Online Only: Have A Plan Before You Expand

Online Only: Have A Plan Before You Expand

With interest rates so low, could now be a good time for growers to reinvest in their businesses or even expand, if market growth supports it and they have strong banking relationships? We asked Charlie Hall, an economist who holds the Ellison Chair in International Floriculture at Texas A&M University, for his take on the situation. Is there opportunity in a down economy? He says expansion can be feasible if it’s done for strategic purposes.

“In a recent webinar and my presentation at ANLA’s Management Clinic about surviving the economic downturn, I said the number one action point is conserving cash,” Hall says. “Expansion is not conserving cash. It’s not the time to get bigger for bigger’s sake, but if you have a clear strategy in mind and a firm idea the market can support, expansion can be feasible.”

Before moving into a new trade area, growers need to ask themselves if their market can handle additional product, he says. “The key to profitability is not selling more plants but getting more for the plants you do sell,” he explains. “Yes, per capita consumption is not where it should be, but you can’t simply move into a new trade area and expect to sell more bedding and flowering potted plants. Will the market handle additional product in the area you are looking into expand? You also have to look at infrastructure and the availability of inputs, such as pots and growing media. Are their localized suppliers to feed the new site? Are you expanding your carbon footprint too much? More retailers are implementing sustainability requirements and purchasing locally.”

Being clear on a differentiation strategy also is important, he adds. “The two primary strategies are low cost or differentiation. Some can do both. They fill an anticipated market need at a lower per unit cost. You don’t do yourself a favor if you answer one and not the other. You need to anticipate the market demand out there.”

Assessing demand requires investigation by the grower, Hall says. “If you want to supply box stores in the Dallas-Ft. Worth market, have there been stockouts? Is there latent demand that is not met?” he asks. “Look at the nature of the competition. Who is already there? What will their response be when you enter their market? You’ve got to buy your way into the market with price, which creates a potential for a price war, and nobody needs that in our industry.”

Perhaps the most important factor of all is the relationship with your customer, the retail buyer. “It takes a relationship developed over time with a lot of trust,” Hall says. “We hear all too often they will buy all you can grow, but that’s not always the case.”

Industry Outlook

The big trend is not expansion but growers working together to serve their markets. “Anecdotally, we’re hearing about an increased number of contractual arrangements with smaller and midsized growers,” he says. “I think we’ll see more cross-docking arrangements and more of an emphasis on logistics. We’re going to see more sophisticated contract alliances.”

Hall estimates our industry lost between 10 and 15 percent of the growers last year. “Although I don’t want to wish anyone ill will, a reduction in growers is actually better. A lot of the glut is filtered out and there are greater efficiencies for those left,” he says. “Some businesses had it too good for too long. People were in business in spite of themselves.”

Even though we’re seeing consolidation in the supply chain and a reduction in growers, the green industry is still highly fragmented. “A concentration ratio reflects the market share of largest producers,” he explains. “We don’t have an Albertsons or Safeway as a high proportion, like in the supermarket industry. Our retail market share is 38 percent box stores, 32 percent independent garden centers and 30 percent Walmart. There are a few large major but still a whole bunch of other folks. We’re still on the fragmented versus concentrated side of the spectrum.”

Leave a Reply

More From Structures...
GGS Cannabis Production

April 19, 2017

Suppliers Can Offer Technical Solutions for New Cannabis Growers

Here’s a look at how a few manufacturers have partnered with growers to make their transition into cannabis a smooth one, whether it’s through hands-on guidance or partnering with other industry leaders.

Read More
GrowSpan Series 1000 Greenhouse (GrowSpan) feature

March 24, 2017

New Greenhouse Structure Models Emphasize Crop Protection, Energy Efficiency

Manufacturers of new structure models say they are responding to grower concerns with designs that focus on ventilation, maximizing your space, and incorporating a wide range of crops. Here’s a look at some of their latest offerings.

Read More
Brian Munchel

March 18, 2017

Brian Munchel of Ludy Greenhouse Manufacturing Dies at 48

Munchel, a long-time member of the National Greenhouse Manufacturing Association, worked at Ludy Greenhouse Manufacturing for more than 30 years and was a computer-aided draftsman.

Read More
Latest Stories
GGS Cannabis Production

April 19, 2017

Suppliers Can Offer Technical Solutions for New Cannabi…

Here’s a look at how a few manufacturers have partnered with growers to make their transition into cannabis a smooth one, whether it’s through hands-on guidance or partnering with other industry leaders.

Read More
GrowSpan Series 1000 Greenhouse (GrowSpan) feature

March 24, 2017

New Greenhouse Structure Models Emphasize Crop Protecti…

Manufacturers of new structure models say they are responding to grower concerns with designs that focus on ventilation, maximizing your space, and incorporating a wide range of crops. Here’s a look at some of their latest offerings.

Read More
Brian Munchel

March 18, 2017

Brian Munchel of Ludy Greenhouse Manufacturing Dies at …

Munchel, a long-time member of the National Greenhouse Manufacturing Association, worked at Ludy Greenhouse Manufacturing for more than 30 years and was a computer-aided draftsman.

Read More
Nexus Atrium for Prides Corner

March 15, 2017

How Tech Suppliers Are Helping Growers Find Solutions

Greenhouse structures and components manufacturers highlight some of their most recent projects.

Read More

February 15, 2017

Growers Planning to Invest in Structures in 2017

Data from this year’s Greenhouse Grower State of the Industry survey indicates that growers are planning to make major investments in structures and facility upgrades this year.

Read More
NVAC Greenhouse prototype

February 15, 2017

New Greenhouse Cooling System in Development for Hot-Cl…

Researchers at McGill University in Quebec have developed an alternative evaporative cooling solution for greenhouses in warm climates, and are now seeking commercial partners.

Read More

February 15, 2017

Registration Open for NGMA Spring Meeting

The annual gathering of the National Greenhouse Manufacturers Association will feature a look at green industry trends, emerging market opportunities, and more.

Read More
EFTE Film

January 18, 2017

Looking at Glass or Polyethylene for Your New Structure…

Ethylene Tetrafluoroethylene, also known as EFTE, is a fluorine-based material that looks like a standard polyethylene greenhouse film but offers high light transmittance.

Read More
Nadia Sabeh, CEAC

January 18, 2017

Upcoming Seminars to Focus on Managing the Greenhouse E…

The seminars, which will also be accessible online, are presented by the University of Arizona’s Controlled Environment Agriculture Center.

Read More

November 16, 2016

Stay Up To Date On Greenhouse Structures And Materials

eGro, an online resource for greenhouse growers, features a series of video lectures and tutorials on a wide variety of topics, including greenhouse structures and terminology, heating and cooling, and more.

Read More
Dual Atrium Greenhouse (Nexus)

October 12, 2016

Gibraltar Industries Acquires Nexus Corporation

The building manufacturer and distributor strengthens its position in the U.S. greenhouse market, complementing its RBI greenhouse company with the aquisition of Nexus Corp.

Read More
Gotham Greens Atrium Style Greenhouse Chicago

September 14, 2016

How An Energy Audit Of Your Greenhouse Can Save You Mon…

Is your greenhouse utility bill getting you down? Consider an energy audit to evaluate potential energy savings.

Read More
JGS Structure at Vineland

September 14, 2016

Take A Virtual Tour Of Canada’s Vineland Greenhouse Tec…

The one-of-a-kind research greenhouse project was completed by JGS Limited and features 40,000 square feet of horticultural research space.

Read More
Stuppy Greenhouse Manufacturing's Rainbow Super Structure

September 14, 2016

NGMA Contributes Revisions And Updates To Building Code…

The revisions cover the definition of a greenhouse, improved efficiencies in making greenhouse code changes, and more.

Read More
GrowSpan Light Deprivation Greenhouse

August 25, 2016

New Light Deprivation Greenhouses Help With Light Manag…

The GrowSpan light deprivation greenhouse from Growers Supply is outfitted with a blackout system that provides growers with control over the light cycle.

Read More
Cannabis Structure

August 23, 2016

5 Factors To Consider In Your Cannabis Structure

Along with the size and specs of your greenhouse, it's also important to focus on ventilation, light deprivation, benching, irrigation, and odor control.

Read More
Nexus Dual Atrium at Lucas Greenhouses

August 15, 2016

6 Ways Greenhouse Suppliers Are Partnering With Produce…

Greenhouse and equipment manufacturers share how they work with growers to provide customized solutions.

Read More
Cannabis Structure

July 28, 2016

How To Maximize The Efficiency Of Your Cannabis Structu…

The up-front costs of creating your cannabis facility may be high, but at least one expert says making the investment now will be well worth it down the road.

Read More