On the Horizon…
The shroud of gloom and doom that was hanging over the past 365 days — at least — may not have lifted completely, but the growing community has realized now is not the time to complain about it. For 2009, it's all seeing each wave of challenges as a new opportunity, making changes and being smarter to prevent an undertow that drowns your businesses and sucks out your optimism. Here are some thoughts from five industry experts on what's ahead, just over the horizonÉ
Diversification Is Key
University of Florida
When we look ahead to the future of our industry, the economic situation is obviously the big issue. I am an optimist and feel the economy will rebound and start growing. However, the hardcore economists are telling us that the recovery will be slow. The serious pressure on profitability and success of companies will continue at all levels of the industry — suppliers, growers and retailers. The consolidation trend will also continue at all these levels.
For wholesale growers, there will be an important balance between controlling costs and, on the other side of the business, being forward-thinking and aggressive in the marketplace. For spring 2009, some geographical areas of the country will be stronger than others, and some retailers will be better than others. As the economic situation turns up and 2010 starts looking better, the variation in segments of the market may be even bigger. Businesses will need to pay close attention and decide which products and services will work best in each situation. I do not see us going back to cookie-cutter products in all markets. Diversification of products and services will be key for growers' success as the recovery moves forward.
An aggravating factor complicating our current situation is that prior to the strong economic slump, there were significant changes already occurring in the relationships between retailers and their suppliers. So, as things start moving again, no one will know how to define "normal" or what target numbers should be. It is important to realize that the major big box retailers are discounters and will always emphasize controlling their costs and prices. I do think that, two or three years down the road, the most successful suppliers to big box stores will be the ones who are more involved in the garden center. This will look different for the different retailers because of their varied business strategies, but better-functioning garden centers and better-looking plants will be good for the industry as a whole.
Not to leave out independents or smaller wholesale growers: The secrets to success here have not really changed. Yes, the current economic pressure is tremendous. The importance of creating a distinctive image and an environment that excites the retail customer cannot be overstated.
Given my involvement in the National Sustainability Standards Committee, I'm often asked about where we are. We should separate this issue into two areas: informal, just-plain-healthy practices and formal certification. There are the actual sustainable practices that are good for the environment, society and your business. These are not going away, and companies will adopt these policies because they are good business practices. We will see an increase in the importance of a retail product's "sustainability story." This change may be slow and will certainly vary with markets, but the trend is there. In some cases, the story needs to be aimed at impressing the retailer more than the end consumer.
Then there is the more formal certification of those sustainable practices by an independent agency. While the public emphasis on the need for certification has slackened considerably, this is a temporary lull. There are companies in the supply chain working to gain independent certification of their products, and many growers are continuing to work toward certification. Certainly some motivation here is because it is the right thing to do, but there is also an underlying feeling that there will be a marketing advantage when the retailers and retail customers come back looking for documentation for sustainable products.
Don't Forget People and Profit
OFA — an Association of Floriculture Professionals
"Trying to forecast the future is difficult, but when we take control of our destiny, the future is easier to predict." I made that comment 12 months ago in last year's industry forecast. The point is still valid — even more so in 2009.
The biggest factor impacting this industry is still the weather. Drought, cold, rain or sunshine on Mother's Day weekend has a huge impact on sales. That's just the way it is.
Another impact is the recently confirmed economic recession. According to the experts, the United States has been in a recession since December 2007. Those same experts tell us that domestic recessions last about 12 months and global recessions last about six months longer. If that is true, we are either at the end of the dark tunnel or will be by mid-2009. Either way, the impact is still with us. But what does it mean?
Will homeowners — and by this, I mean not only those in traditional homes but also those with condos and zero-lot properties, as well as the myriad of renters — invest in plants during an economic downturn? Some say no, that gas prices and other increases in staples will cause them to shift toward necessities and avoid "discretionary" purchases. Others say yes, that in tough times, people tend to "nest" and invest more in affordable quality-of-life and value-added improvements to landscapes and interiors.
Either way, tough choices are facing all of us. And that's where this concept of "sustainability" creeps back in. No, I'm not just talking about saving the planet. I'm focusing on the other two Ps of sustainability: people and profit.
We must not only be working harder, but SMARTER! Sustainability is all about that distinction. There is too much misinformation regarding sustainability being about only the environment while the other two Ps are left behind. Those who not only survive but thrive during this challenging time will continue to invest in their people by supporting compensation, education and professional development to retain qualified, efficient and effective staff. Replacing and retraining costs time and money. It's easier to keep the ones we have and make them better.
We must also look at our current production and sales costs to determine whether there are smarter ways to get the job done and squeeze every possible penny from improved efficiencies. Costs must be reduced — and prices increased — to improve margins. The cost of everything is rising, so take advantage of this situation to be smarter about your pricing. Plants are still a great buy for the value, yet we sometimes forget that.
We have many choices in 2009, so choose well.
Pay Attention to Shifting Views
There is no doubt that the coming months will be a challenge for our industry, but I also see them as a great opportunity. The entire economy is in transition, and I think American consumers are changing the way they view products and services.
In a strange sort of way, I think this presidential election was a liberating event for many Americans of all colors, races and creeds. We all grew up memorizing "All men are created equal." Of course, Jefferson used the line in the Declaration of Independence. Lincoln repeated it in his Gettysburg address nearly a century later, and Dr. Martin Luther King Jr. repeated it again in his "I Have a Dream" speech, approximately a century after that. Yet I think many, many Americans asked themselves whether they truly believed this as they debated their options for president.
This sort of introspection, along with some of the rhetoric during the campaigns, has caused many Americans to assess more than just their politics. Indeed, many Americans are reassessing life. We know the outcome of the November balloting, but I think the true impact of the reassessment process has yet to be measured.
I think Americans, whether by choice or through stress caused by the shifting economy, are changing the way they think about life. I think folks will be questioning their own past attitudes and, along with that, their consumption patterns, in light of the poverty and inequity that exists in America and the world. I think Americans will be asking themselves whether owning certain products is really necessary. We've all read about school children giving up their own Christmas gifts to share the wealth with those less fortunate. I think this election has liberated many more Americans into thinking about sacrifice, sharing the wealth and looking at others less fortunate.
And I think the reality of the economy has forced others into making certain sacrifices. We're seeing more written about the Great Depression and what it was like to live in that era. And we are already seeing news articles about frugality being the rage and conspicuous consumption being dead; I think this will be the new ethos for America.
Of course, this is bound to have an impact on our industry. Any time society changes its mores, it has an impact on the economy and all subsectors that are part of that economy. The issues we will face as an industry will likely center on our ability to make ourselves relevant to the majority. In some cases, this will mean offering more for less to present greater value, or changing our entire offering to make it more a part of everyday life and less a part of luxury consumption. And in some cases, we really will need to strive to expose the essential aspects of being close to nature in order to make our products and services of consequence.
I think this, in part, has already started. Container gardening has replaced flower beds in many yards. Vegetable gardening can be considered an essential — i.e., putting food on the table — so this will be considered de rigueur. But I think the big opportunity we have yet to completely embrace is the essential nature of having green spaces available for our citizens in many cities.
This, in part, is why our company has so embraced America in Bloom. When we look at Europe, we find several countries that use garden plants for landscaping public spaces. Many homes don't have yards, so the town squares or city parks present the only options for green spaces. And in a number of countries, the plant material used for such public plantings is a significant part of total bedding and perennial plant sales. Trees and shrubs also are used in these settings, and often the only lawn space is in public spaces. For most of the last decade, we have looked at Europe and felt some of this tradition could help grow the industry here. I am concerned that this tradition will become more of the future basis for the industry here and not just a growth opportunity. In either case, America in Bloom is up and running, with the only thing holding it back from further growth being the modest budget with which we work. We are an organization of volunteers, and we welcome further support from all of those in the ornamental horticulture industry.
Turn Challenges Into Opportunities
Pohmer Consulting www.pohmer-consulting.com
To suggest that 2009 will be a different kind of year would be an understatement!
Among the major factors that will face our industry this year: A sluggish, bogged-down economy; consumers who have lost confidence in both their financial and personal futures, and possess a changed purchasing psyche and behavior; a new focus on price value at retail; and more unknowns than knowns about the economy and how to stimulate it.
And there's little consolation in the fact that all industries are faced with the same challenges you are. And, yes, there will most likely be some shakeout of both growers and retailers who can't manage or have the resources to weather this storm. But for all the dismal news and new challenges, there's opportunity for those producers with vision and stick-to-it-iveness who are willing to change and adapt.
Here are a few opportunities to consider:
Be reactive. Plan for the best and manage to the realities; you can't throw in the cards you have been or will be dealt, so be prepared to adapt quickly to the changing playing field.
Cash is king. You've heard it before, but in this economy, it's more critical than ever. Stay on top of your receivables and watch your expenses closelyÉbut don't do anything that will diminish your ability to service your customers.
Become more sustainable. Economic sustainability is the name of the game in 2009, and many green initiatives have huge financial payback to you. Anna Ball recently described a study that showed that, out of 100 seeds that are planted, only 75 or so ever make it to the retailer's cash register. Think about the labor, inputs, chemicals and pesticides, and investments in equipment and facilities to grow product that never sees the light of day. Better planning and improved processes yield tremendous paybacks — financially and environmentally.
Be creative. Now more than ever, you'll need to truly partner with your customers to deliver on their consumers' needs and expectations. Work together and figure out how to sell the benefits of what our products offer, not just the price value. Unlike many other industries, we have a product that consumers genuinely like, but we need to tell our benefits story to keep them buying.
Yes, 2009 will be a challenging year. But producers who can adapt and survive will be positioned to thrive when we get through this economic downturnÉ
Watch Emerging Trends
I must admit that my crystal ball looks a little cloudy, but I see it clearing a little as spring approaches.
In my opinion, the economic turmoil will have minimal effect on the coming spring. It will have some effect to off-peak business. That said, I do believe that we will see some buying trend changes. As with last season, we will see a strong vegetable and herb business — all sizes of material will be in demand. Additionally we will see a higher demand for fruit-bearing vines and shrubs, such as grapes, strawberries, blueberries and raspberries. We will also see a higher demand for small backyard fruit trees.
The other major trend will be driven by how much the consumer believes they can spend. They will be buying less on impulse and more on "how many plants can I get for my money?" Yes, a value question but also a quantity question. With that in mind, we will see more movement back to packs and 4-inch material — and less demand for container gardens above a retail price point of $25.
All indications would suggest that by mid-year, we will see a slight up-tick in the housing market. When that happens, landscaping demand will start up as well.
Last, the consumer wants to buy eco-friendly products: They will pay more for them, but not too much more. We will also see consumers become even more interested and sensitive to products produced by sustainable companies.