COVER STORY — Taking Care of Business
2011 has been a chaotic year for Jerry Halamuda and the team at Color Spot Nurseries in Fallbrook,Calif. With the passing of co-founder and best friend Mike Vukelich and the acquisition of two Hines locations, many people are wondering, "What's next?"
Vukelich played a huge role in catapulting Color Spot into an innovative industry leader, and although he's no longer with us, he has left his mark in the company and within the industry. Vukelich lost his battle with brain cancer and passed away last August.
"We've always considered ourselves to be a family business," says Halamuda. "The Vukelich and Halamuda families have had family members involved in the business for many years."
As a matter of fact Mike Vukelich's father, Mike Vukelich Sr., still works with Color Spot as a consultant. "Sometimes it's not easy to remember how it was 20 years ago, and so that culture is really important. He understands the business."
Today, the company has changed a bit since its first Big Grower cover story back in our inaugural issue in April 2006 (see sidebar). But Color Spot continues to grow and adapt to the constantly changing marketplace.
DIVERSE MANAGEMENT
I had the chance to meet with Halamuda, founder and president, and Rodney Omps, CFO, in late January. The company structure is now comprised of four individuals: Halamuda and Omps, as well as two COOs, Chip Mello in the Southwest territory and Oscar Truyol in the West.
What makes this management team strong is its diversity in background, says Halamuda. He and Vukelich grew up in the nursery business. They mixed soil, they planted plants, they built greenhouses. They got their hands dirty. And because of their technical background, they felt it was necessary to bring in individuals with a different skill set. Omps, Mello and Truyol are seasoned businessmen who have experience in finance and have worked with Fortune 500 companies.
"In any business, if you're in the financial end and you begin to pick up the technical end of the business, when you put those two together, it really makes for a company that can grow and expand," shares Halamuda. "If you want to grow and expand in today's marketplace, you really have to be able to talk the
language of those financial institutions."
Through growth and expansion, both organic and by acquisitions. Today, Color Spot Nurseries has 12 facilities throughout California and Texas, and one now in Arizona. It hasn't been a painless journey, but results have been worth the hurdles.
"We're producing 350 million plugs [a year] and a little under 60 million vegetative liners," says Halamuda. "And we do that internally at our own facilities."
With that growth comes change, but one thing has remained concrete and that is Color Spot's mission: To serve the customers and meet their needs. All decisions are made with that goal in mind. "Everybody at Color Spot lives and breathes serving our customer. If you do that right, it's amazing what happens," Halamuda affirms.
RECENT ACQUISITIONS
Last spring, Color Spot announced it was acquiring select Hines operations in California, Texas and Arizona. The reason for the acquisition, says Halamuda, is to satisfy the customers's demand. "They were saying, 'We need another supplier,' and from our standpoint, buying trucks, trailers, racks, land, and building greenhouses — there isn't any reason to do that unless we have a customer we have the ability to service."
Acquiring these facilities gives Color Spot 18 million square feet of greenhouses total and about 2,500 acres for growing inside and out. Adding the Texas location was a huge move for the company as it is located strategically in the central part of the United States and for Color Spot it fits perfectly into their Southwest market.
"That operation is 420 acres and has about a 1.5 million square feet of greenhouses. It's a juggernaut," shares Halamuda. "It's one of Hines' best facilities." It was a smart move for both parties. "It would cost somebody $30 to 40 million to replicate it, and they had little use for it," adds Halamuda. "It puts us in a position where we have the kind of facilities necessary to grow for our
customers."
With the expansion of their production facilities, Color Spot will also be able to expand its product offerings. One line in particular that will see growth is their line of shrubs, including tropicals, vines and broad leafs. "Hines has kind of been known as a shrub and perennial producer," says Halamuda. "That facility in Texas at one time was about five times the volume it is today. What will happen over the next five to 10 years is we'll build it back to that volume."
Nothing will happen overnight at Color Spot, though. Halamuda is very adamant and is extremely cautious when it comes to outrunning the company's capital.
"We don't push our people to the point where we don't have the technical expertise," he says. "With small growth spurts, we'll be able to manage the quality and consistency."
What really defines whether or not Color Spot grows and expands does not depend on what the company wants; it all goes back to the customer and each overall program"We're looking out there to see if there is a place we could go in our current marketing areas and if there is something we could do with a product line that they need us to supply," says Halamuda.
"What we're looking at all the time is: do we have a purpose, do we have meaning, is there a customer that can use our services and our offerings, does it work economically, does it make sense, and can we adapt it?"
SEAMLESS INTEGRATION
While the whole acquisition process can cause a lot of headaches for businesses and those individuals involved, it has been a fairly seamless integration for Color Spot. And they have their SAP software to thank for that.
"That is really our defining point for differentiation," says Halamuda. With 12 production facilities that are growing thousands of line items, it can be overwhelming trying to efficiently create a plan of action for each customer at each location.
It was a large investment back in 2000, and it caused some headaches in its earlier years. Now that it's fully integrated, payroll, production, financials, procurement, human resources and all other aspects of the business are all tied into the system.
You can get all your information instantaneously through reporting," adds CFO Rodney Omps. "And it's accessible through Blackberries and web-based portals." The system puts out information in a consistent format as all 12 locations are on the same platform.
"When you have 12 physical locations spread out like we have, servicing multiple markets and customers, you could not operate a company with that number of locations and product groups without a system like SAP," says Halamuda.
JOINING FORCES
Color Spot's SAP software has allowed the company to stay true to its mission and service the customer successfully. Without such efficient planning across each location, their partnerships with their customers may not be as strong. Each customer has its own model, so each program must be created independently and needs to be easily accessible to make real-time adjustments.
Part of what makes Color Spot so successful is its ability to deliver on each of its customers' needs. "The relationship is all based on results, and performance," shares Halamuda. "If you don't have performance or results, you don't have a customer."
Color Spot's strategy requires spending a lot of time making sure they understand each customer objective and their go-to-market model so they can employ it correctly.
"We spend an awful lot of time understanding what their packaging requirements are, what their genetic requirements are, and how they're putting their plan together," Halamuda says. "We're very focused and clear on what exactly the program is, and we have a lot of access to our customers. It's all about spending time crafting a program that meets their needs. Then the relationship is positive."
This strategy has proven positive for Color Spot; some of their customers have been working with them for 25 or even 30 years! Many of these customers have gone through many changes themselves and have changed companies but have always stuck with Color Spot as their supplier.
"We respect every customer's model, whether we agree or don't agree," says Halamuda.
But he refuses to do business on a one-time basis. "The only business we bid on is annuity based business. That customer has a program — not a product, not a time frame, not an event."
Color Spot prides itself in having a year-round business with the ability to service customers 12 months of the year.
"There are a lot of people who look at us and say, 'Maybe you should be more focused, maybe you should be more concentrated, maybe you should drive these certain key product categories,'" shares Halamuda.
Halamuda's position is if they have a truck full of annuals for one customer, why not fill up the truck with perennials or another product category that the same customer will want to sell at their store as well?
"If we have the ability to widen our mix up, then we have the ability to fill that truck and get a larger order out to them," he says.
Today, Color Spot specializes in annuals, perennial, vegetables, herbs, shrubs specialty flowering, bulbs, mums, poinsettias, groundcovers and almost any kind of flowering container.
Some of the more focused growers close their doors certain months of the year. Not Color Spot. "This is part of our model," Halamuda says. "We go from Jan. 1 to Dec. 31 with all our products. Because of that, literally 95 percent of our product goes out to market on our own trucks, tractors, trailers, lift gates and rolling racks.
TEAM INVESTMENT
Halamuda is careful not to take anyone at Color Spot for granted. For example, since they do business year round, they might have a truck that goes out to the same store three times a week. That same driver is on that same truck, visiting the same customer every week. That kind of interaction helps nurture Color Spot's relationships with customers.
"Those drivers get to understand the store manager, where they want the truck parked, and where they want the product unloaded," states Halamuda.
When it comes to distribution, Halamuda prefers to limit use of outside freight contractors. "With contractors, you don't own the tractor, you don't own the trailer, and that person isn't on your payroll," says Halamuda.
Halamuda says he is fortunate to have a huge fleet. "We're not happy because some of the year, you see it parked. But we've found that we have to have it to be able to serve our customer," he adds.
"There are many companies that will talk about their team being the key to their organization, and everyday we understand that everything we do, all the results that happen, certainly don't happen because of us," says Halamuda. "They happen because of our team that's out there everyday producing plants, taking care of the products, sales, service, accounting, you name it. That's what it's all about."
SIDEBAR — SIX YEARS AGO
In April 2006, GPN published its first issue of Big Grower, which featured Color Spot Nurseries as the cover story. A lot has changed since then, within the industry and the company itself. But Jerry and Mike's "lessons learned" from six years ago, still ring true.
Here are a few:
• To grow your business, you have to be capitalized right.
• It's all about the customer; we exist to service our customer.
• There are good years and bad; your balance sheet should be able to absorb the bad years and anticipate the good ones.
• You have to expect change; be ready to change anything except your core values.
• Even if you weren't trained in finances, you have to learn it.
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