Industry Leader Forecast
Oh, if only we each had a crystal ball. We could see intothe future and be prepared for those late-coming springs or the newest producttrend or the economy’s ups and downs. It would make life a little boring, butour financials would look a lot better.
Since we haven’t yet tapped into the supernatural, wethought a collection of educated guesses would be the next best thing; henceGPN’s 6th annual “Industry Leader Forecast.” We polled several ofyour peers on what they think will be the biggest issues facing commercialgreenhouse growers over the coming year. From economic changes to customerservice to buying habits, find out what to look for in 2004.
All segments of the market working together. That is what Iwould like to see in 2004 and beyond. We have so many avenues being pursued inthis great industry that we need to find a way to each build on the efforts ofthe other. We have “big boxes,” smaller chains, independent gardencenters, grower/retailers, mass producers, specialty growers, distributors ofgenetics and other inputs, producers of plant inputs, breeders andmanufacturers. We are all trying to find our place, and it normally is at theexpense of others in our segment of the market.
Each one of us is trying to establish an identity that willhelp carry us into the future. Our company is a partner in The Flower Fields,which is a branding program run by breeding companies. Proven Winners is abrand established by a group of production companies. Simply Beautiful is theproduct of a distribution company. MiracleGro Plants is an effort by afertilizer manufacturer. Growers are differentiating their plants from thegrower down the street through the use of containers, branding or some othermeans. Independent garden centers are highlighting their differences from thebig boxes in the area through selection and perhaps plant quality. The big boxretailers are all trying to be different from each other through branding, pricingor some other means.
What we aren’t doing is working together to make the totalpicture bigger and better than the pieces. And that is what I think theindustry is poised to do. Those of us at the breeding, production anddistribution levels need to work with the growers to give them more controlover, and benefit from, the products they sell. We can’t continue to”pull” (read force) products through them. We can get retailersexcited about our efforts, but we need the grower to produce it before we actuallyhave a product for the retailer to sell. In my particular case, I am alsodependent on the distribution companies to get my products to the grower, sothat he can get them to the retailer. If there isn’t benefit to them, it isn’tgoing to happen.
So, my prediction is that this is the year that we start tomake that happen. We shouldn’t be competing with each other. We should beworking together to make the gardening industry grow — all of us. Then we willtruly be successful.
— Joel Goldsmith
Survival in the Land of Mass Merchandisers
As we look to 2004, the obvious issues (concerns) jump out.Higher energy costs, higher fuel cost, higher overall production cost andhigher major medical costs for our employees are just a few that come to mind.I think if you were to ask major retailers the same question, they would echothe same comments I listed above. (By the way, we did ask and that’s what theytold us.)
Also of concern are questions/comments such as:
* Cana large grower continue profitability to serve several mass merchandisers? Withcustom programs such as private label branding and different pot size or flatconfigurations, the risks get higher and higher for the grower.
* Canour industry continue forward without a more formal, legally bindingcustomer-to-grower purchase order commitment program? In my way of thinking,that would benefit both the customer and the grower.
* Howdo distribution channels remain open to new breeding and varieties coming fromsmall breeders? With the tremendous consolidation and vertical integrationcontinuing with the distributor, some great genetics are not making it to themarket place.
* Merchandising(service) at store level as well as leaving racks behind at stores is now the norm.What will be next and is our industry ready for the next”requirement” from our customers? Some thoughts would includepre-pricing all products like packs and 4-inch, or maybe a pay scan program.
* Last,I’m concerned about more consolidation of some very good companies because offinancial, economic or environmental issues. We saw several good companies fallby the wayside this year. I know it is inevitable; I just hate to see it.
A Christmas wish for Santa (yes, it is late but I’m alwayslate, Santa understands): Major merchandisers (retailers) all take a 15-percentincrease in retail prices and allow the growers a little breathing room. By theway, the customer will pay more; everyone has seen the exit surveys.
— David Edenfield
Smith Gardens, Inc.
Washington in 2004
Washington is never short on challenges, and predicting whatwill happen is an art that no one, so far as I know, has perfected. That said,here are some of the current issues of importance to floriculture, and what I thinkmight happen in 2004 on those issues.
First of all, we will see brought to fruition a completedcertification program for import of geranium cuttings from the offshoreproduction facilities of the major production companies. In fact, that programis being finalized as I write these words. The certification program, built onthe clean stock production practices of the companies and adding some newrequirements, is the culmination of nearly two years of effort by the U.S.Department of Agriculture, Society of American Florists (SAF), the AmericanNursery and Landscape Association (ANLA) and the industry itself. It’simportant because over 70 percent of geraniums sold in the United Statesoriginate in offshore cuttings and without this certification program, thoseimports would no longer be allowed. Many people have done a lot of work to makethis dream a reality, and it’s the best Christmas present I could have possiblyasked for!
On another very important front, the agriculturalimmigration reform legislation will be passed this year. Grassroots support isimperative to this legislation’s success, and the legislation is important toeveryone in agriculture. More than 70 percent of today’s agriculture laborforce is estimated to be undocumented because employers have no reliable way ofverifying legality of worker identification and have no workable guestworkerprogram. S. 1645 and H.R. 3142 (the “AgJOBS bill”) are our best hopeof solving this serious problem, and passage is a top priority for the industry.If you have not yet contacted your senators and representative, please do so –contact me for more information.
We’ll be making a push this year to increase the funding forthe Floriculture and Nursery Research Initiative (Congress still has not passeda final budget for the U.S. Department of Agriculture, but must do so quicklyafter it returns to work in January). This year, funding should remain level at$6 million annually, which has been a big accomplishment in a year of draconianbudget cuts. Next year, we want to see an increase in that funding level.
SAF is working on many other issues of importance: continuedability to use methyl bromide, continued availability of important chemicals, amove to update overtime compensation rules, passage of the Association HealthPlans legislation, permanent passage of estate tax repeal, crop insuranceexpansion and reform of existing sales tax structures, just to name a few. Yourindividual voice can make a difference. All too often, business people andemployees think their voices don’t matter. But by joining together as anindustry, floriculture can, and will, be heard in Washington!
— Lin Schmale
Society of American Florists
From the Land of Legislation
Whereas previously we thought of issues of the marketplaceas our largest challenges, we are now seeing governmental regulations at thetop of our list, and there are several that come to mind. While laudable intheir goals they put a lot of pressure on companies such as ours.
In California all tailwater and the first one half inch ofrainfall in any 24-hour period must be retained on site. The goal of running acleaner operation with less impact on the environment is one that we support –but it is difficult for a large outdoor operation that drains the rain ofseveral hundred acres, not to mention the water from our own irrigation.Likewise, having multiple small locations can be equally tough to ameliorate.
California has passed a health insurance regulation thatasks companies with more than 200 employees to cover the health insurance needsfor employees and family. This can add a $6,000-8,000 yearly cost for employeesthat may be earning $18-20,000 per year — a very large percentage increase.California’s Workman’s Compensation crisis is well known, and now it turns outthat the unemployment insurance system is likewise in trouble and will beaugmented by a 50 percent increase in premiums.
Beyond the above top-of-the list items, there are still interestingchallenges in the marketplace. Each national retailer is looking todifferentiate their program. For the grower, this leads to shorter productionruns and increased complexity due to customization. At Altman Plants we believethat each customer deserves to be treated separately, but certainly achievingthis in an efficient manner is a learning process.
Also coming soon from a national retailer near you isUCC.net. This improvement in the product identification system will improve EDIbut will require a significant investment in software and systems as well as alearning period for growers and retailers alike.
There are definitely some tough challenges out there, butthat is what makes life interesting.
— Deena and Ken Altman (not pictured)
Channel Specific Worries
The strength of the mass marketers will continue to polarizegrowers . . .forcing those who service them to become even more efficient,while at the same time they will have to start the learning curve to accommodatethe “pay by scan” activities and responsibilities that will roll outin 2005.
Those choosing to supply the independent garden centers willhave to help them differentiate their products and programs from the massmarketers . . .it’s no longer the sole responsibility of the independent gardencenter retailer to create this differentiation, but rather a partnershipbetween retailer and grower that will result in relationships that both canbenefit from.
— Stan Pohmer
Pohmer Consulting Group
Going in the Right Direction
My 2004 forecast for the industry is that it will keep goingin the direction it is going . . .but . . .Bridget probably expects me to usemore than 18 words to make that statement, so I’ll elaborate some.
About 10 years ago, a major industry change took place:several growers starting taking control over the way their product looked inthe big box garden centers. These growers were outside of Florida andCalifornia, where service programs had been the norm for years. As we in theindustry had long complained, the chain stores were not caring for plants atretail, and they were not about to start. These farsighted growers realizedthat this situation was an opportunity for them to differentiate their productfrom other suppliers. These growers immediately saw significant increases insame store sales and sell through. Today, merchandising is not an option — itis a requirement to do a large amount of business with the home centers. Thereare greenhouse operations now that have more employees working in the retailstores than they have in the greenhouse.
The next step in this evolution is now starting, as a smallgroup of growers see the opportunity to take even more control at retail. Thestores’ ability to accurately track vendor sales and percent sell through isfacilitating these changes. The stores can easily see when a certain vendor hasincreased sales and profit. We are now breaking through a barrier in therelationship between growers and big box stores — a few growers are findingways to make themselves needed by the chains. The grower may be giving aguarantied sale, but in return, the grower is exclusive in the store and isgetting more control over what product is put where and even controlling theprice point in some cases. Also, the grower is getting a higher wholesaleprice! In one situation we will see this spring in a major market, the growerwill control the entire color section of the store and do everything exceptring up the sale. The grower is taking advantage of this opportunity and hasdeveloped a completely new and innovative marketing plan to enhance theappearance of the stores and the product. Yes, the next step is individualgrowers having more control but only the operations that are innovative,willing to take significant risks and have a positive approach to thesituation.
As I write this, it is the tail end of the poinsettiaseason. I’ve seen plants poorly displayed, not removed from sleeves, dying fromlack of water, dying from being flooded in a pot cover that does not drain –this is a situation that has gotten ridiculous in too many chain stores. Theretailers cannot and are not going to care for the plants (sound familiar?).The poor sell through is hurting growers due to reduced demand for restockingthe same store. We are on the cusp of seeing a few growers take more control ofthe poinsettia situation. It will not take much in-store service to greatlyimprove the quality of the product offered at retail.
Barring weather problems, it looks like the industry couldhave a very good year. Spring should be very strong — have a good one!
— Jim Barrett
University of Florida