As part of our State Of The Industry report, we asked industry leaders to answer questions about the state of all things greenhouse floriculture. John Bonner, general manager of Eagle Creek Wholesale in Mantua, Ohio, shares his take on the state of the industry this week.
How would you describe the state of the greenhouse floriculture industry today?
The industry is in flux and going through some serious changes.
Has our industry entered a new era or paradigm shift? Please explain why or why not.
Yes, the new paradigm is one of accountability for making sure not only our customer is successful, but even more importantly, the consumer. This mantra is rippling back through the supply channels. Creating value also seems to be the law of the land today.
What are the greatest challenges growers are facing today?
Our greatest challenges are creating programs and products that are relevant to today’s consumer, have value in the eyes of that consumer and meet the profit objectives of the retailer. It’s not just about getting the plants out the door and letting the retailer deal with them. The correct answer is: Get the plants out the door to the retailer at the right time, in the right package, and at the right price point so the retailer is successful in utilizing their space in the most profitable manner.
What are the greatest opportunities for growers to build their business?
The current economy is challenging. But it has created great opportunity in that those who have positioned themselves by reinvesting in their business now stand to reap huge rewards.
It seemed like just a couple years ago there was some concern that there was just too much capacity out there serving the market. The mentality that “more is better” then shifted to “reduce the shrink, control variable costs and sell through.”
Today, there are businesses falling by the wayside that have not been able to weather the economic stress we are all facing. That puts those who have reinvested in their businesses in a very unique position–if only in the short term.
On the macro level, this economic environment is forcing people out of business and therefore aggregate supply is contracting. The good news is that same business environment is only marginally reducing the aggregate demand in the market. I see evidence of this, as last season galvanized my understanding that our industry has a low “beta,” meaning we are only moderately affected by changes in the economic business environment.
I suspect with the financial requirements of lending institutions today, that even solid businesses are not expanding fast enough (although they would like to) to replace the multitude of antiquated acres going under. Nor does it make much sense to buy greenhouses that are not efficient.
The net effect of all this should be one of higher prices, higher margins and a return to profitability. Banks want to see profitability, and they will lend to those companies that show they can repay their loans. The secondary effect of all this can be summed up in one sentence: Those companies that are in position right now with the right sales mentality and who also have modern infrastructure and systems are about to capitalize–big time.