The Sixth Annual State of the Industry Report
Year after year, the Annual GPN/Summit Plastics State of theIndustry Report provides the most comprehensive data available about the pastyear in floriculture. The big question is, what has changed so much in oneyear? New trends, higher sales, valuable growing information ? basically,how everyone in the floriculture industry is doing with their businesses andwhat valuable information can be shared to better each grower who reads thereport.
With the help of GPN readers and Summit Plastics, which isnow in its fourth year as a co-sponsor for this survey, we are able to bringthis information to the growers to give them what they need to better theirproduction. We want to thank all of the parties involved in supplying thisinformation, and we appreciate the support that came along with it. And nowladies and gentlemen, The Sixth Annual State of the Industry Report.
On approximately September 13, 2002, the GPN staff mailedout 1,900 surveys to growers all over the United States. The growers werechosen at random from the GPN subscription database of wholesale growers. Inmany of the cases, it was also indicated that some of the growers surveyed ownone or more retail outlets and/or landscaping services. Out of the 1,900surveys, 114 were returned and usable. They were then recorded and tabulated by the GPN staff.
The numbers tabulated are as accurate as possible, given theinformation provided. Since not every answer was usable and since numbers wereaveraged to the nearest round number, some of the percentages are slightly moreor less than 100. Also, many of the questions required more than one answer,also adding to the margin of error.
To our greatest ability, we have tried to provideyear-over-year data. This information gives the readers the ability to trackcertain sections of the industry, to spot trends, consumer preferences, etc.The GPN staff compiled all data from 1997, 2000 and 2002, and AccountabilityInformation Management (AIM) in Palatine, Ill., tabulated data from 1998 and1999. The Data from our First Annual State of the Industry does not appear inthe comparison because the methodology used for that survey is not compatiblewith that of subsequent surveys.
This year is also a little different. In the past, we havepresented the State of the Industry Report in the May and/or June issues.Asking the growers to give us numbers for the May/June issue was hard since theseason had ended six months prior to the surveys being sent out in January.This year, we sent the surveys out as soon as the major selling season wasover, allowing the numbers to be fresh in the grower’s minds. Since we waiteduntil now instead of last May or June, there is no data from 2001. The lastupdated data that we have is from 2000.
The data compiled by AIM and GPN are similar in mostrespects; however, readers should know that there is a degree of variance withthe data. Basically, there is a margin of error, and all of the information inthis report is accurate to the degree that respondents provided accurateinformation on the surveys.
Since there are a number of regions in this country thathave different growing conditions, it is important to include all of them inthe survey. It is important to understand who is responding to the survey toget a better feel for what is going on with their crops.
For 2002, the West Coast gave the most responses with 24percent of the surveys. Currently, the Midwest ties for second with the South,which both share 18 percent of the responses. The Mid-Atlantic has 13 percent,the West 11 percent, the Northeast 10 percent and the Central part of theUnited States comes in last with six percent of the responses.
The amount of operation space was also a widely answeredquestion with all but one of the respondents indicating their operation space.The numbers indicated that 29 percent of the respondents own between100,001-500,000 sq. ft. in production space. The next size comes in with aclose 26 percent for 50,0001-100,000 sq. ft., which makes each size only onepercent less than the previous State of the Industry Report. However, thepercent of respondents from the 25,000 and under category is up nine percent, givingthe survey a better look at that operation size. The 25,001-50,000 productionsize adds up to be 12 percent, while 500,001 and above comes in last with only11 percent of the responses.
Overall, the production space in 2002 averaged out to be294,722 sq. ft.,which is only16,290 sq. ft. less than the previous survey. Using the margin of error as aguide, there is not much of a difference in the two years, showing aconsistency in growing production space. However, when the space is dividedinto fixed-cover greenhouse space, shade house, retractable-roof greenhousesand open fields, the number varies a little more than the previous year. The2002 fixed-cover amount is 76,187 sq. ft, which is down by 81,820 sq. ft.However, keep in mind that the size of operation does not really lend itself toa year over year comparison ? since every year a different group ofpeople with different sizes are chosen to answer the survey ? making theoperation size an incomparable yearly number. Shade houses are averaging 33,778sq. ft. overall, and open fields are at 175,136 sq. ft., which are both verydifferent from the years past. The unsurprising statistic is that theretractable-roof greenhouses represent the least amount of production space,(an average of 214 sq. ft.) in this survey, as they have in years past. Thesurvey results show that West Coast growers with production space between25,001 and 50,000 are the only ones adopting open-roof structures in anynumber, with an average of 1,071 sq. ft.
The region with the largest production space is the Southwith 707,863 sq. ft.; second place was the West Coast, with 301,177 sq. ft. Aninteresting fact is that the West (226,928 sq. ft.), the Midwest (217, 717 sq.ft.) and the Northeast (197,014 sq. ft.) were all within 30,000 sq. ft. of eachother. That leaves the Central United States with 88,506 sq. ft. and theMid-Atlantic with 67,128 sq. ft.
The South also has the largest number of fixed-covered greenhousesquare feet (87,822 sq. ft.), shade houses (148,228 sq. ft.) and open fields(471,813 sq. ft.). The Mid-Atlantic came in with the least amount of productionin each category. All of the other regions have an even number between theproduction categories.
Taking climate into consideration, these numbers are notsurprising. The favorable climates in the South and on the West Coast allow for”less formal” production space, including outdoor and quonsetproduction, both of which are substantially less expensive than even polygutter-connects.
This year’s responses also showed that growers have decidedto increase their indoor production space by 28 percent and their outdoor spaceby 21 percent. Growers in the Northwest are the ones that want to increaseproduction the most, by 66 percent in indoor space and 109 percent in outdoorspace. Also, growers in the 25,000 and under space range want to increaseindoor space by 42 percent and outdoor by 55 percent. Because no explanationswere given, we can only look to the industry trend away from small, 100-percentwholesale operations as an explanation for these high numbers. Our own growervisits show price pressures affecting small growers the most.
Source of Plant Material
Now that growers have the production space, where do theyget the materials? The majority, 41 percent, said they grow the materialsthemselves, as opposed to getting it from a broker, 30 percent; through a plugproducer, 16 percent; directly from a propagator, 11 percent; or in some otherway, two percent. However, those numbers have been pretty consistent since1998, showing that most of the material is grown by the growers themselves.
In each region and size operation, the results are almostthe same as the overall, with the exception of the Midwest. The survey showsthat growers getting the materials from a broker (42 percent) is a higherpercentage than growing it themselves (26 percent).
Given the amount of vegetative material currently inproduction, we were surprised by the continuing trend of self-sourcing. Withthe number of vegetative varieties and patent-restricted products rising, weexpected Á
to see fewer people propagating their own material. Wesuspect that growers are simply reallocating resources. If x number of plugsand liners were bought-in and y produced in-house in years past, the number ofplugs produced in-house (y) would rise to accommodate the increased number ofcuttings and liners that must be purchased (x).
Producing plants is not something that just happens with ahoe and some water. There is a lot of money and effort put into making asuccessful crop. The overall average production cost in 2002 was $7.00 per sq.ft. This adds an additional $1.17 from the 2000 total, but it is still down $4.26from 1999 when the average price was up to $11.26 per sq. ft. Each year dependson the weather, the economy, possible natural disasters and any otherunpredictable situations that may occur, and this year’s rise seems veryreasonable given labor shortages and drought.
This year, the South had a high average of $26.18, anunexplainable anomaly that is only $2.82 less than the previous year. TheMid-Atlantic is at $6.39 per sq. ft., which is down a large amount from lastyear’s $23.24 Á per sq. ft. The variance in production costs year overyear is dramatic. At first, it was enough to make us question our data. Aftercloser examination, we attributed the inconsistency to a fluctuation in theresponse pool, and viewed it as an unfortunate side effect of our methodology.But we can’t just write off this data, and we shouldn’t. These are therespondents’ best estimates of their production costs. We all know growerswhose input costs are extremely inflated ? newly mortgaged greenhouses,extra staff and high shrink. When we see production costs like in those fromthe South, at $26.18 per sq. ft. in 2002 and $29.00 per sq. ft. in 2000, weknow that some of these high-risk growers were in the survey pool. Instead ofinferring that the average cost of production in the South is three times thatof the Mid-Atlantic, we should see this as an indication that some growerscontinue to flout sound business practices.
Trends in Automation
With the advances in greenhouse technology, there is agreater number of products that can help growers with economical cropproduction. The survey showed that growers already owned the followingautomated devices: 36 percent own environmental controls; two percent floodfloors; 11 percent sub-irrigation benches; 25 percent root-zone heating; 12percent floor heating; 35 percent moveable benches; 17 percent automatedseeders; 23 percent automated flat fillers; nine percent automated transportsystems; and five percent automated transplanters. Compared to the last Stateof the Industry Report, the amount of automated systems that are currentlyowned by growers is down by approximately 10 percent. Because of the economybeing down this past year, automated systems are less popular. Next year’snumbers should show if this is a new trend or the result of sampling.
The region that owns the most automated helpers is theNortheast. The most commonly owned product is environmental controls, with 55percent of respondents. Another 45 percent goes to automated flatfillers. Theinteresting fact arose that many of the regions bordering Mexico seem to useless automated systems. The less expensive labor becomes an issue becauseMexicans enter the country through border states looking for work, and many ofthe regions in that area hire them instead of purchasing automation. With morephysical labor help, there is less of a need for automated help.
Another fact that came up was that growers owning100,001-500,000 sq. ft. were the ones to use the most automated labor. In theprevious State of the Industry report, the growers with more than 500,000 sq.ft. production space held the most automation, which this year is significantlyless. One reason is that the report showed that a majority of the largergrowers are in the West Coast region, which is closer to the Mexican border. Itall depends on the area and the amount of labor that is available.
Types of Crops
The types of crops that are grown every year are what canmake or break a sale. The results showed that 32 percent of the respondentsgrow bedding flats, while 62 percent grow container crops. Traditionally,bedding flats have been considered the industry’s major crop; however, the 2002results show that container crops are growing more and more popular. Since thelast State of the Industry, container crops have gone up from 57 percent andbedding flats have actually decreased from 39 percent.
When looking at the results according to region, it showsthat the South is growing approximately 77 percent container crops, leavingonly 18 percent for bedding flats; the West Coast is not far behind at 74percent in container crops and 17 percent in bedding flats. The other regionsare not straggling; they too are strongly growing their container crops market.
The 25,000 and under group is the production size that seemsto be planting the most bedding flats (45 percent). However, they still growcontainer plants as 50 percent of their crop. Without a doubt, Wal-Mart’s $6flat and the consumer demand for instant gratification are the causes behindthis container crop shift.
Another aspect we can’t overlook is the demand for new, new,new. In the past few years, consumers have begun looking for a different,”nontraditional” plant to spruce up their homes. They’ve grown tiredof impatiens and geraniums, and we’re seeing this more and more in the State ofthe Industry. Out of the 18 choices of bedding flat crops, the majority of thesales went to the “other” category, with 24 percent, an 11-percentjump from the last State of the Industry’s totals. Instead of the traditionalimpatiens, perennials, mums and marigolds, consumers are more interested inbuying plants such as shrubs and trees, foliage, tropicals, etc., givinggrowers something new to consider. The West Coast has the highest number ofpeople producing in the “other” category, with 41 percent. However,the South is not far behind with 38 percent. Growers with more than 500,000 sq.ft. in production have also embraced the “other” category, with 37percent of their sales in the category. Overall, the “other” categorymay soon be the talk of the industry.
The second most popular category is vegetables and herbs, 13percent of sales. You might be surprised to know that vegetables/herbs havebeen slowly gaining production space, and this year the popularity is peaking.Next in line is the traditional perennial (11 percent) that will always beclose to the top because of its variety and easily recognizable plants. Eventhough the trend shows that more consumers want something different, there arestill a lot of consumers out there that enjoy tradition in their plants.
The rest of the 18 choices run in the 0-7 percent range.Most of the traditional bedding flats are just not as widely grown as the moreexciting, non-traditional crops. Impatiens have risen about three percent sincelast year; however, mums have dropped two percent from last year’s 4-percenttotal, and everything else stayed virtually the same.
Even though perennials might be slipping in bedding flatproduction, they are thriving in the container crop department. Perennialsoutsell any other container crop by approximately seven percent, at 19 percentof container production, and are up 11 percent over last year’s production.Other traditional annuals are 12 percent of the growers’ sales. Most popular inthe Midwest (30 percent) and in operations over 500,000 sq. ft. (31 percent),perennials are one trend that seems to Á keep going in all regions andsizes as each year goes by.
The second trend that seems to be popping up is foliage, withan overall 11 percent in sales, up two percent from the previous State of theIndustry Report. Growers in the West (21 percent) and the West Coast (20percent) are neck and neck when it comes to foliage sales. With the growingtrend in bedding flats and now in container crops, the foliage market will bein full bloom in the coming years.
Poinsettias are up from two percent to eight percent, as aregeraniums. Each year, the trends change and growers must adapt their spaceallocations, but with survivors like perennials, poinsettias, geraniums andother popular traditional plants, no small fluctuation will stop the demand.
Overall, which crops are the growers going to be adding totheir production in 2003? Specialty pot plants are the surprise trend that willbe added to more schedules next year. The 17 percent total is up from only twopercent from the last report, giving the specialty pot plant a 15-percent jump.Last year’s highest increase came from perennials at 10 percent, but this yearthe category is down to six percent. Growers are becoming increasingly comfortable with the variety ofcontainer crop possibilities.
Greenhouse chemicals are what help make the plants growstronger, longer, healthier, more colorful and so on. However, since 1998 theamount spent on greenhouse chemicals has decreased from $24,128 to $10,517 in2002. Which chemicals have been making a difference? Insecticide prices were at$5,214 in 2000, and now they have dropped to $3,734. Fungicides are down to $3,046from $5,495; herbicides are also at $20.25, a $1,221 decrease; and biologicalcontrols are down the most from $1,384 to $335 from last year’s totals.
Not surprisingly, the region that is using the highestamount of greenhouse chemicals is the South, with an average cost of $14,335 onall greenhouse chemicals. There is a large population of growers in the South,as well as a warmer climate, and growing seasons tend to last a little longerin that area. When crops are in warmer climates, diseases, pests and weedsbecome more prevalent, which is why more chemicals are purchased in the Southas opposed to anywhere else.
With decreased insecticide and fungicide use, you mightexpect to see increased biological use, but this is not the case. Biological usehas, in fact, decreased substantially from last year’s numbers, the exceptionbeing the West Coast, which continues to spend twice as much on biologicals asany other region.
The chemical that is being spent the most on in greenhousesall across the country is insecticides. There are so many new species ofinsects that are being discovered and invading crops that it is no wonder moremoney needs to be spent on trying to get rid of them. The regions with the mostinsecticide spending are the South with $5,104 and the Northeast with $5,059.
Where the plants go
The plants are grown, look like a million dollars, and it istime to present them to the consumer. Since last asked in 2000, there has notbeen much of a change as to where growers send their crops to be sold. Overall,growers tend to sell the majority of their crops through their own retailcenters, at an average of 38 percent, which is up from 30 percent in 2000. Cutthat number in half and that slides the garden centers into position with anaverage of eleven percent. Eleven percent also goes to wholesalers, which isdown from 15 percent in 2000. Landscapers are down one percent at nine percentwhile retail florists are up one percent at seven percent. Grocery stores andchain stores are only down by one percent at six percent, probably due to thefact that a number of chain stores decreased their garden centers in the pastyear. Plant brokers are down from five percent in 2000 to three percent thisyear. The only two categories that have stayed consistent are the massmerchants, which remained at six percent both years, and the “other”category, which also stayed the same in 2000 and 2002 at five percent.
Growers in the Midwest were the most successful in their ownretail outlets with 55 percent of their crops. Growers in the 25,000 and underproduction size sell 86 percent of their crops in their own retail centers,blowing away any of the other size categories. Over the year, the amount soldat a grower’s own retail has been the number-one way to sell a crop, and as theyears have gone by, there has not been much change in this area. A lot ofconsumers prefer to buy plants from smaller retailers or at least a place thatdoes not have a national brand name attached to it. The feeling is that a lot ofthe growers’ own retail centers take better care of the plants and know how tomanage them better; all in all, consumers want to go where the quality and careare.
Since a lot of consumers do prefer the personal touch ofgrowers, the survey asked what growers have been doing to ensure that for theconsumer. The results turned out to be unsurprising, but not great news.Eighty-five percent of the growers do not provide any type of in-store serviceto chain stores. Only eight percent do, leaving the rest to unusable answers.However, the growers that do provide a service provide merchandising for thechain, and some growers also water the plants. One of the services that isgaining popularity is for growers to come in and clean up the area for thechain to make the area look better. Some places provide racks, reset thebenches and even consolidate.
The region that seems to do the most servicing is the WestCoast, with 22 percent of growers saying they do provide service. An even moreinteresting fact is that growers with more than 500,000 sq. ft. of productionspace have close to the same numbers as the West Coast, showing that not onlyis the West Coast providing more service, but a lot of the larger growers arethe ones providing this service. Growers in the Northeast, Mid-Atlantic and theCentral United States do not provide service to chain stores and neither do thesmaller production sizes. However, when the warmer, more populated climatesenter into the mix, more services are done.
The majority of growers may not provide services to chainstores but a slightly higher percent does guarantee the plants that they sell.Eighteen percent of growers provide a guarantee on their plants, which is a4-percent increase from the previous report. Another interesting fact is thatthe Central United States is the region that provides more guarantees than anyother region or production size by 43 percent. Also, growers in the 50,001- to100,000-production range offer the highest amount of guarantees with 29percent. With moves by some mass merchants to adopt pay-by-scan, we expectthese numbers to change over the next few years, as more large growers acrossthe country adopt both guarantees and in-store merchandising.
So what do the majority of the growers guarantee? A numberof Á growers said they make sure that the plants are healthy and/or ofgood quality, so if something did happen they agreed to replace
them for free. Other places have guarantee limitations. Forexample, several growers have a 1-week return policy, others 30 days; it alldepends on what the grower feels is the right time and which plants theseguarantees are for. One grower has even decided that no matter what, the plantsare guaranteed at 20 percent off the original price, giving the consumer alittle extra incentive to buy from that particular grower. A small promise cantake sales a long way.
We all know that the economy has not been in the best shapethis year. The average amount of sales for the year of 2002 is approximately$1,070,276, only a slight decrease from last year’s $1,127,090. The numbersshow the results of a bad economy; however, they still showed a good profitmargin for growers in the long run. On average, 51 percent of growers reportedthat their net profits increased in 2002 (up from last year by 12 percent),which only showed a decrease of five percent, and 24 percent of growers stayedthe same as the year before. This shows that in bad times people are stillwilling to get out there and buy a few plants.
The West Coast had the highest increase in the UnitedStates, with a 9-percent increase in net profits. The Northeast and the Southcome in at a close second with a tie of an 8-percent increase in net profits.Fifty percent of the growers in the 25,001-50,000 category ended up breakingeven over all of the other sizes. Unsurprisingly, the size with the highestincrease is the 500,000 and higher, showing that larger production sizesconsistently make the most in profits. As a matter of fact, the majority of theprofits were sold in the larger production area with an average if $3,660,000in total sales. This runs head to head with the Northeast as the region withthe highest amount of sales at $1,926,057. Surprisingly, the South came in with$620,889, a significant decrease in profits from last year’s survey. TheMidwest ended up having the least amount of profits with $512,607, but not aslow as the 25,001-50,000 group, which has an average profit of $208,375.
How to Obtain a Copy
Due to the space allotment, we were unable to include all ofthe information from our survey in the pages of the magazine. We do offer a wayto obtain that information, though. This publication offers breakdowns byregion and size of operation for all of the categories in this article. Thereis also a number of categories that were not discussed in the article aboutmedia, employee information, Internet usage and more that may be of greatinterest to growers. There are also a number of questions that compare previousyears to the current data, giving the grower an in-depth idea of how trendshave changed.
The cost of the complete survey is $100.00. Please submityour order to Bridget White, GPN, 380 E. Northwest Highway, Suite 200, Des Plaines,IL 60016, or E-mail your request to firstname.lastname@example.org.