Your next move

As we close in on 2015, the nursery industry has seen some forward progress, even if it was at a crawl. As I mentioned in my column, you’ve got to celebrate the small victories. Results from our annual State of the Industry Report point to some positive attitudes and outcomes.

Growers are confident about the rise in market demand for nursery products in 2015. In fact, 80 percent of respondents said they were confident to varying degrees. The pessimists came in at 19 percent saying they weren’t confident about the market. (See chart below)

Sales (in dollar amounts) have increased this year for 67 percent of respondents, and profits are up for 54 percent of respondents. (See chart below)

As you examine the charts, use these survey results to stir discussions for your own business.

We asked growers to identify the greatest problems facing the industry in 2015. The top three responses: The economy; labor issues; and increased expenses. Weather and government regulations were close behind.

Kelly Lewis, general manager at Ruppert Nurseries in Laytonsville, Md., says one of the biggest challenges for growers is labor.

“Labor at all levels can be difficult to find. From entry-level crews to experienced supervisors, it is difficult to find the people we need,” he says.
 

How we did it
The data was collected by Readex Research via an online survey Sept. 25 to Oct. 1. The survey was closed with 492 responses. To best represent the audience, the results in this report are based on the 199 respondents who own/manage a nursery whose primary business is growing nursery crops for the wholesale trade.

Illustration by Michael Gelen

Industry Report

Crops

Crops that produced the most sales volume (number of goods sold) and the highest profit were almost in line. But the winning crops were container-grown shrubs, field-grown trees, container-grown perennials and field-grown trees. As for planned crop increases, propagation material took the top prize with 34 percent saying they will add that category next year, followed closely by container-grown perennials and container-grown shrubs. Some 18 percent of respondents said they plan to grow fewer field-grown trees in 2015.

Respondents also said the market will experience continued shortages in 2015 of field-grown trees, container-grown trees and propagation material.

Industry Report

Profits

In terms of profits, a little more than half of respondents enjoyed increased profits this year, although most were on the lower end at 1-9 percent. Some 31 percent reported no change. For profit margins, the profits far exceeded the losses and 8 percent broke even. It’s almost split down the middle regarding anticipated profits in 2015.

Decker’s Nursery in Groveport, Ohio, took some radical steps to get and remain profitable.

“We’re having more profit this year than in the last decade combined,” explains Brian Decker. “The profitability we’re showing this year is a result of steps that were taken in the last three to five years to position ourselves to be where we wanted to be. When a lot of people were either financially unable or afraid to be aggressive, we felt that it was unbelievably important to streamline ourselves with mechanization in every way possible, and also be prepared to build inventories for what we knew would be the flip side of the record from the devastation of the economic recession. We did a lot of things to make ourselves highly efficient labor-wise. We thought we were going to have trouble getting enough people and that has proven to be the case.”

Decker’s invested in a lot of infrastructure, including container handling and trimming machines, conveyor systems and other material handling processes.

“Even though we were losing money in those years, and we had to borrow the money to do it, we took some aggressive steps to keep ourselves on the cutting edge of things. We also built up inventories when other people were afraid to buy. We are a liner producer, as well as a finished stock grower, and when people were afraid to buy our liners we took steps to build our inventories. As a result, our sales for 2014 are up more than 40 percent over last year.”

Industry Report

Sales

The amount of respondents who experienced increased sales (in dollar amounts) in 2014 compared with 2013 was a solid and exciting 67 percent while 20 percent reported no change. Looking to 2015, 62 percent said they anticipate sales to increase but 34 percent think sales will remain the same. That’s not necessarily a bad thing, because profitability can still increase even when sales do not, as long as growers are increasing efficiency and raising prices. Speaking of prices, 69 percent of respondents increased prices in 2014, and 10 percent took a chance by raising prices by double digits.

Industry Report

Economic outlook

 
Grower confidence hasn’t waned much since last year’s survey. In fact, the amount of those who said they’re not confident at all dropped in half compared with last year’s survey.

And growers seem to be treading carefully in terms of capital expenditures. Almost 40 percent said they’re not budgeting for an expansion project in 2015. And for those who are expanding, most are budgeting less than $25,000.

Nationally, UCLA Anderson senior economist David Shulman forecasts inflation at 2 percent or higher during the next two years, driven primarily by rising residential rents and increasing health care costs. The sectors expected to fuel the nation’s economic growth include housing, nonresidential construction, and investment in equipment and software.

According to Kiplinger, housing starts could number 1.29 million in 2015, an increase of 26 percent from 2014.

According to the Thomson Reuters/University of Michigan Surveys of Consumers, more households expect income gains in 2015 than anytime in the last six years. The median increase of 1.1 percent was the highest since late 2008.

Industry Report

Other Markets

The health of the entire industry is riding on several links in the supply chain. Garden Center magazine’s State of the Industry Report this year reported overall sales for independent garden centers were up across the board, with 72 percent reporting an increase in revenue in 2014, compared with 47 percent in 2013. When it comes to plant sales, 68 percent of garden centers reported increased perennials sales and 63 percent sold more edibles this year. Fewer garden centers had decreased sales in green goods (annuals, edibles, perennials, trees/shrubs) compared with 2013. Most decreases were reported in other, non-green good categories.

Lawn & Landscape magazine’s State of the Industry Report revealed a profitable market for landscape contractors.

In the greenhouse market, perennials tied for second for the crop category projected to experience increased production next year. Vegetable plants was No. 1. (See chart below.)