September 2010 Big Grower

2010: A Retrospective By Dean Chaloupka

GPN magazine recently invited me to be a panelist at a presentation about the state of the industry during this year’s OFA Short Course. Prior to the show, GPN and OFA — and Association of Horticulture Professionals — sent a survey out to growers around the country, and more than 500 responded. The survey results were in many respects as expected, with the central theme and top concerns about the future being profitability, cost containment, low prices, big box stores and their suppliers, and the economy. There also were a couple of questions and responses that suggest that there are a lot of things we, as an industry, still just don’t get.

Profitability/Cost Containment Versus Sustainability
Many respondents wrote that rising costs associated with labor, benefits, inputs and energy would be their most important issue in the next five years. In the survey, participants were asked what types of things they thought they needed today to be more successful. The growers responded saying they wanted to learn how to be more efficient using their current resources. When asked how important it was to their business to create and document, more than half of them said it currently was not a top priority at their company. For as pressing as profitability and cost containment seem to be for the industry, the overall response to this question suggests industry members still don’t understand sustainability.

If you asked for a two-word definition of sustainability, most would say “green” or “going green,” because that is how many industries have defined it. That’s a poor choice: It is hard for company owners to focus on “going green” when their very livelihood is at stake. But redefine sustainability as “waste reduction” or “saving resources,” and see if that doesn’t change a few minds.

Yes, those savings or reductions can come in the form of less water, chemical or energy usage, which do have a “save the planet” aspect. They also can come in the form of using less paper, plastic or unproductive labor, or working toward less plant loss in the greenhouse and fewer wasted miles on trucks. Redefining or more comprehensively defining what sustainability is makes it much easier to understand its importance. A case can then be made for all suppliers to develop “sustainability” programs with benchmarks and timelines for improvement. These reductions in waste should be at the top of everyone’s list, and they should be considered very urgent if not critical for all growers and suppliers’ existence going forward. It is what customers expect and are demanding.

Sales Versus Costs
More than 53 percent of respondents said their wholesale revenue was flat or decreased from 2008 to 2009, and more than 77 percent expected it to be flat or lower in 2010. Profitability was not much different, as 57 percent said wholesale profits were flat or declined from 2008 to 2009, and 78 percent said they would be flat or down in 2010. But when asked which area of their business had been most impacted by cost increases in the past 12 months, sales and marketing ranked at the bottom. Labor, shipping/transportation, energy, inputs and health care all had a bigger impact. This means that often, when growers are concerned with all those other factors, sales and marketing budgets end up being held flat or even lowered as a savings measure.

Here’s another instance where we don’t get it: It’s counterintuitive that at a time when consumers are being very careful with their discretionary income, growers and suppliers pull back on the sales and marketing expenditures because it’s the easiest place to make cuts, and because it is harder to measure the results ofthis spending.

Let’s redefine sales and marketing, too, as “discussions with the customer.” Considering all these flat or declining revenues, wouldn’t you want to increase your contact with current customers, develop discussions with new customers, communicate your competitive advantage, update current products to drive higher value, and develop or introduce new products? A business that controls its sales and marketing costs also controls which customers it touches, how often it engages, what it communicates, and what new or innovative products are brought to the market. If growers and suppliers want to increase revenue and margins, they will need to make an ongoing commitment and devote resources to their customer relationships. Don’t you expect it as a customer when times get tough?

One Last Word: Economy
Stop using it!

The word “economy” continued to pop up when the survey asked about the most important issues in the next five years. People also used it endlessly at the OFA Short Course: “The economy is bad!” “The economy needs to turn around!” “We are just dealing with the economy.” The central theme each time: There is nothing that can be done; they have no control. It’s discussed in a passive way, as if they’re the victim.

Just as “all politics is local,” so, too, is the economy. You control how you perform in your local market. Substitute “customers,” “vendors,” “products,” “new ideas and innovations” or “partners and stakeholders” for the word economy, and see how you phrase things. You might change how you approach the future. Your attitude might be a bit more positive. Everyone impacts each of these pieces of their local economyevery day and ultimately has the control they seek, and can make a positive impact.

Now, is the “economy” really that bad?