All Eyes On The Horizon

June 14, 2007 - 08:09

Maintaining success through ownership changes is a feat for any grower, but Floral Plant Growers’ story stands out: It has persevered through multiple owners and the switch from family ownership to corporate investment. Dean Chaloupka, president of Floral Plant Growers, attributes much of the company’s success to keeping everyone’s eyes on the horizon, holding long-range business views and sustaining consistency no matter who holds majority ownership.

Floral Plant Growers, headquartered in Demark, Wis., continues to successfully produce plugs and retail-ready products, including specialty containers, to the U.S. Midwest and Mid-Atlantic regions. It’s business as usual even though the company recently sold two of its East Coast facilities, an example of a decision that is best for Floral Plants Growers in the long term, according to Chaloupka.

Chaloupka described how the forward-thinking Greiling family, owners of Greiling Farms, which became Floral Plant Growers, empowered its managers and staff to continue with regular business practices after their departure in the late 1990s. While a tremendous amount of expertise departed with the family, the Greilings had looked ahead, anticipated the change and constructed a solid knowledge base for those employees that remained. That knowledge base has allowed the company to grow and flourish under investor ownership.

Today, Floral Plant Growers takes a long-term perspective regarding most business aspects, from assembling mixed containers and dealing with energy costs to managing pay by scan and maintaining its investor-group relationship. Though it may not always consist of the easiest short-term choices, this long-term outlook places in the forefront what will be best for Floral Plant Growers as it moves ahead.

 

Investor Owned

One of the few successful investor-owned businesses in the green industry, Floral Plant Growers began its relationship with investment groups in 1998 when the Greiling family sold the company to Sentinel Capital Partners. Six years later, Blue Point Capital, a middle-market equity firm headquartered in Cleveland, Ohio, with offices throughout the United States and China, bought the company from Sentinel and continues to own it today.

Most of Blue Point’s investments are manufacturers or service businesses engaged in the business-to-business space; Floral Plant Growers is Blue Point’s first foray into the green industry. The company was attracted to Floral Plant Growers’ strong reputation and presence in the Midwest as well as its diverse product line.

Sean Ward, a partner at Blue Point Capital, explained that the floriculture industry presents several attractive attributes for investors, such as dependable cash flow, strong demographic trends and a regional competitive environment, but its extreme seasonality and perishable product sets it apart from Blue Point’s other holdings. “While a number of our other businesses have peaks and valleys during the year, none is as extreme as in this [industry]. Perishable products are a relatively new venture for us. A steel casting does not die in a week if it is not watered,” said Ward.

Despite the product differences, the basic management techniques are similar among all the industries in which Blue Point participates. Every company must satisfy its customers and deliver value in an economically sensible way, said Ward.

Controlling quality and internal costs is left to Chaloupka and his employees; Blue Point does not engage in the day-to-day business operations and sticks to involvement in major decisions. “[Blue Point] turns to us as the experts when it comes to running this company as part of the industry. That’s key,” explained Chaloupka.

 

Surviving Through Change

Blue Point is always ready to sell one of its companies, according to Ward. “Value creation and price are two of the critical components. We look at what we believe a company’s potential to be and then weigh that future value against the offer on the table. This process is undertaken in concert with management. One thing is certain, when a private equity firm acquires a business, they will look to sell it,” he explained. If the right price comes from a viable buyer that would be a good owner for Floral Plant Growers, Blue Point will sell the company. Despite this knowledge, Chaloupka is not worried.

A contributing factor to Floral Plant Growers’ success through multiple owners is its ability to maintain consistency and continuity: Like with Sentinel, Chaloupka knows there will be a day when Blue Point will sell, and Floral Plant Growers will continue on just as it did in the past and will continue to do in the future. As long as the talent remains in the company and everyone’s expectations are aligned, the investor relationship will continue to work, he feels.

“In the end, we are proud of the fact that we’re owned by a private equity firm,” said Chaloupka. “The vast majority of growers in the country when you say private equity, they look at it negatively: That it doesn’t work, it can’t work and there have been failures. I think we’re an example of when it has worked.”

 

Implementing Pay By Scan

If there’s one element about the transition from Sentinel to Blue Point that Chaloupka feels bad about, it’s that his company Growers had not started pay by scan at the time of the switch. Now in its third season with pay by scan, the company got the call to implement it at certain big boxes not long after Blue Point took over. “Change is inevitable,” said Chaloupka in regards to implementing pay by scan. “It’s what you’re going to do about it.”

Despite being unexpected, the change didn’t cause Blue Point to panic. Floral Plant Growers board members that Blue Point installed with the company put Chaloupka in contact with consultants that work with companies in other industries using pay by scan, a resource Floral Plant Growers would not have had without Blue Point’s help. The contacts were able to explain what other companies think about pay by scan and how they handle it, which helped Floral Plant Growers get the ball rolling. Ward describes the pay by scan implementation process as one of learning for all parties involved.

 

Treating Retailers Equally

Today, Floral Plant Growers works with both pay by scan and non-pay by scan customers. Despite the difference in financial models, both scenarios involve similar risk, Chaloupka explained: “With pay by scan, the risk is very immediate. If it doesn’t sell, you don’t get paid. If you look at what the other retailers are doing, how they work with their suppliers, the same risk exists, it’s just from a long-term perspective.”

According to Chaloupka, success is based on overall results for all retailers: If plants are unsold at a pay by scan retailer, the retailer is not affected in the short term, but in the long term, that retailer will look at the suppliers that aren’t driving good numbers and sell through. “Long term, we can lose them if we’re not doing a good job or we can gain more business if we’re doing a good job,” said Chaloupka.

Similarly, growers who overfill non-pay by scan stores will get paid immediately, but they may lose their abilities to supply those stores in the future. By being equally attentive and delivering the best results to both customers, some of the risk is negated for Floral Plant Growers.

“It ultimately comes down, I think, to how you look at it long term. Do you have the best interests of the retailer at heart? Are you incorporating that into your business practices so you will be retained and continue on as a supplier? That’s how we approach each of them. I want to sit down with the non-pay by scan customers and be happy about their results as I am with my pay by scan customers,” Chaloupka explained.

 

Managing Supply

Two years worth of pay by scan data from retailers has helped Floral Plant Growers tighten its supply operations and streamline production schedules. “Dealing with pay by scan has made us an overall much better supplier,” said Chaloupka. “I should actually apologize for it as president of the company, but it was an eye-opening experience to actually understand how the product really sells. When we were shipping compared to when it truly sold was significantly different.”

The company ensures it meets product demand by working with what Chaloupka calls the industry’s “secondary market.” The market is a semi-organ-ized grower group that communicates and understands who needs product and who has product at all times.

Because Floral Plant Growers bases its production on averages, it uses the secondary market and either sells or purchases inventory as necessary. “In the beginning of the season, our production was small. [The] Kansas City [market] was going strong, so we bought some product out on the market from another grower. That’s what you need to do,” said Chaloupka. “We don’t know going into a season if we will sell anything to another grower or if we will buy anything from a grower.”

Chaloupka continues to forge relationships with other growers for the secondary market. “The retailers want fewer suppliers. That’s happening. In the long term, success will be about developing those relationships with other growers,” he explained.

 

Keeping Expectations Aligned

For Chaloupka and Floral Plant Growers, staying successful ultimately means keeping everyone’s expectations aligned, from the investment group to the employees to the customers. “We are taking care of our customers. We are taking care of our investors. We are taking care of our employees. We are taking care of our vendors. It will all be fine, and it really doesn’t matter whether we’re family owned or by an investment firm. A lot of it is how you look at it. A lot of it is expectations,” said Chaloupka.

Floral Plant Growers’ customers expect premium product delivered in the right amounts at the appointed times. With the investment group, it is a matter of creating realistic return expectations and meeting them. Employees of Floral Plant Growers know what is expected of them because they are kept informed of the company’s status and needs, including its profits and costs, through an open-door policy.

When unrealistic expectations don’t match reality over an extended period of time, problems arise, which is why Chaloupka works to keep all parties involved with Floral Plant Growers informed. Some companies succumb to the pressure of unrealistic returns and spread themselves too thin too quickly, Chaloupka noted; Floral Plant Growers approaches each situation by asking what’s best for the company overall, even if that means selling properties, as the company recently did with its East Coast facilities. While the answers may not always mean the company gets larger, they do mean realistic expectations for the company are being created and met.

Ultimately, Chaloupka places value in people doing what they say they’re going to do: “I’m only going to be around the industry and around the company as long as I keep my promises. I don’t know that that is any different than working for a family or working for investors,” he said. “What matters is what goes on out there. Does every employee have the right tools? If we see an opportunity, does that mean we’re going to adapt? Absolutely. Do your job, take care of everyone: That’s the heart of our company.”

SIDEBAR

 

Floral Plant Growers At A Glance

Majority owner: Blue Point Capital, Cleveland, Ohio
Locations: Facilities in Denmark, Wis.; Richmond, Ind.; and Boyden, Iowa as well as four network grower locations in Wisconsin
Size: Approximately 47 acres among all of the facilities and one-half acre at each network grower
Employees: Roughly 150 full-time employees and 450 seasonal workers
Customers include: Home Depot, ShopKo and Wal-Mart

 

Lessons Learned

Dean Chaloupka, president of Floral Plant Growers, started with the company when he was 16 years old. Since then, he has witnessed company ownership transition from the Greiling family to Sentinel Capital Partners to Blue Point Capital, and through it all, he has seen Floral Plant Growers grow and thrive as a business. Here is some of what he has learned through the years:

 

  • Align everyone’s business expectations, from the employees, to the vendors and more, because the biggest problems arise when expectations differ.
  • Communication keeps expectations equal. Floral Plant Growers shares everything with its employees, from financial information to business planning.
  • It’s important to work through difficulties and do what you think is best for the situation.
  • The measure of a company’s success is not its size. Being successful is taking care of employees, ensuring everyone has the right tools and pursuing the right possibilities for the company.

 

Building A Network

In its second year, the network grower program at Floral Plant Growers allows select individuals to purchase inventory from Floral Plant Growers, grow it themselves and sell it back as finished plants. The company currently works with four network growers — all located near the company’s Denmark, Wis., headquarters. Because of the program’s success, Floral Plant Growers is considering expanding to more growers within two years.

The four current network growers are all dairy farmers, a deliberate choice, according to Dean Chaloupka, president of Floral Plant Growers. Farmers already understand weather and its effects on crops and the need for 7-day workweeks during production season. Farmers also have plenty of land, enough to put up a one-half acre greenhouse at each location and leave room for delivery trucks and equipment.

To help them and the program succeed, the network growers typically grow monoculture crops and Floral Plant Growers helps train them and provides growing information. The company also takes on the financial risk: “They do not have any risk of selling [a crop] other than just growing it well. If it’s snowing in May and they produce the crop, we have to buy it whether we have a customer for it or not,” explained Chaloupka.

The process of finding candidates to start the network program began by sending out more than 1,000 letters and flyers to Wisconsin farmers and master gardeners. From that, roughly 450 interested people attended three informational meetings. At those meetings, the financial model and time requirements were presented. The 40 candidates who showed continued interest had to fill out a questionnaire and provide references and some financial information. From that, eight viable candidates were considered; ultimately, four were selected to be in Floral Plant Growers’ network program.

 

Mixing It Up

Dean Chaloupka, president of Floral Plant Growers, has noticed an increase in mixed container sales in recent, something that is at once both a wonderful and complicated observation for Chaloupka and the company. The grower’s diverse customer base requires a diverse product offering that includes multitudes of mixed containers, which can be difficult from production, inventory and shipping standpoints.

Mixed containers are produced in different trays and media; they are also shipped differently. While Floral Plant Growers has automation in place to standardize seeding, plugs and transplanting, the full benefit of the machines can’t be realized because of the tray variety moving through production. “You see far more containers now than you do flats,” said Chaloupka. “Back in the production area, we’re not at full efficiency with all of our machines.”

Since automation can’t fully handle everything, Floral Plant Growers’ mixed containers are hand transplanted, and as demand for containers increases, so do labor costs. Despite the increased costs, the company will continue to grow mixed containers because they are what consumers want, explained Chaloupka. In the future, he hopes to find new automation to serve the company’s current production needs.

About The Author

Meghan Boyer is associate editor of GPN’s Big Grower. She can be reached at mboyer@sgcmail.com or (847) 391-1013.

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