Hope on the horizon

As the season began earlier than normal, Tim Cahill was excited, but he kept waiting for things to change.

But the sun kept shining, the rain stayed away and he just continued shipping.

“All year I kept telling my wife, ‘This is just weird — something is not right,” says Cahill, owner of Cahill Family Greenhouses Inc. in Salem, Mo.

It was especially strange after last year, which proved to be one of the worst weather years for the industry between blistering heat in the South and nonstop rain in many other parts. But this year, Mother Nature seemed to be more sympathetic.

“If growers couldn’t grow in this year in our area, they really need to get out because the sunlight was so abundant in January, February and March – it was incredible,” says Scott Mason, general manager and grower at Ritter Greenhouse in Bridgeton, Mo. “It was some of the best weather growers have seen ever that they can remember.”

Cahill said he’s used to getting some rainy parts that provide a chance to catch his breath and catch up, but he didn’t see any of that this year.

“Usually in the spring you have a week or two where it does nothing but rain,” Cahill says. “We didn’t have any of that this year, so it was just perfect weather from start to stop.

“Last year, that’s all it did was rain. It was strange to go from last year, where you have that in your mind, to this year. All season it just seemed like there was something wrong — nothing was normal. It was one of those years where I said, ‘You’ll remember this year because they don’t happen very often.’ I kept watching the forecast and thinking, ‘OK, it will start,’ but it never did, which is nice.”

Nice indeed, as Cahill sold every plant he had and was empty by June 1.

“We’d sell whole plantings in two days,” he says. “In the normal time we’d sell one planting, I had three, almost four, plantings sold this spring compared to what would normally be, and I kept adding on every order.”

Yes, the spring season was a success, and some growers even saw double-digit sales increases over last year, which has provided hope for the future across the industry.

“For the most part, we’re past the worrying about will tomorrow come in terms of the recession and the effects we suffered through,” says Forrest Stegelin, associate professor of agriculture and applied economics at the University of Georgia.

Here’s a look at what went well this season and some of the concerns still on the horizon along with that hope.

Struggles despite successes
Despite a strong sales season, many people aren’t quite overjoyed yet. Stephanie Whitehouse is the sales and marketing manager for Peace Tree Farm in Kintnersville, Pa., and she says it wasn’t spectacular, but on a scale of one to 10, 10 being the best, she’d rate it a solid seven to eight, with last year being a five or six.

“It was definitely an improvement,” Whitehouse says. “I wouldn’t say it’s amazing or we’re jumping for joy here, but we’re content.”

Part of the hesitation to get excited comes from looking at the bottom line.

“It was one of the best selling years people have seen in the Midwest, but from a profitability standpoint, it was absolutely stagnant,” says Andy Krieger, co-owner of E. Krieger Greenhouses in Jefferson, Iowa. “A lot of volumes have gone out, but the profitability is really hurting in our industry right now.

“[There are] good sales, and everybody is thinking, ‘This is wonderful,’ but when you look at the bottom line, it wasn’t there. There are double-digit sales increases, but then profitability is tighter and there’s no fat to draw from — no reserves after the last two or three years.”

He attributes part of that to: over-production, increasing costs, and a perceived less value because of big-box stores.

“Profitability is tight,” Krieger says. “Margins are tight because of fixed expenses, insurance, labor, fuel, right down the line. Fixed expenses and cost of goods have all gone up. The fat is gone. The reserves are gone.”

Whitehouse also agreed that the profitability levels aren’t higher despite increased sales.

“The fact that the winter was a lot more mild definitely helped lower the cost for heating,” she says. “But we found we were spending more on our biological control system.”

Since Peace Tree Farm is certified organic, it uses biological control for all of its pests.

“Because there wasn’t that cooling off season or that hard frost or normal winter temperatures, we were spending more time controlling for our insect population — successfully, but there was a longer control season than what we had seen in the past,” she says.

In addition to costs going up or having to spend more money in areas you may not normally need to, many growers may not see high profits this year because they’re spending money on maintenance or upgrades.

“I’m looking at upgrading some of the systems to try and stay competitive, so whether or not profits are up with where our priorities lie, that remains to be seen,” Mason says.

Profitability levels may also not be as high because many growers made much-needed adjustments to what they grew only to have wished they hadn’t. For Cahill, since 2008, his late plantings haven’t sold as well.

“I cut them back at least half this year, which I shouldn’t have, but how do you know?” he says.

Krieger also said that while the spring season started early, it also ended early.

“They bailed,” he says. “We were selling product in March and had a really good April, and after Mother’s Day, sales died off. Instead of looking for more, instead of them trying to garner some additional sales, I think the retail customers, at least our retail customers, just bailed. … Because the season was so early, it wasn’t extended. The window frame was exactly the same — it was just moved up a month earlier.”

Janet Peele is the owner of Aberdeen Florist & Garden Center in Aberdeen, N.C. There she grows 80 percent of what her garden center sells, but she saw her season start strong and fizzle out.

“We had really good early spring sales and a lot of interest,” she says. “It fell apart a little early this year — it wasn’t because of rain or hot days. I’m not sure if people are just holding back or what, but a lot of my landscape customers have cut back on them too, so I think there’s just a general tendency not to spend any money right now.”

As a result, she’s going to take a different look at what she grows for next year.

“I’m going to be much more careful,” Peele says. “I’m going to do some good analysis this year and decide what sold and what didn’t. … I’ve always gone about my planting with about a 10 percent expansion each year, knowing that something is going to fail and something will not come in seed-wise, but I’ll be a little more conservative next year.”

Peele says her customer base is more high-end but she’s also starting to see a growing military population in her area, so she thinks that as they start to learn about her center, it will increase business. But this new demographic will have different needs from her current one, so she’ll need to learn what they want — a common issue for many growers and garden centers alike. Krieger predicts more attrition in the industry as growers try to learn more about new ways of doing business.

“It’s going to take a while longer for the growers to really figure out what those new customers want — what the new dollar bill is looking for,” he says. “It’s going to take less growers and less product out in the marketplace and a more catered product line to meet the new customer’s needs.”

Trying new things
While many still have hesitations about the future, growers can’t deny that it was a good year at least, and it was a shift toward the future. Much of that has come from trying a variety of new things.

“Most of [the growers] I was in touch with this spring … had a pretty positive outlook,” Stegelin says. “They admitted that they didn’t produce the sheer volume that they used to produce, but they became more aware of and the need to focus on basic business function rather than worrying about production. They’re all good at production and know how to produce, and it was a matter of running a business that they seemed to realize that there were some activities that they could be putting a closer tab on or at least directing their own personal efforts to.”

Stegelin says another way he’s been pushing change is by advising growers to raise prices, and he was excited that many did. They produced fewer plants — some by as much as 20 to 25 percent — but raised the prices and still saw their revenue come in about the same as in previous years.

He says another reason why many growers were successful this year was because they got away from the tried and true.

“The ones that felt they had a successful spring said they did something they hadn’t done in the past — took the initiative,” he says. “Instead of them growing it and waiting for it to come — kind of like the take off of “Field of Dreams” — that they had done in the past, they proceeded to do more outreach and pre-sale marketing efforts to communicate what their abilities were and find out what the needs were so that they could, in fact, make some last minute production changes rather than filling a greenhouse with plant material like they had in years past and assume they would sell it out the door.”

These changes weren’t out of desperation though, he says. Instead, it was a realization that they wanted to sell what they had and get the most money they could.

“A lot of people, in the past, would nickel and dime them in price, but when they took the initiative and instead of waiting for that buyer to show up on their doorstep, they trust the whole notion and put the buyers on the defensive in the sense that they were willing to accept the higher price — and without many questions asked,” Stegelin says.

Additionally, Stegelin says many growers are going more toward margin management now instead of sheer marketing and pricing. He says all the economists in the industry have been preaching this, but growers are starting to listen.

“Once we started talking essentially about margins and pointed out to them that every retailer around them is dealing with that as well as producers … they suddenly realized that was the way most businesses were operating, and the growers started looking at their own particular operation, and it shifted,” Stegelin says.

He says this year was also one that perhaps margins are probably not jumping a whole lot.

“They’re finding out that they’re probably not increasing their margins, but what they’re finding out is what their margins really are and what it’s going to take to get where they want [to be],” Stegelin says. “Some had unrealistic expectations for particular plant materials.”

He says some growers thought their pride-and-joy product was their best opportunity, but when they look at it closely, it may not be, or they can make changes to make it more economical for them. Or in some cases, it was better to instead focus more on differentiation and not offering the bread-and-butter products that a lot of retailers sell. Whitehouse says they decided to focus on more unusual plants this year that the company was already known for.

“The common annuals that a lot of other growers in our area are growing, we don’t need to be in that business and trying to compete with everyone else,” she says. “Our customers aren’t coming to us for those plants — they’re coming to us for the new, the unusual, the cool, the different plants that will help them set themselves apart as well.”

Cahill went the same way.

“I did more varieties but less of them,” he says. “I cut back on the staple products and added on more of the odd stuff, more of the newer stuff, just in smaller quantities. That helps me for ordering next year because I know what’s going to sell on the new stuff and what didn’t, instead of buying a bunch of it and getting hung with it.”

Whitehouse says that they also continued focusing on organic herb and vegetable programs.

“We did see another increase this year compared to last year and the year before that the edibles movement still is growing strong, and we still have a fairly big desire or there’s a lot of demand for that out in our market,” she says.

In addition to focusing on differentiating themselves, the Peace Tree Farm team also started an early season program this year and promoted it heavily. In the past, they offered a few plants available from the end of February through early April that are cold-hardy and have lots of color to get their garden center customers and the end-consumers excited about planting early. But this year, they expanded it to about a dozen plants, and they heavily advertised to their garden center customers, encouraging them to get their customers in early.

“I think [implementing this] took taking a look at how our spring season had gone last year and coming to the realization that the traditional spring season, from Easter to Memorial Day, is what it is,” Whitehouse says. “You can’t increase your sales that much because customers are locked into, ‘This is the traditional season.’”

She says people, no matter what, are going to be coming into the garden center and purchase plants, so they shifted focus to bringing people in and exciting the end-consumer earlier in the season and throughout the year. Doing this created some good buzz in their area and helped lead to a better year.

“Increasing your early spring sales is probably where you’re going to see most of your revenue coming in from,” Whitehouse says. “You’re going to see your most improvement throughout the season if you were to create an early spring program.”

Tales of pre-orders
A lot of the talk has been about garden centers not putting in as may pre-orders, and it’s been hard for growers.

Trey Pitsenberger is the owner of The Golden Gecko Garden Center in Garden Valley, Calif., and he didn’t put in pre-orders this year because he doesn’t have problems with availability.

“We have a problem here in California where we’ve always been able to snap our fingers,” he says. “We on the retail end need to work with growers more and make more assurances.”

Those assurances would certainly help many growers that depend on pre-orders. Last year Mason’s business had gotten to the point where they had about 40 percent of business in pre-orders, but this year it knocked down to about 25 percent.

“When we came to the table, it was price,” Mason says. “Price was the issue. Local customers went to out-of-state growers. How that’s possible, I have no clue.”

He also lost quite a bit of contract sales from a larger customer this year, so he shifted his focus in order to still be successful.

“We’ve transitioned into a filler,” Mason says. “As the plants went out the door so quickly for the IGCs, they didn’t have planned deliveries from larger growers, so smaller growers stepped in and carried that weight.”

He says that while many places are cutting down on variety, he increased the variety so that he wouldn’t miss out on sales opportunities.

“I wouldn’t cut down on variety,” Mason says. “Variety seemed to have made it for us. We only increased varieties this year. It seemed the more varieties we packed on, the more we were able to fill a truck with a single order to a single customer because we ended up being a one-stop shop. That really helped us this year. Besides the weather, the biggest contributing factor was adding varieties to our list and keeping customers well-informed.”

As a result, while he lost contract sales business, his revenue from the independent garden centers increased significantly for the first time in about five years.

“It was probably the best March we’ve ever seen as a company,” he says. “April kind of evened things out, but we had a strong late April. March definitely did it for us. … The IGCs were way up, and that really helped.”

Pitsenberger says that there are ways growers can work with garden centers for next year to avoid having to shift focus.

“Work with us earlier in the season,” he says. “Talk to us about what might be needed in the future. … [We need] more communication earlier in the season about what’s selling and the direction we can go and what can we do different that will set us apart from the supplies of our competition.”

While many said pre-orders were down, Peach Tree Farm saw a fairly large increase, thanks in part to a program offered by Hort Couture, which they serve as an allied wholesale grower for. Hort Couture offered a program last year at the end of the year where garden centers could pre-book for the spring with Peace Tree Farm and they would receive 10 percent of their total orders back as a credit toward POP and merchandising displays for promoting Hort Couture in their stores.

“That was a good, solid help to let us know early on that spring was probably going to be better than we had seen in the past,” Whitehouse says.

Whitehouse said they sold out of some materials early on, so some customers wished they had pre-booked.

“We said, ‘Hey, this is what happens when you don’t pre-book. We’re only going to grow a finite number of material, and when it’s gone, it’s gone,’” she says.

As a result, she anticipates more garden centers pre-booking this year.

“A lot of people are realizing that pre-booking is the way to go,” Whitehouse says. “I understand from a garden center standpoint it’s difficult to forecast what your season is going to be like, but if you can pre-book the items you know you’re going to need … that helps. Then as a garden center, you know you’ll have it and you can build your other orders around it.”

She said for those that had pre-ordered their Hort Couture products, many came back and added on other Peace Tree products to round out their orders.

Whitehouse says, “It definitely helped build really nice orders.”

The spring season proved to be a strong one for most growers because of implementing better business practices, finding ways to overcome down pre-orders, implementing new programs and differentiating from competitors. Because the weather is unlikely to be any better than it was this year, by continuing these initiatives and building on this year’s successes, next year can hopefully be even better.