September 2, 2008 By Melhem Sawaya
At best, it was a fair season for most growers; but just as importantly, how did gardeners fare?
According to Statistics Canada, the industry growth in 2007 stalled. Flower and plant sales were up a modest 1.5 per cent due to excellent 2007 spring sales.
This year, however, started with disastrous potted plant sales, with an Easter that was the worst I’ve experienced in my 30 years in the industry. This was mainly due to an early Easter, bad weather, and inferior crop quality. Potted plant sales never picked up, even at Mother’s Day.
Bedding plant sales started strong, with an explosion in demand for product around April 17-20, which was no doubt prompted by excellent weather for a short while. Then, for the next six to seven weeks, there was steady business, though at a somewhat slower pace. The long weekend was earlier than normal with less than desirable weather, but sales recovered nicely the weekend after that.
At the end of the season, sales in general were just fair. Some growers sold out, while others had sales declines of only one or two per cent. However, many medium-to-small operations that grow plants on speculation, assuming there would be market shortages that will create demand for their product, found there was little demand. This translated to more than seven to nine per cent of unsold product.
For the first time in my 30 years in the industry, bedding plant season sales are lower by three to four per cent in general. Is this a blip … or a trend?
It is the same picture at the retail level. After all, greenhouse sales are directly impacted by what happens at the retail level, big box stores or garden centres. Big box stores are trying to differentiate themselves from other retailers by carrying different container sizes and shapes and different plant material – which all help to avoid price wars. Even with product differentiation, there are some items, such as 10” hanging baskets, where few varieties are grown and marketed as loss leaders to attract customers. Generally speaking, all this does is increase sales of the inferior, lower-cost hanging baskets and reduces sales of higher-end products. Also, the stores are making much lower margins, or even negative margins; in many cases, so is the grower.
But the main concern is with consumers receiving products that, many times, don’t perform well. Next season, they might not buy plants at all.
Garden centres generally fall into one of two groups. One is progressive and goes after new ideas, mixes, and container configurations. The other is so afraid of change, it continues with the same old programs.
The garden centres that do change and adopt proven programs are going ahead and reaping the benefits. However, those who stick to their traditional product lineup are losing sales and returning much lower margins.
Using caution while incorporating changes is good, but the key is to adopt something that’s been proven. In other words, try a new program on a small scale the first year, after you have done your homework and feel that this new program could be successful. If it’s successful, enlarge it the next year and drop at least one program you feel is not as popular. To make these choices effectively, accurate records of sales-per-item are very important. The easiest way is to take the plunge and barcode all your products – even if it is for your own garden centre or for selling to other retailers. You can only make proper changes from accurate and objective facts and records.
My guess is that garden centres are always looking for innovative ideas and products to help them build relations with their customers, and those selling only what consumers will have success with will be industry leaders.
Many of the people I talk to always say “next year is another year,” and they will see what happens. Well, some factors are totally out of our control. What is going to happen next year with the economy, or the weather, or any number of other things that are beyond our control?
The first important thing to do for next year is get our production adjustments for:
2. Product mix.
3. New introductions.
4. Elimination of a program (crop, pot size or variety) that gives the least return.
5. Review customer lists and, if your list is basically one large account, give a little more thought to the situation. Another important factor to look at is the production numbers compared to your sales numbers. Determine what customers were really asking for and what you just shipped to them because you have it.
6. Discuss with your buyer what sold well and what didn’t. These discussions should be with the actual plant department manager of the store as well as the chain’s buyer.
7. Do not build a new production program for a crop because one customer mentions that he would have sold more of that item. Check with other buyers to determine if that is the case. Even then, new programs are to start small to test the reality of the product demand.
Consumers are always asking, “what do you have new that is different?” It is very important to have new products, but what is more important is to have a proven variety that will perform well for consumers. The only way we are going to know a variety will perform at all levels – in the store and in the consumer’s garden – is to go through the process on a trial basis the first year. Evaluate it for the next year.
The trend the past several years has been towards large containers of mixed or solid products, and this year especially, growers still working with the 12-0-4 flats got stuck with a good 20 per cent of their product. With many configurations of cell packs, very few of the 12-0-4 flats could find a home with growers.
Also, the 6” or gallon annuals are gaining in popularity. Sales are increasing more than 200 per cent. Sales of mixed containers are on the rise but the right mixes still lack culture knowledge or colour, texture and container coordination – though we have come a long way from eight years ago.
With the introduction of new product mix, we don’t really know the exact cost of production until we go through one or two seasons. With mixed containers, I don’t think many growers took a serious look at how much it will cost to grow and ship 12”, 14”, or 20” containers of different cultivars in one pot. At the
same time, recipes from breeders are enormously over-inflating the number of liners to make a container. This is an unnecessary cost and also frustrating for gardeners trying to maintain a container full of roots and which has lost its water-holding capacity.
Sales are very important, but sales at minimal – or negative – margins mean only one thing: closing the doors of our greenhouse much sooner than we desire. Costing our product with all the details that take into consideration every aspect of our operation is a must. This is the foundation for decisions on pricing or determining whether to grow that specific crop or not.
Strange enough, even the demand for our horticultural product is down. The prices held up compared to last year, though this meant margins shrank drastically since costs went up substantially. With lower margins and decreased sales, something needs to change and change fast!
In the next issue, we are going to visit costing (again) and compare greenhouse operating costs from 2000, 2006 and 2008. The reality is prices have been flat since the 1980s but the cost of production keeps going up and something is going to give.
I know that the mentality of many buyers is to squeeze the supplier as much as possible – just shy of them going broke. Well, Mr. Buyer, I do not supply any plants but I know exactly how much costs have increased. If prices don’t go up by at least 10 per cent, I predict that within the next two years, you will be paying 20 per cent more – because a third of your suppliers will no longer exist!
For the next season, a definite five to seven per cent cut in production is a must. However, if most of your sales are on speculation, you will need to cut by 10 to 12 per cent, or look for new customers who will at least consider buying from you.
As an industry, if we don’t co-operate and approach the demand for our product as priority Number 1 – and do the right promotions where every dollar put into promotion is 100 per cent used for promotion and not management fees – then we are spinning mud.
Many intelligent marketers in our industry feel all that is lacking is co-operation to reach our ultimate goal of increasing the demand for horticultural products. We must stop thinking, “if I don’t help my neighbour, I will have one less competitor.” The fact is, if one operation goes down, the whole industry suffers, as it will drive costs up. Don’t ever think you are getting rid of a competitor – instead, you are increasing your costs and making it harder to make a profit.
Another major aspect we need to start, as an industry, is to implement programs to teach the ultimate consumer how to keep a garden plant alive and provide them with the following:
1. The varieties that thrive the whole summer.
2. The right size plant for the container.
3. The know-how to take care of the plants.
4. The means and tools to take care of the plants.
Any homeowner or consumer who has success in maintaining plants is guaranteed to buy more plants the next year. But if the plants don’t perform or die two to three weeks after they’re purchased, it is also guaranteed customers will buy less or stop buying completely.
It is a great industry and has served us well so far and, with co-operation and focusing on solving these inconvenient issues, is guaranteed to continue to well serve our children and grandchildren.
Melhem Sawaya of Focus Greenhouse Management is a consultant and research coordinator to the horticultural industry. Comments on this or any other article are always welcome at email@example.com .
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