Market Trends: April 2001

Many contractors planned for increased overhead expenses in 2001, partly due to the growth they experienced in 2000 and the growth they plan to experience in 2001 (18 percent of contractors said they expected to grow 20 to 29 percent in 2000, according to a Research USA survey, and 86 percent of the respondents to a Lawn & Landscape Online survey predict growth in 2001).

The majority of contractors who answered a Lawn & Landscape Online poll are planning a less than 5 percent increase in overhead expenses - 39 percent budgeted for an extra 3 to 5 percent in overhead expenses, while 19 percent planned for a less than 2 percent increase.

To participate in Lawn & Landscape online polls and to review past polls, visit www.lawnandlandscape.com/poll.

REGIONAL OUTLOOK
Talkin’ Texas

AUSTIN, Texas - Texas’ green industry has a total state economic impact value of $9.76 billion, according to a recent study conducted by Texas A&M University.

Landscape-related firms make up approximately $2.4 billion of that total, revealed the study, which was funded by the Texas Nursery & Landscape Association.

This is the first study conducted in Texas that also examines green industry employment. According to the figures, the Texas green industry represents more than 222,000 jobs, and landscape firms average 42 employees per firm. The majority of these employees are in the general labor category. In addition, the survey said landscape firms expect an increase in their labor force by as much as 30 percent throughout the next five years.

Economic value also was measured, evaluating the difference between sales revenue and purchased input costs, including employee wages and benefits values, owner’s compensation, dividends, capital outlays and paid business taxes. Texas’ green industry’s economic value totaled $6.46 billion.

Though consolidation continues, the number of landscape firms in Texas has increased, the survey said. Approximately 70 percent of total survey respondents are landscape contractors.

CONTRACTORS TALK BACK
Rising Fertilizer Prices

The Professional Lawn Care Association of America (PLCAA) recently polled its members to gather their thoughts on the predicted rise in fertilizer prices, the effects of which could influence contractors’ businesses more than rising gas prices, according to PLCAA.

"Price increases in fertilizer may have a good deal more impact on our profitability than perhaps those recently experienced in both gasoline and insurance," pointed out Bob Andrews, past president of PLCAA and president of The Greenskeeper, Carmel, Ind. "It is also an issue that seems to have caught contractors off-guard."

Ninety-one percent of the survey’s respondents said they have already experienced increased fertilizer prices. Price increases ranged from 2

to 35 percent, with 20 to 25 percent being the most reported number, according to PLCAA survey figures.

A majority of the responding contractors - 77 percent - have raised or plan to raise 2001 prices to offset the increasing fertilizer costs. Most of the contractors in this group are shooting for 3 to 4 percent price increases throughout the next year.

"While most members are raising prices across the board, some are increasing prices for new customers only or raising prices slightly higher for new accounts than for existing ones," Andrews said, pointing out that those contractors who aren’t raising prices either are pre-ordering a larger product quantity, feel comfortable with their prices and are absorbing the increase or feel that the fertilizer price increase is temporary and the extra money they spend on supplies will correct itself after prices drop.

Rising fertilizer prices also have influenced product supply and availability, according to 86 percent of the survey respondents. "Some contractors said suppliers had backed out of already quoted prices, meaning if they did not agree to the increase, ‘No sale.’" Andrews said. "Others cited that suppliers were only willing to quote on products already on hand, but not products ordered for future delivery. Some contractors pointed out that only fertilizer with a high urea content was in short supply, but that anything else was readily available. Others said that any shortage had been offset by early ordering for 2001, which they believe their suppliers will honor."

INDUSTRY UPDATES
Catching Up With ECI

CALABASAS, Calif. - When Environmental Care first appeared on the cover of our pages in 1992, it was a $58-million company with 20 locations in seven states. This year, the company expects to generate about $185 million in revenue from 57 locations in 17 states. After Bruce Wilson steered the ECI ship for 20 years, Richard Sperber assumed the presidential helm last year while Richard’s father, Burt Sperber, continued as president of ECI’s parent company, 52-year-old Environmental Industries. EII, with its subsidiaries (Environmental Golf, U. S. Lawns, Valley Crest, Valley Crest Tree Co.), now surpasses a half-billion dollars in sales.

Lawn & Landscape recently caught up with Richard to find out how the industry’s largest independent company views its future, as well as the future of the industry. Not surprisingly, he is confident that ECI will continue to grow, thanks to an organization-wide focus on three goals. "We focus on three areas: delivering superior customer care; recruiting, training and retaining the finest people in the industry; and producing steady and strong profits," Sperber related.

Describing his role as "someone whose job is to keep reminding everyone else about our goal," Sperber is focused on developing the company’s 3,000 employees. "The most important thing we’re doing is investing in our people at the branch level with our new EII University," he said. "This represents a $1.5-million investment to train everyone from the account manager level up in a six- to eight-month-long program that provides a mix of classroom, Intranet and hands-on learning," he explained.

While ECI’s acquisitions have made recent news, these are people-driven deals, Sperber noted. "Expansion into new markets takes place for two reasons: our customers want it and our people require it," he asserted. "As we train people better, they want more opportunities. Our people dictate how we grow and where we grow to. Now we’re helping them grow faster."

Despite signs of a softening economy, Sperber remains confident that landscape contractors will enjoy continued prosperity. The challenge will be dealing with clients who have higher expectations. "Because customers are more demanding, fewer companies will remain attractive options as a service providers," Sperber noted.

Companies that focus on their people will remain competitive industry players, however. "We all use and have access to the same equipment and materials, and we’re all impacted by the same weather. So we’re playing on a level playing field," Sperber observed. "The only difference between us and any other company is our team."

IN THE NEWS
Dow To Acquire Rohm & Haas

INDIANAPOLIS - The steady stream of consolidating pesticide manufacturers continued with the announcement that Dow AgroSciences will acquire Rohm & Haas, as the turf and ornamental market assumes an increasingly important role for these companies as agricultural markets soften.

"We are delighted with the proposed acquisition of the Rohm & Haas agricultural business, which includes its prominent fungicides, insecticides and herbicides," said Charlie Fischer, Dow’s president and chief executive officer. "These product lines complement and enhance our portfolio ... products for specialty crops as well as turf and ornamental businesses."

Although federal regulations prohibit Dow employees from disclosing details until the deal closes in the middle of the second quarter, the company is excited about the additions of Rohm & Haas’ Eagle fungicide and Dimension herbicide. In addition, Dow acquires Rohm & Haas’ position in the joint venture RohMid, which owns the insecticide Mach-2 with BASF.

"Seeing our CEO specifically mention the T&O business tells you that this deal wasn’t just made for specialty crop reasons," added Scott Eicher, senior product manager at Dow AgroSciences, adding that many basic pesticide suppliers are focusing more attention on non-agricultural markets now. "If you look at the global agricultural business, you’ll see it’s either flat or contracting 1 to 2 percent annually. Where are the companies that sell into that market going to get new sales? They’re looking more at specialty businesses like T&O and pest control."

And the consolidating probably isn’t over. "The six largest suppliers have annual sales from $3 billion to more than $6 billion, the next largest company is at $500 million, and there are about 10 manufacturers at that level," Eicher observed. "Manufactuers need to have enough critical mass to afford basic research and development for products as well as provide products with regulatory support."

Jeff Jetton, Rohm & Haas’ business communications manager, agreed, explaining that pesticide manufacturers are finding success harder to come by today. "You have to have a critical mass to compete in this marketplace," he observed. "If you can’t compete at that level, the best thing for you to do is get out of the business."

"I’m not sure when the consolidation will end," Eicher added, "but I wouldn’t be surprised to see more deals in the next 24 months between companies in the top and second tiers."

HISPANIC LABOR
Proposed H-2B Bill May Increase Visas

WASHINGTON - The Essential Worker Immigration Coalition is devising a bill that could raise the annual cap on H-2B visas and create short- and long-term visas, replacing seasonal and peak-load limitations.

The bill, which largely mirrors the H-2A agricultural guest worker compromise of 2000 that narrowly failed passing in Congress, could raise the visa cap from the current 66,000 to 120,000, and generate six-month and eight- to 10-month visa programs.

The proposed bill also includes an earned status adjustment provision for landscape and other service workers, according to the American Nursery & Landscape Association (ANLA), a member of the coalition.

The coalition is searching for support of this program while pinpointing chief House and Senate sponsors. For more information, contact ANLA’s Anthony Bedell at 202/789-1893.

IN THE NEWS
Senate Votes to Kill OSHA Standard

WASHINGTON, D.C. - The U.S. Senate voted against OSHA’s controversial ergonomics standard designed to prevent workplace injuries.

Voting 56 to 44, the Senate approved the proposal to scuttle the ergonomics rule, which could force employers to redesign workspaces and compensate workers for repetitive-motion injuries. The proposal is now at the House, where approval is predicted.

The Senate vote was a major victory for business groups that argued the rule, partly due to compliance costs, which were predicted to reach nearly $100 billion. For organized labor, which supported the rule as the broadest workplace reform ever ordered by the federal government, it was a big setback.

The Senate resolution not only invalidates the standard, but prohibits OSHA from ever reproposing a regulation that is substantially the same again.