Greenhouse Canada

Business Management
From the Editor: Pricing pressures affect everyone


November 18, 2008
By Dave Harrison


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Our website polling is less than a year old, but we’re already
encouraged by the response. We’ll be adding polls throughout the year,
and are open to suggestions from readers.

Our website polling is less than a year old, but we’re already encouraged by the response. We’ll be adding polls throughout the year, and are open to suggestions from readers.

The first poll question we posed, way back in February, still attracts quite a bit of interest.

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Have you been able to increase overall prices in 2008, and by how much?

As of early November, the responses were as follows:

  • No increase: 49.2 per cent.
  • Yes, and by 1-4 per cent: 25.4 per cent.
  • Yes, and by more than 5-9 per cent: 19 per cent.
  • Yes, and by more than 10 per cent: 6.3 per cent.

(We didn’t dare ask if anyone had rolled back prices. If they did, it’s doubtful they’re still in business and reading this editorial.)

Our polling sample is small, but it should reflect industry consensus. (One flaw in the question is that we didn’t break it down between flower and vegetable sectors.)

But reading that about half our respondents ushered in no price increases at all is quite alarming. Input prices continue to rise each year, so why not product prices going out the door? Transportation costs ballooned for much of the year with the spike in oil prices, though at the time of this writing, a litre of petrol can be had for some 85 cents in some regions in southwestern Ontario. Wages and salaries are rising, certainly to help your staff keep abreast of inflation.

Columnist Melhem Sawaya commented on industry inflationary pressures in his September 2008 feature, “The numbers don’t lie.” He said that over the past 20 years, labour costs have risen 40 per cent, equipment is up by 50 per cent, chemicals have doubled in price, and packaging and labelling expenses are 400 per cent higher. He pegged energy increases during that same time frame at between 150 and 200 per cent. His conclusion: “Prices have to increase by 20 to 30 per cent, at a minimum…. Consumers won’t tolerate a 100 per cent increase, but a 20 to 30 per cent hike is acceptable for them and essential for you.”

He cautions, however, that growers have to earn those increases with “better service and a higher quality product.” Important, too, is the role of retailers in providing a premium level of care for the plants on their shelves. “Customers buy for beauty and enjoyment,” notes Melhem, “and a $2 or $3 cost increase will never stop them from buying flowers. However, inferior plants will definitely kill every sale.”

But while our poll shows half of respondents held the line on prices for 2008, the remainder did pass along increases, including some by more than 10 per cent. That’s quite encouraging, indeed.

It’s a competitive marketplace. Perhaps growers are worried that any effort to increase prices might result in a lost customer, or two, or more. But reasonable increases, accompanied by quality products and exceptional service, should not scare off existing customers.

Holding the line on prices for years on end is not sustainable. ■


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