The role of the plant broker is undergoing some significant changes with new entrants starting to impact how the channel operates. Over the last six months, major changes have occurred to this portion of the supply chain. Some prominent examples are:
• Griffin Greenhouse Supply acquired Syngenta Horticultural Services (SHS) from Syngenta.
• ePlantSource, an online storefront, has announced its launch sometime around April 2013.
• McHutchison has announced the formation of a new national division named Vaughn’s Horticulture, and it opened for business on February 19, 2013.
The North American broker channel consists of 30 to 35 brokers, albeit some are seed only and some are plants only. However, this channel is dominated by seven companies serving the U.S. market. Below these seven companies are listed in order of sales volume based on my own assumptions:
1. Ball Seed with sales estimated to be 2.5 times more than the closest competitor.
2. Express Seed is arguably the fastest growing broker company in the U.S.
3. SHS, which was recently purchased by Griffin Greenhouse Supplies, as mentioned above.
4. McHutchison has primarily focused on the small and mid-sized growers but will expand its reach into the large grower market with its Vaughan’s Horticulture division.
5. Fred C. Gloeckner is a solid broker seemingly focused on pot plants, cut flowers and bulbs. It has also introduced the Fantasy Poinsettia concept.
6. Henry F. Michel sells to growers and garden centers.
7. Eason Horticultural Resources (EHR) is a broker that seems to focus on the middle market and also serves garden centers with nursery stock.
The brokers listed above, in my estimation, constitute 80 percent of sales to the grower market. This does not factor in contracted items that are usually a direct grower-to-grower sale; it does not include a huge number of bulb products sold direct to the grower market.
It is interesting to note the number of growers has vastly declined but the number of brokers is now starting to increase. As so the pie gets smaller, this will lead to a decline in the number of brokers over the next five years. In 2000, there were 11,625 growers, and in 2005 that number dropped to 10,563 growers. In 2011, the USDA reported 5,763 growers. The number of reporting states dropped from 36 in 2000 and 2005 to 15 in 2011, so these numbers are estimates, but this clearly indicates a significant change in the grower population.
The Role Of The Broker
The role of the broker in the supply chain has changed significantly over the past 20 to 25 years. This change is driven by the retailer taking control, vast reduction in the number of growers and production exceeding demand. Prior to the 1990s, a plant vendor would set the grower selling price and offer all brokers a standard discount. There was little to no negotiation on price. The broker would take care of the marketing, sales and collection, and the vendors exercised more control than the broker, ultimately becoming more like an annuity for some of the larger vendors.
In the 1990s, however, that all began to change as the retailers took charge and demanded more from the growers who then demanded more from their brokers. The brokers now buy at a negotiated price and set their own selling price with much lower margins than in the past. For the most part, the brokers are also not doing as much marketing, as their primary roles became sales and financing. This has created huge accounts receivable portfolios prior to the spring market. Some brokers now use financing as a sales tool. Seldom do you hear of or see a really compelling value proposition, and some have given up on selling value. At some point, breeders and producers will be faced with the same challenge.
Today’s Broker System
One factor that impacts how a broker operates is its relationship with the breeding and production sector. Ball Seed is the only broker that is vertically integrated with sister companies in seed, vegetative breeding and production — a clear advantage to their broker division. Whole Express Seed is the only broker company owned by a grower with ties to young plant and plug production.
Most of the larger brokers are focused on multiple market segments with a few notable exceptions:
• Express Seed appears to focus on the large grower market (basically those who serve the national retailers), and I would argue they do this with very favorable results.
• Eason Horticultural Resources is seemingly focused on the small and mid-size markets with a large degree of success and growth
• McHutchison appears to focus more on the mid-size and smaller grower, but with the launch of Vaughan’s Horticulture, I expect to see a greater focus on the large-grower sector.
As the grower segment has experienced a lot of margin pressure, with higher costs and more demanding retailers, that margin pressure has been passed down to the broker, and many have seen significant drops in the past 10 years.
Some have responded by being better buyers and tougher negotiators, while some have rolled out more exclusive products. The smart ones have also figured out how to be more productive and are able to control and reduce costs, and they will be the ultimate winners.
There is still a lot of tradition in some brokers selling organizations that still rely on relationships to maintain or grow their businesses. While relationships are important, helping the customer remain competitive and profitable continues to be an important element for the broker. We frequently hear stories of sellers who lose orders and complain because they have been calling on that customer for 25-plus years but forgot one thing. These sellers want to re-book an order, not re-sell it, and there is a huge difference.
It is also very surprising what little investment some brokers make relative to training their salespeople on how to sell the products. In most broker companies, the sales part of organization is the engine driving the company. To prove my point, try asking your broker representative about the last sales book they’ve read.
The Future Of Plant Brokers
The brokers who will survive and thrive will outperform their competitors by:
• Using a computer system that provides instantaneous responses to customers, employees and vendors
• Having a website that allows the customer to access all information easily, 24 hours a day, seven days a week, 365 days a year
• Managing a high-performance supply chain
• Growing their sales faster than their costs
• Having a highly-trained and motivated selling organization
Brokers will continue to be the main sellers to the grower. Very few vendors want to sell direct due to the cost of selling and, most importantly, the cost of an account receivable. The broker segment will remain healthy for those who know how to manage.