Clear the obstacles

Growers’ attitudes about the nursery market are somewhat encouraging, which seems to be the new normal the last two years.

This year’s Nursery Management State of the Industry research revealed sales and profit increases surpassed declines by some pretty impressive numbers. Because of the gains, nearly 70 percent of those surveyed are confident the market for nursery products will grow in 2014. It’s a safe view of the market since more questions than answers remain about the nation’s economy (see story on page 18 about economic indicators).

Economic forecast

In its third quarterly report of 2013, the UCLA Anderson Forecast asserts that the U.S. economy is “returning to normalcy.” And while the economy will not be normal by historical standards, it will be noticeably better than in recent years.

After growing at a now-revised 2.5 percent rate in the second quarter of 2013, real GDP growth will continue at 2.5 percent for the rest of the year before rising to its historical 3 percent in 2014 and 2015.

In the near-term, the adjustments business firms will make as a result of the implementation of the Affordable Care Act could negatively affect the quantity and quality of the net increases in employment; companies may convert full-time employees to part-time, and smaller businesses may seek to limit their headcount to 50 full-time employees.

The Anderson Forecast calls for housing starts to increase to 965,000 units this year, compared with 783,000 last year. This is actually a reduction from previous forecasts, due to a slower ramping up of production than originally envisioned.

The forecast calls for a return to normal growth on the order of 3 percent in 2014 and 2015, a percentage-point higher than the 2 percent growth rate the economy has experienced since the recession ended. It also sees an end to the very low interest rates we have become accustomed to the past few years. While a resumption of normal growth is a good sign, it will not be enough to restore the economy to its pre-recession growth path, said UCLA Anderson Forecast senior economist David Shulman.

Sales

Sales gains so far in 2013 far outweighed declines with 64 percent of those surveyed saying sales increased this year compared to last year. The largest increase was 1-10 percent followed closely by gains of 10-20 percent. Some 17 percent said sales were flat this year and 19 percent saw a decline in sales.

However, more than three-quarters of respondents expect sales to increase in 2014 compared to 21 percent who said sales will remain unchanged from this year to next.

More than 40 percent of those surveyed said they don’t pre-book orders, but 31 percent of those that do said pre-bookings were up this year compared to last year. And another 44 percent expect pre-bookings to increase in 2014.

Profits

More than half (53 percent) of growers said profits were up compared to flat (23 percent) or declines (24 percent). And most (67 percent) anticipate an increase in profits in 2014. Perhaps they’re raising prices, improving efficiencies or getting a handle on production costs (see story on page 22).

The largest gain was 1-10 percent with flat sales ranking second and a profit gain of 10-20 percent coming in third. Only 3 percent of respondents said they weren’t profitable, which is down considerably from 13 percent in our 2012 survey. But 14 percent said they weren’t sure if they’re profitable, which is alarming.

When we asked growers specific ways to improve or retain profit margins, there wasn’t a huge “winner.” Some 40 percent said “offering a better product mix,” while 28 percent said “price increases,” and 18 percent said “new product introductions.” In the “other” category, some of the more interesting responses were “production efficiency,” “better quality control” and “expanding our customer base.”

Crops

This year, growers said container-grown shrubs garnered the highest sales volume (26 percent) in 2013 followed by field-grown trees (19 percent) and container-grown perennials (18 percent). This year’s most profitable crops for respondents were container-grown shrubs and container-grown perennials tied for first place (21.5 percent), followed by field-grown trees (19 percent) and edibles (12 percent). That’s pretty close in line to what growers said last year with the exception of edibles which took a 9 percent jump. Growers plan on producing more perennials next year (43.5 percent), followed by flowering shrubs (37 percent), edibles (30 percent), evergreen shrubs (27 percent) and shade trees and flowering trees both at 25 percent.

See how your customers fared

It’s important to know how others in the supply chain performed this year. Find out the hits and misses with independent garden centers and landscape contractors.

IGC winners
It’s no surprise that annuals were the biggest area of growth for garden centers, but edibles, perennials and (surprisingly) trees and shrubs saw sales gains this year.

IGC losers
We’ll have to take the good with the bad. Although 15 percent of those surveyed for Garden Center magazine’s state of the industry report said trees and shrubs sales accounted for their biggest sales increase, another 18 percent said the category had the biggest decline. However, compared to last year’s Garden Center survey, when nearly half of the respondents said it was their worst category, this is still an improvement.

A closer look at trees and shrubs
The tree and shrub department is doing better at IGCs compared to last year, according to Garden Center.

During the past couple of years, the popularity of edible trees and shrubs, especially berry plants, smaller or “patio” citrus and other fruit trees for smaller spaces and containers have fueled some of the growth in the tree and shrub category. Garden Center also pointed out the use of trees and shrubs, especially evergreens and others with winter foliage, in larger sized containers used in commercial/public settings. Rather than replacing all of the plants in the container, only the annuals need to be replaced, reducing costs, and providing visual appeal throughout the winter as well.