January 2012 Big Grower

INSIDE THE BOX — The End of the Tunnel? By Dean Chaloupka

As we look around the industry and what has gone on the past six months, most reports from growers and their sales results at retail has been mostly positive. While no one will ever mistake the volume and sales of mums, poinsettias, Christmas trees, etc. with those achieved during the spring season, the fact that most regions of the country have seen an increase in sales during this time brings optimism for not only spring 2012, but beyond.

So why is there optimism in most growers and retailers today?

There are adjusted, more realistic expectations. The heady days when retailers opened new stores every week of the year and growers sold into what seemed to be an ever increasing market have been over for a few years. Growers and other suppliers no longer plan their production and business model around this type of expectation. They now study and know how much product can be sold through any given retail location, what the buying patterns are for that specific store or market and build the plans accordingly. This has also meant that suppliers have cut out waste from their companies and business model.

There is better understanding of the consumer and what it takes to drive sales by growers. With a need to understand a new sales paradigm and eliminate waste, it was critical for suppliers, just like their retail partners, to truly understand what drives the consumer's purchase decision. They need to not just grow what they liked to grow but supply the colors, sizes, and even containers which stimulated the consumer to buy. They also needed to better understand who the consumer is and make decisions based on this knowledge (i.e. gender, age, nationality, etc.).

As an industry, there is a leaner group of suppliers (code for less of them). As hard as it is for many to face and admit, this economic downturn has resulted in fewer growers and suppliers. Some needed to go. It would have been good for a few that didn't survive to have made it and vice versa but in the end, it is survival of the fittest. It is a consolidation that was thrust upon the industry more so than controlled by the industry; and today, the grower base supplying the retail chains does so because they understand the previous two points made.

There is a retail segment that understands the consumer of this category is important to them and now markets aggressively to them. Big box, mass merchant retailers understand that the lawn and garden category, while seasonal, is critical to them. It attracts an energized consumer that can be counted on every year to decorate their yard and replenish their home with plants. In addition, they will spend a considerable amount of money on rakes, hoses, planters, bark, stone and fertilizer to ensure that the area in which they reside is pleasing to live in.

While the homeowners in the United States may have lost value in their homes, it does not mean they value their homes any less. By realizing that the lawn and garden category represented a potential bright spot, retailers have promoted heavily to attract consumers to our products. They have also helped to revive vegetable gardening, which had been a declining category and sparked renewed interest in healthy eating through the use of vegetables.

Is the light at the end of the tunnel a train?

In five to six years, Generation Y will be reaching their "beginning home buyer age" between 27 to 30 years old. As pointed out in futurist and demographer Ken Gronbach's book, The Age Curve, it is a generation that is 100 million strong and will continue to expand for the next 30 years. It is critical to understand not only how they buy but how the sheer mass will affect us.

Whether that means they will be able to buy condos vs. houses, smaller houses vs. the big ones the baby boomers had built remains to be seen, but they will have a huge impact. There is a wave of these consumers coming and they will impact the lawn and garden industry just as the baby boomers did.

We will need to understand their tastes in decorating and use of space within the home they occupy in order to sell to them. We will need to know what information they require and how best to provide our message to them. Early indications are that they will want not only information about the product they buy, but also they will have a greater need to understand and trust the company that supplies them. They want to know not only about the product but how it is produced, how the employees are treated, their sustainability or environmental stance. This will require transparency that some companies may not be ready for or comfortable with although the best within the industry today are already meeting this need for consumer information.

For a few within the industry, the light which is a train will run them over. While they have survived the most recent economic downturn, they may not have the energy or capital to ramp up. They also may not adapt fast enough to prosper with the new consumer wave. That will be part of the natural evolution within a competitive marketplace.

For many, they will hop on the train and ride it fast and furiously to new heights. Chances are you see it and have already begun planning the resources needed for this. You see the opportunity before it exists and the truly successful companies always do.

That light and opportunity is the sheer volume of a Generation we call Y.