The Bright Side Of Contract Growing

Top 100 Growers: The Bright Side Of Contract Growing

Plants Unlimited President Nirmal Shah knows what it’s like to devote a majority of a greenhouse production facility to a single customer and lose all of that business in an instant.

The lost business was Frank’s Nursery & Crafts, which at one time was a retail chain with a couple hundred stores on the East Coast. In May 2002, though, Frank’s filed for Chapter 11 bankruptcy protection, leaving the operation previously known as Van Boven’s Greenhouses with 10-plus acres of greenhouses to fill in Kalamazoo, Mich.

“We were in kind of a panic situation at the end of the spring,” Shah says. “[Former owner] Larry [Boven] did not get paid for some amount of his product–not like all of it–but he did not receive a good amount. Going forward, we had to ask what are we going to do to replace that business? Out of the 13 acres, 10 1/2 or 11 were for Frank’s.”

It was around the time Van Boven’s lost the Frank’s business that Shah approached Boven about pursuing new customers. Shah had been with Van Boven’s as a grower for 2 1/2 years, but he joined Boven later that year on a mission to land enough new business to fill their empty greenhouses.

While Shah landed business with Menards, Boven successfully approached Masterpiece Flower Company about growing crops. Between the two new customers, Van Boven’s was able to fully use its greenhouses the following spring. Shah’s ability to land Menards was also a turning point in his relationship with Boven, who sold the business to Shah in 2006.

Menards is no longer a customer of Shah’s today, but Masterpiece Flower Company is. So are six other growers and brokers whom Plants Unlimited serves as an operation that’s entirely devoted to contract growing.

In Pursuit Of Opportunities

Because Plants Unlimited developed a good relationship with Masterpiece, Shah began to explore other contract growing options. One year, the operation grew a crop for Green Circle Growers. Another time, Plants Unlimited took an order from Zylstra Greenhouses, which is actually located across the street.

In Plants Unlimited’s first years contract growing, Shah took relatively small, one-time jobs. Still, those jobs trained him to work with other growers. They also provided Shah a glimpse at a new business model.

“We realized this could work if done in bigger numbers,” he says. “It could work if done correctly and planned out.”

When Shah took over at Plants Unlimited in 2006, he was mostly selling to Masterpiece. But he made phone calls, went to trade shows and expanded his network of growers. The extra effort ultimately led to six other customers. Shah currently serves as a contract grower for Battlefield Farms, Bert R. Hybels, CK Greenhouses, Color Point, Elzinga & Hoeksema Greenhouses, and Neal Mast & Son Greenhouses.

To Shah, the contract growing approach is the most appropriate one for his business. The thought of selling direct does cross his mind at times, but he realizes his operation is not entirely equipped to handle direct shipments to many of the retailers his customers serve.

“We are not required to have elaborate inventory tracking software, trucking, shipping management–which we will need if we work directly with Home Depot, Lowe’s or any big store,” he says. “Pay-by-scan comes into the picture, and we would need a lot of people and systems we do not have in place right now.”

Curbing Concerns

Shah also believes serving retailers directly could rile up other growers in his area.

“Between those two reasons, we decided to stay away from direct shipping,” he says. “If I get myself backed into a corner, I’ll try everything I need to. But right now, when there are other options, I like to have the relationship where I can sell to the big growers who can let me fill up my space. Basically everybody’s happy that way.

“So far, it has been successful for us and I intend to keep it that way. I’m not trying to explore into other things right now.”

Shah, like many contract growers, has one main concern about contract growing: What if your customers decide they don’t need you? There are a variety of reasons why growers wouldn’t contract others to produce crops for them. Perhaps the cost of fuel no longer makes long-distance business feasible. Maybe the quality of the crop the contract grower produced was below the retailer’s standard. It’s also always a possibility that the contract grower’s customers will build new greenhouses to handle production themselves.

The list of reasons goes on, but Shah argues a contract grower is likely just as concerned about losing business with other growers as other growers are concerned about losing business with retailers.

“If I were selling to Lowe’s directly, I could always have the same thought if the buyer said there’s no more for you,” he says. “What if it’s going to be your neighbor supplying me? I would assume everyone in business has the fear of losing their customer, so how is contract growing any different than selling direct?”

Shah combats his contract growing concerns by letting non-customers know he’s open to new business. Balancing the business between the seven rather than devoting an overwhelming majority to one or two customers is a strategy that helps Shah sleep at night.

“Our biggest customer went from 95 percent of our business to maybe 35 percent with Masterpiece,” Shah says. “It’s still a big number that if you were to lose that customer it would take a lot to replace it, but that number is significantly down.

Finding Balance

To Shah, there really are no set percentages that say how much of one’s total production should be committed to different customers. There is no set number of customers a grower should serve, either. In fact, in some instances, adding more customers complicates matters.

“In my case, I’m dealing with seven folks here,” Shah says. “I really enjoy working with all of them, and I would love to add two or three more to the mix. The only thing is because we grow for seven different people, everything from inventory and tag management to pot management and shipping complicates things more.

Shah estimates he grows 100 different SKUs, which is an extravagantly large number for a contract grower. Usually, contract growers prefer monocropping.

“I end up growing so many different things it makes growing challenging,” Shah says. “When you have so many different products–sizes, shapes–consistency becomes a concern. You take a step back and wonder if you need to project yourself and market more as a monocrop grower. Or, do you offer yourself and say you can do anything you want us to grow? Just give it to us.

“It is definitely a challenge but it is probably part of the reason customers keep coming back. It takes a lot of attention at the greenhouse. I want to make sure the Lowe’s grower doesn’t get a Home Depot tag or vice versa. Or the Meijer customer doesn’t get an independent garden center tag, and vice versa.”

Regular communication is a key to curbing contract growing concerns, as well. Say a customer orders 10,000 pots one spring: Shah will talk with that customer as early and as often as he can to anticipate drastic changes and keep his greenhouses full.

“There’s always the possibility that a customer who bought some product from me this year might not need as much–or might not need anything at all–the following year,” Shah says. “For example, when we sit down June or July with all seven of our customers, we will ask if we should plan on a similar approach next year. They can’t always give us a full answer, but even if there’s a slight hint that the chance is there for significant change, we like to know so during the summer and fall we can find other options to make sure our place is taken care of.”

Topics:

Leave a Reply

More From Top 100 Growers...
Battlefield-Farms

December 20, 2017

Battlefield Farms Obtains MPS-GAP Certification

With the increasing requirements of retailers on use of chemicals, and the growing attention to production circumstances, MPS-GAP is a perfect fit for Battlefield Farms, the company says.

Read More
Botany-Lane-Tropical

November 20, 2017

Botany Lane Greenhouses Announces Expansion Into Young Plants

Botany Lane, a producer of finished tropical plants, succulents, and specialty annuals in the Western U.S., recently announced it is expanding to provide young plants for growers and grower-retailers.

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
Latest Stories
Battlefield-Farms

December 20, 2017

Battlefield Farms Obtains MPS-GAP Certification

With the increasing requirements of retailers on use of chemicals, and the growing attention to production circumstances, MPS-GAP is a perfect fit for Battlefield Farms, the company says.

Read More
Botany-Lane-Tropical

November 20, 2017

Botany Lane Greenhouses Announces Expansion Into Young …

Botany Lane, a producer of finished tropical plants, succulents, and specialty annuals in the Western U.S., recently announced it is expanding to provide young plants for growers and grower-retailers.

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
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
Costa Farms Owners

August 1, 2017

Costa Farms Will Maintain Operations “the Costa Way” Wi…

The Miami, FL-based, Top 100 Grower operation announced an agreement for Markel to acquire a majority interest in Costa Farms and its related companies. But the operation will continue to be run by current leadership, with the partnership Markel offers to allow it to continue to grow.

Read More
ISO Cutting Machine

May 16, 2017

The Top 100 Growers are Investing in More Technology to…

Labor has traditionally been among growers’ most significant costs, but the continued rising costs and lack of available labor are currently two very heavy burdens that growers have to bear. As the labor supply dwindles, the Top 100 Growers discuss their next steps toward investing in technology to streamline efficiency at their respective operations.

Read More

May 16, 2017

The Top 100 Growers Speak Out on Changes Needed in Immi…

Opinions about the new administration’s approach to immigration reform vary widely among Greenhouse Grower‘s Top 100 Growers. Many say they are “very concerned” about the potential impact on agriculture’s guestworker programs. Others say the entire guestworker program needs to be overhauled to be simpler and easier to use for growers, and hope that this will be part of the reform efforts. And some seem to be generally in favor of the current methods. “I am in favor of securing the borders but want a simple system for legal residency.” — Dale Buist, Countryside Greenhouse and Farm Market “All this talk has made huge waves in the migrant labor workforce. Continuing this path will create an even greater shortage of employees willing to do our type of work.” — Mark Worley, Speedling, Inc. “[Trump] is only enforcing and not reforming. We will lose a lot of our best employees if this […]

Read More
2016 Top 100 Growers List

May 12, 2017

How the Top 100 Greenhouse Growers Tackle Managing Cost…

The country’s largest growers continue to strive to maintain a balance with price and costs while making sure they stand out from the competition.

Read More

May 8, 2017

Greenhouse Grower Top 100 Behind the Scenes: How (and W…

It’s more important than ever to have good data that allows us to accurately measure the size and scope of our industry.

Read More
2016 Top 100 Growers List

May 8, 2017

2017 Greenhouse Grower Top 100 Growers: The Complete Li…

Growth signifies a healthy industry, and indeed, several of Greenhouse Grower’s Top 100 Growers expanded their operations significantly between 2016 and 2017.

Read More

April 11, 2017

Jerry Halamuda of Color Spot Nurseries Retires

The co-founder of Color Spot Nurseries has retired, effective immediately, and has named a replacement.

Read More
2016 Top 100 Growers List

February 18, 2017

Top 100 Growers Survey for 2017 Is Now Open!

Operations with more than 400,000 square feet of environmentally controlled production are eligible to take the survey, which only takes a few minutes to complete.

Read More
Dan and Jerrys Greenhouse 1

February 17, 2017

Dan and Jerry’s Greenhouse Buys Iowa-Based DeJong Green…

The acquisition will allow Dan and Jerry’s, a bedding plant grower headquartered in Minnesota, to extend its seasonal product offerings and service a new customer base with local distribution.

Read More
Dallas Johnson

January 17, 2017

Dallas Johnson Greenhouses Owner Passes Away at 78

Dallas G. Johnson, who started the company in 1985, is survived by his wife, Kay, and two children.

Read More
Top 100 Breakfast Panel for 2016

July 19, 2016

Top 100 Growers Talk Labor, Automation, And Sustainabil…

More than 60 growers got up with the sun at Cultivate’16 to hear a four-person panel discuss hot topics such as labor, automation, and sustainability at Greenhouse Grower’s Top 100 Growers Breakfast, sponsored by BASF.

Read More
Costa Farms won International Grower of the Year. Representing the operation, (left to right) were Chuck Zala, Michael Vera, Menachem Ganon, Jose Costa, and Mike Rimland

May 24, 2016

AIPH Seeking Entries For Its International Grower of th…

The International Association of Horticultural Producers (AIPH) is inviting ornamental growers from all around the world to enter the AIPH International Grower of the Year Awards (IGOTY) for 2017. Last year’s big winner was Florida-based Costa Farms.

Read More
Top 100 Drone Image Feature

May 16, 2016

Greenhouse Grower’s Top 100 Growers Talk Technolo…

The Top 100 Growers are already by nature some of the most technologically advanced greenhouse operations, due to their sheer size and need for efficiency. Many of the largest growers also serve big box merchandisers and home improvement chains, where prices are dictated, so producing plants at the lowest possible cost is essential to growers not only staying in business, but also profiting and expanding their operations. This year’s survey focused on the automation and technology the Top 100 Growers are investing in, and how these advancements have improved their operations, as well as how they have affected growers’ labor issues. We also asked growers about how they’re solving labor issues, where they’re recruiting new hires, and how they’re keeping their people committed. Lean management programs and sustainability certifications have become higher priorities in the past several years, due to growers’ needs to run efficiently and focus attention on sustainable […]

Read More
2016 Top 100 Growers With Drone

May 10, 2016

Reading The 2016 Greenhouse Grower Top 100 Ranki…

Greenhouse Grower’s Top 100 Growers survey reveals continued growth among the nation’s largest operations.

Read More