Growing in the Green: Spring 2011 experiences…

August 31, 2011
Written by Melhem Sawaya
It is almost August as I am writing this article and many growers are already planning next season. Here is how I saw this past season unfold, and the factors that affected the outcome and what we can learn from this season that can positively impact the next spring season.

Simply put, a cool April slowed sales and a rainy May resulted in below normal sales. And while June had better conditions, it didn’t produce sufficient sales to make up for the previous two months.

gitg1      
Get your kids involved.

     
This picture reflected the retail level. Many, if not most, wholesale growers did much better than last season.

SEASON HIGHLIGHTS
  • Cool weather in April slowed sales to way below normal – by at least 25 to 30 per cent on average compared to other years.
  • The rainy May affected sales, but at least stores were not loaded with product. This is because buyers and suppliers are communicating much better; stores are stocked by taking the weather and sales into consideration. This means there is no garbage on the shelves.
  • In June, stores experienced steady sales that were better than last year, but supply still significantly exceeded demand. One grower had the following comment when asked about the state of the Toronto market: “Mel, if growers are taking the product to the market in transport trucks and buyers are coming with mini-vans, we are not going to sell much.”
  • Sales were up by five to 10 per cent for a few garden centres and chain stores. There were very few with flat sales or a two to five per cent decrease in sales.
  • By and large this spring season, there was no increase in sales compared to last year. Many growers were up by 10 per cent, but at the same time, many were even or lower by 10 per cent.
  • Many growers were stuck with up to 30 per cent of their product but, in general, these were small-to-medium size growers growing products on speculation.
  • Product quality was above average.
  • With respect to product mix, there was more reduction in flats production again this year. There were more containers, but some growers did not reduce production of flats enough and many flats were dumped … even impatiens flats.
  • From what I heard, zonal geranium sales had the worst year, percentage-wise, compared to other genuses. Maybe gardeners realize geraniums need work (mainly dead-heading) after rain and, if not done, botrytis will take over and the plants are good only for recycling.
  • From what I saw, petunia flats did not sell well at all.
  • On average, sales of all 10 cm pots, of any variety, were down, but sales of 15 cm pots were up.

FACTORS AFFECTING THIS PAST SEASON
■ Here are some factors that impacted the outcome of this past bedding plant season:

Weather: Cool weather in April prompted lower sales than normal and, at the same time, consumers shifted from buying the cool crops to the regular May crops earlier than usual. This also led to some growers getting stuck with cool crops such as osteospermum. By the way, osteospermum should be marketed as a regular season crop for two reasons:
  • It’s easier to produce and will cost less because our experience is that if you need to make April 20 sales, then you have to grow the crop at a higher temperature than if the sales date is May 5-10 or later.
  • By promoting April sales of osteospermum, the consumer mindset is that it is like pansies and does not flower in the hot weather. To the contrary, almost all osteospermum flowers at high temperatures. In our trials this year, osteospermum flowered the whole summer, and as you know the temperatures were in the mid- to high-thirties in southwestern Ontario.
Almost every chain, and some independent garden centres, had low-priced hanging baskets on the Mothers’ Day weekend and the rainy weather kept the consumer from getting in the mood to go out and cash in on those sales or any other bedding plant product. This led to overstocking for many chains. If plants are in the sales areas for more than three days without much care, they will look bad and have no sales appeal. This will lead to a backup of sickly looking plants the store does not immediately discard. Meanwhile, there was additional product in greenhouses ready to be shipped… but with nowhere to go.

gitg2  
Teamwork makes things run smoothly and pleasantly; get all your staff involved.
 
Product mix: Bedding flat sales have been declining every year, but this year the bottom fell out. Production-wise, sales of flats were cut by 10 to 15 per cent, and yet some growers still ended up dumping another 10 to 20 per cent. For some reason, petunia was the doomed variety – perhaps because the cool May weather dampened sales, and consumers did not want to plant in mud.

Ten-inch hanging baskets were plentiful, but at the same time demand and supply were very close.

Mixed containers were still in demand and the market can still absorb good-quality mixed containers at a reasonable price… but that does not mean cheap. Many growers calculating the cost of mixed containers realized that production of a good mixed container costs much more than expected, and they ended up selling them at a loss or with a very slim margin. If we do not make a profit selling an item, simply increasing the sales of that item does not make profit. Yes, this is obvious, but there are still many growers who track “dollar sales” instead of “dollar margins.”

Sales of 10 cm containers are slowing because:
  • Too many were over-priced.
  • 15 cm pots are produced earlier in the season than other years and, compared to 10 cm pots, they were reasonably priced.
  • Consumers increasingly want an instant garden, and this can be accomplished by planting 15 cm pots rather than 10 cm units.
  • Many homeowners are planting 25 cm (10") hanging baskets in their gardens – especially when offered at a very low price.
  • Increased production and flat demand. In Ontario, for example, there was a five per cent increase of product over last year. Many growers increased production by five to 15 per cent. There was also less product – between five and 10 per cent – shipped to the U.S.
After last year’s disaster in June, most growers did not plan for much in the way of sales for the month. Those growers, therefore, cleaned up nicely because any product leftover from May sold in June.

It should also be noted that production areas of many weekly flowering-pot producers were filled with bedding plants either for themselves or contracted to another grower.

gitg3  
Buyers taking a first-hand look at what performs well in their market area.
 
The point is, there was an increase in production, and slower sales were not all weather-related, though bad weather didn’t help.

FLAT DEMAND

■ This can happen when we shove a product on consumers that is not garden proven, setting up the consumer for failure and turning them off from gardening.

It is also a problem when we sell products at the wrong time, for example, retailing New Guinea impatiens at the end of April or the first week of May when they are not even 7ºC tolerant. Most of the customers who had these hanging baskets that went into the garbage after two to five days will not buy anything else, especially after wasting $10-$40.

Another problem is with the buyers’ blind hunger to have something new and exclusive. All too often it leads to major losses for both growers and stores. The breeder/salesman who talked the buyer into featuring the product is not only using untested information but is actually part of the cause of shrinking demand.

Many times, we grow products because they are cheaper to produce. However, if the shelf life and garden performance are not tested and we continue with them even when we know the product is not very good, we have simply ensured we’ll have a very dissatisfied consumer.

CONCLUSION
■ Grow what you can sell. Avoid dumping – this will keep prices stable because there will be no pressure to drop prices. It also ensures dumping doesn’t eat up 15 to 20 times the profit you made on your sales.

Educate, listen, work with your customers and employees, and be your operation’s coordinator who keeps things running harmoniously. Bullying and bossing around might get the job done but it will not build a successful business.

Building a team that cannot wait until Monday to come to work, rather than one that cannot wait until Friday to leave, is the basis for a successful business. ■

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, please e-mail:
This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or visit www.focusgreenhousemanagement.com or www.sawayagardentrials.ca .


Here’s a handy checklist for the 2012 season

1. Involve customers in planning your production schedule.

2. Do not grow exclusively for one buyer (with their bar codes and packaging) unless the commitment is to buy everything you agreed to produce for them.

3. Diversify your customer base – test new waters carefully and on a small scale.

4. Grow well-tested cultivars that you know and try not more than five per cent, as new cultivars are not necessarily better than the old ones.

5. Involve your staff in the selection and planning process … especially if they have been with you a long time.

6. Production numbers that are projected by your accountant or banker – or accountants for your customers – don’t mean much because “sales and production” is not just a numbers game … many other variables are to be considered and only the close relationship between you and your outlet store/independent garden centre allows you to know their mechanics and caprices to determine the potential for increasing the business.

7. Sales projections based on the need to pay a mortgage or buy a new toy will normally backfire. Base production numbers on orders or your customers’ potential sales capacity, the kind of information you learned through years of dealing your customers.

8. Only grow what can fit properly spaced right away.

9. Plan your product mix and order early enough.

10. Profitable mixed containers should be planned; don’t just plant whatever is around. Price them properly to make a profit and not just increase dollar sales.
a. Two to three varieties per mix is good enough.
b. You must choose compatible varieties, so that one will not overgrow the others.
c. Experiment with fewer cuttings per container as, many times, you will not see the difference and you will get a better shelf life product and a better chance of survival for the consumer.
11. It is OK to run out of product, but disastrous to dump anything. Losing a sale means you lost only the margin you would have made (depending on your production this varies from five to 15 per cent). However, based on your profit margin, every dollar of dumped product actually eats up $15 to $20 in sales.

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