Around the Table

October 17, 2008 - 09:53

How are skyrocketing energy costs impacting your overall business?

“The most significant impact over the past year has been felt in the cost of transportation. We have yet to realize the full impact of the recent energy cost increases. Over the past few months we have seen significant increases in the cost of production inputs — fertilizer, growing media, plastic — driven by the cost of petroleum.”

— Tim Stiles

“Energy costs impact many facets of our business, from the costs of raw material to the costs of delivering plants to our customers. On both fronts they have impacted our costs and, correspondingly, significantly impacted our margins.”

— Mike Trebing

“We’re working on being as energy efficient as we can be. In the last few years, we’ve installed complete new heating systems in most of our ranges that are more fuel efficient. We’re also doing more poly covering of the house instead of single layer. Of course, we’re always looking toward what the future is going to be as far as biofuel possibilities.”

— Dave Dagen

Have you had to adjust your production plans/schedule because of rising fuel costs?

“We have little opportunity to adjust our production schedule since sales are driven by a calendar. The events that drive consumers to shop do not change much: Easter, Mother’s Day, Memorial Day.”

— Tim Stiles

“We may be seeding fewer of our own trays and buying in more plugs so that we won’t have to heat as much acreage. We are always looking for ways to become more efficient and reduce our operating costs. Controlling heat costs has escalated to a higher priority for us. We have met with companies offering alternative heating sources and alternative fuels. We have looked for ways to better insulate our poly houses and add second heat curtains.”

— Scott Acker

“I do tend to do more production late spring, summer and early fall than we’ve ever done in the past. It just makes sense to do as much as we can.”

— Dave Dagen

What steps is your company currently taking or planning to take to offset the escalating energy costs?

“Greenhouse equipment: In the past two years, we have invested in energy-saving greenhouse equipment. These include energy curtains, new heating systems and upgraded environmental computers. It appears as though energy curtains have had the most significant impact toward reduced energy consumption.

“Transportation equipment: We ship only 53-foot trailers and strive to fill loads to capacity. When tractors are replaced, we have replaced [them] with fuel-efficient Volvo tractors. We strive to backhaul whenever possible. “Recycling: We attempt to recycle goods whenever practical, including plastic trays and pots, cardboard and decorations from indoor plants.”

— Tim Stiles

“As with many other growers, we are evaluating the cost/benefit ratio of long-distance shipping. We are evaluating lower-margin items and replacing them with higher-margin items. Many varieties, which may have been marginally profitable before, have now slipped into the negative profitability range. These items — some of them high-volume items — may have to be curtailed or eliminated from our mix altogether.”

— Mike Trebing

“First of all, looking for obvious ways to reduce wasted energy in our present operation. Secondly, investing in more energy-saving facilities and equipment. Lastly, passing increased costs on to our customers.”

— Scott Acker

“Basically, wisely capturing late afternoon, natural solar heat. We get more sunlight…than some areas in the North, and we’re trying to use that to the best of our advantage. Just being conscious and not wasting energy.”

— Dave Dagen

Is the rise in energy costs producing a “trickle effect” and impacting other areas of your business?

“There is a trickle effect that is increasing the cost of merchandising, labor and all direct input costs. We recognize that the consumer has less disposable income today than 12 months ago. We need to stay focused on providing great-quality plants that yield satisfaction to the consumer and a high sellthrough at retail. We remain optimistic that consumers will stay close to home in the coming years and want to beautify their yards and patios with flowers and plants.”

— Tim Stiles

“Energy costs’ impacts to the business are real. Marketplace pricing is real. We must evaluate all aspects of our business and our relationships with our customers as we develop the future plans and models for Bordier’s. Unfortunately, yesterday’s thinking will not get us yesterday’s results. And today’s results are unacceptable. So we are faced with re- evaluating our thinking and planning to create a better future.”

— Mike Trebing

“Yes, even as much as employees having higher commuting costs and overall living expenses, down to the basic living essentials.”

— Scott Acker

“I think it’s not as dramatic for us, being in the panhandle of Florida. We have the advantage of great sunlight, which helps negate energy costs compared to other growers in the North. Our energy costs are not as high. But as far as shipping, it has affected us there. We’re not doing much shipping ourselves, looking to outsource a large portion of that.”

— Dave Dagen

Do you see the situation worsening or improving in the future? How does this impact your long-term business plans?

“It is really difficult to predict the cost of diesel fuel, natural gas and electricity; however, it seems likely that prices will hover near their current level or increase. We continue to look for small energy-savings improvements, particularly in transportation.”

— Tim Stiles

“The situation may moderate for a time, but in the long run, energy costs will not be reducing. The impacts to our business will have to be offset by improved efficiencies and improved pricing in the marketplace. Our determination of the success of these factors will clearly be the primary factor in our long-term planning.”

— Mike Trebing

“I think the oil prices driving this situation will not continue to increase. We expect things to level off and decline somewhat but not down to levels that they were a couple of years ago. Long term, we will continue to make energy efficiency a higher priority. Oil is a vulnerable commodity.”

— Scott Acker

“When you have great periods of stress on the commodity…new industries are born. Things will be dramatically different, with different fuel sources than we have had in the past. It’s kind of exciting to see what comes out of this. I’m anticipating new technologies. We’re very much in a state of flux, trying to ascertain where to go. The industry as a whole is in a state of change. It’s painful, but also very exciting, to see what’s going to come along next…what new forms of fuel, new industries.”

— Dave Dagen

About The Author

Darhiana Mateo is associate editor of Big Grower. She can be reached at (847) 391-1013 or dmateo@sgcmail.com.

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