May 2007 Big Grower

Inside the Box: Is Anybody Making Money? By Dave Edenfield

Greenhouse owners/managers always ask if there is anybody in the industry who is making money. The answer is "Yes!" Growers have maneuvered through pay by scan, vendor managed inventories, rebates, merchandising fees, sell-through numbers, ad allowances, charge backs and even bad weather to actually make a return on investment (sometimes referred to as profit). The next question is always, "What do I need to do to make a profit?"

It's not as easy as it used to be: Margins are tighter and expectations are greater. That old question from retailers to growers has never been truer: "What have you done for me today?"

Do Your Homework

No matter who you are servicing, you have to know what you shipped, what you sold and when you sold it. That's powerful information because now you can take a look at sell through. Equally important is that you have a starting point for forecasting 2007 sales.

Right here is where you need to have an honest conversation with yourself: Did I grow and ship only the very best product? Did I ship the right products at the right time and in the right quantity? If the answer is no, you have not been honest with your customer. Growers are sometimes quick to point the finger and blame retailers for all their problems.

Ask YourselfÉ

Take a look at the factors affecting sales and, ultimately, profit. How you answer these questions will help determine if you will make money this year.

• Do you own the SKU or UPC? In another words, do you have competition from a competing grower?
• Is there clear, logical, dated merchandise planning for the garden center and, ultimately, your product? This plan needs to include end caps and tables as well as the storefront. Does it include both in-stock dates and clearance dates?
• Is there merchandising and in-store support? If you provide this, you need to get paid for it. If the retailer is supplying support, it needs to provide you with a formal, workable plan that is measurable and has financial consequences for noncompliance.
• Is there a solid, workable, thoughtful advertising program? Be prepared to help your retailer partner with the right items to advertise at the right time. Don't forget all this has to happen at the right retailer as well.
• Is the retailer generating the foot traffic needed to be successful selling perishable, impulse-driven items? The more people coming through the front doors, the more eyes and hands (and wallets) that will see and touch your products. There are several large retailers that are losing the battle for foot traffic.

One More Consideration

The last challenging factor in this scenario is your ability to manage and understand risk. In the past, I have known and worked for growers who were willing to chase the first and last sale of the season — at any cost. There has also been the fear of letting customers run out of product. I have to ask the obvious question: Can you afford the risk of having too much product? The answer is yes, but only if you are getting paid to take the risk!