. In addition, Pike is discussing garden centers’ and homeowners’ water use with industry leaders and legislators.
“We are working very closely with our state representatives to make sure municipalities do not put a strict water ban on their entity during the times when the rest of the state is not under one,” Juers says.
According to Juers, it is critical for garden centers in Georgia to realize the power they possess if they come together as the “green industry” to work with state associations for publicity, marketing and communication. Organizations including the Georgia Urban Ag Council provide garden centers with a public relations company to help them deal with the media and education of consumers.
“We are all in this together, and none of us will survive if we do not work together,” he says.
Media and consumer education are two issues that are imperative to address for the survival of garden centers affected by a drought. In fact, Juers cites the media’s negative spin on the drought as a contributing factor to Pike’s financial woes. Instead of playing up water conservation and alternative ways to water the landscape, the media focused on how little water was left in the reservoirs. It panicked many people and discouraged them from planting anything.
Education of both consumers and government officials is also key to garden centers’ welfare. Juers recommends that companies get involved in state and local organizations, which can help through the process of implementing beneficial legislation.
Other strategies Pike devised to increase business include utilizing retention ponds at the garden center and focusing on strengthening outdoor living concepts (lawn furniture, grills, etc.) and services (small installations, mulching, etc.).
Looking to the future, Juers advises garden centers to think outside the box to come up with ideas that will help consumers deal with water issues.
“How can you tell your customer that if they decide to plant, you can provide a way for them to do it?” he says.
Preparation Is Key
Due to a different landscape and environment, Southern California’s problems with water supply tend to be of a long-term rather than short-term nature. San Diego County receives about 6 to 7 inches of rain per year, with Los Angeles County receiving about 14 inches per year.
Consequently, Southern California residents rely on underground water reservoirs, which the state started to construct in the 1960s. The underground reservoirs, in addition to water supply above ground, provide enough water to sustain the region through two to three years of drought.
While this period of time may sound lengthy, Southern California has suffered through droughts that lasted for more than three years. A five year drought in the early 1990s caused sales at garden centers throughout the region to drop 22 percent. As a result of this crisis, the Council For A Green Environment was organized in 1992 to release accurate and helpful information to municipalities and law makers in the event of future droughts.
To prepare for the rare but lethal lengthy droughts, the grower division at Armstrong Garden Centers has converted much of its above-ground irrigation to a drip irrigation system. Kunce recommends that garden centers looking to conserve water also recycle and filter their water for multiple uses. Converting exterior landscape irrigation to more efficient systems that use brooms and power blowers to sweep, as Armstrong did, is also helpful.
“It is really about conservation and being prepared. We are trying to make the most of the minimal amount of rainfall we receive here in Southern California,” Kunce says.
Regardless of the challenges in different regions of the country face, the message is clear: educating consumers and implementing water conservation methods may take a little effort and a little money, but these practices may also save growers and retailers when water sources–and revenues–begin to go dry.
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