Compiled by GIE Media Horticulture Group Staff
Another year is behind us, and according to our State of the Industry reports, it’s been a profitable one for most. But as we reflect on our industry’s success from 2015, we must also look to the future. It’s time to take a moment to analyze what worked well, how we can improve, and how we must adapt to the ever-changing marketplace. Industry leaders have weighed in on these issues that have affected their own businesses to provide some perspective and get us thinking ahead for 2016.
Ornamental Breeder: What were some of the factors that affected your business this year?
Teresa Matsui, Increased velocity of mergers and acquisitions and brand lifecycle activity in the grocery store industry [and] increased labor costs due to the effects of the Affordable Care Act, plus the absence of a rational immigration policy.
Jeff Edgar, We’re still climbing out of a long and deep recession. The situation was also made worse by those who use low prices as their only marketing tool. Nobody gained a market share, we just made less money and grubbed unsold inventory.
As a group, we tend to overreact to both the good times and bad. For example, if something is in short supply today, most plant like crazy. Then when the plants are ready for market, the market is flooded, dropping the prices of plants. Then we stop planting, which creates shortages when the market has [reached] a level of recovery. Shortages ignite over planting; make the industry “attractive” to those who know little about our business; the cycle repeats.
Shawn LaRue, We’re really looking at every phase of our business, trying to update and get smarter and have a plan in place because we’ve just been kind of metaphorically hitting the pitches, not really studying the picture at all right now.We haven’t for the last couple of years.
Michael Roe, Our need for quality labor has definitely increased. We’ve hired more local labor recently and have requested an additional 12 H-2A workers to come at the end of January (which is two weeks earlier than normal because we have so much potting to get done to stay ahead). Right now, it’s next to impossible for us to keep up with demand.
Scott Chatham, We’re seeing price increases. We’re seeing our costs go up and the price increases are going to have to occur. We’re seeing labor shortages like we’ve never seen. We’re seeing the average hourly wage creep up immensely.
OB: Did you expect these factors? Which were unexpected?
Matsui: Yes, these factors were largely anticipated. However, what we didn’t necessarily foresee was the implosion of multiple grocery chains (or significant parts thereof) in 2015. We weren’t directly affected, but this certainly has an effect on the overall landscape of one of our major sales channels.
OB: How will you adjust your business in 2016? What trends and factors are you anticipating will have an effect on your business in the coming year?
Edgar: We’ve noticed increased prices and shortages of some key plants. There are too many very similar plants being introduced to the market and with some very creative names.
As a grower, I’m always looking for a way to remain a grower, yet look to grow something nobody else is growing or use a method that nobody is using. [I’m] trying to lead rather than follow, and trying not to get caught in too many reactive situations.
“We have to be smarter and more strategic in our marketing efforts, and more targeted in our sales efforts.” — Teresa Matsui, president of Matsui Nursery in Salinas, Calif.
Because of plant shortages, we are dipping into an inventory of smaller-sized plants, at least to offer our customers a solution to short supplies. To turn a crop a year or even two years before planned availability cuts our costs per plant, yet the prices for these smaller plants may be the same or even more (than we were able to get for the last several years) than the ones they’re substituted for. Growing more trees in boxes allows us to harvest trees any time, no field soils removed, no need for specialized harvesting equipment, produces a better root system, etc. This method helps us to cut costs and production time, while increasing the plant’s quality, [and] adds to our profitability.
Matsui: We have to be smarter and more strategic in our marketing efforts, and more targeted in our sales efforts. We anticipate significant headwinds in the macro environment, which we expect may suppress overall floral demand as well as grower pricing power as consumer discretionary spending is impacted by the strong dollar, higher interest rates and regional economic downturns. At the same time, there will always be occasions for which and recipients for whom a floral purchase is exactly right. As long as we provide the right product for these purchase opportunities, Matsui Nursery will continue to thrive.
Chatham: As we get rated by other companies, our strategy is basically making sure that we treat everybody like they’re ladies and gentlemen who are working for us and we’re serving other ladies and gentlemen and treating them with respect. We’re holding fast to our guns on not taking away benefits, paying for vacation, treating [staff] like professionals.
LaRue: We expect growth in density, but at least for 2016, we’re not planning to grow geographically. It’s not something we’re actively pursuing. Obviously, if something came up and we were in a position to take advantage of it, we would certainly address it, but it’s not something we’re planning for.
I think labor is going to be the key part of the equation moving forward. I think the equation is changing between what you can do the work for and what people are willing to pay for. I think people on the bottom end of the scale are going to start electing to do more of the work themselves and not necessarily hire a professional contractor to do things. On the upper end of the scale, you’ve got a lot of competition. There’s certainly some sharks in the water moving forward.
Roe: Our industry and our nursery are definitely back into a growth phase for what we are predicting to be three to five years. Another big shift from our standpoint is the gigantic increase in the demand of old standby bread-and-butter crops, like Dwarf Burford Holly, Schillings Dwarf Holly and Indian hawthorne. While we will continue broadening our offerings with branded plants, it appears we’ll see the majority of our sales volume pick up in the staple crops.
We are also entering the chain store business in 2016 for the very first time. There will be a learning curve to go along with all the other increased business in other markets. All in all, it looks like our market has entered into a trend where it’s both fun and profitable to be in the nursery business again, and that is a blessing.