Money Makers
Mowing, installation work and fertilization were ranked the three most profitable services in a recent Lawn & Landscape survey.
According to a Research USA study, 50 percent of surveyed contractors said that mowing is their most profitable service (gross margin of 52 percent), 31 percent said landscape installation is their most profitable service (gross margin of 40 percent) and 22.9 percent said turf fertilization (gross margin of 34 percent) brings in the most profit.
The varied nature of the industry is reinforced by the wide range of services generating the highest profitability for contractors, although interviews with many contractors found they are dealing with increased pressure on gross profit margins as the direct costs associated with producing a job, especially labor, continue to rise.
| SERVICE | PERCENT PROFITABLE | ESTIMATED GROSS PROFIT MARGIN |
| Mowing | 50 percent | 52.5 percent |
| Landscape Design/Build | 31 percent | 40.3 percent |
| Turf-Fertilization | 22.9 percent | 33.8 percent |
| Lawn Care | 15.1 percent | 38.1 percent |
| Landscape Construction | 14.7 percent | 34.6 percent |
| Snow Removal | 12.8 percent | 30.9 percent |
| Edging/Trimming | 10.9 percent | 39.8 percent |
| T&O-Pruning | 9.7 percent | 24 percent |
| Irrigation | 8.9 percent | 25.2 percent |
| Seeding | 8.5 percent | 22.4 percent |
| Fall Clean-up | 8.5 percent | 33.6 percent |
IN THE NEWS
Inside Illinois’ Industry
URBANA, Ill. - A new University of Illinois study proved that the various well-known agriculture industries in the state don’t compare to the size of Illinois’ green industry.
Primary estimates show that, in 1999, the product and service sectors of Illinois’ green industry generated nearly $2.9 billion in net sales, said Gary Rolfe, professor and head of the Department of Natural Resources and Environmental Sciences, College of Agriculture, Consumer and Environmental Sciences, University of Illinois. These sales figures place the green industry ahead of corn production in its importance to the state’s economy, Rolfe said. Total cash receipts from Illinois’ agriculture industries are as follows: corn at $2.56 billion, soybeans at $2.1 billion, hogs and pigs at $646 million and cattle at $490 million.
"I don’t think anyone had a clue that the green industry was as large as it turned out to be," Rolfe pointed out. "It’s a very important piece of information that could help influence legislative initiatives and bring more research dollars to this important sector."
The survey, which was funded by a coalition of green industry professional associations, was sent out to 12,000 state businesses, agencies, institutions and others who produce, maintain, use or sell plant materials to enhance environments. It had a 31 percent response rate and offers some interesting insights regarding the industry’s economic impact on a state level.
Other report findings include:
- There are more than 9,000 green industry businesses and more than 2.3 million end-users of green industry products and services in Illinois.
- Overall, the green industry employs a workforce of nearly 160,000 people with a payroll of more than $1.74 billion.
- For every job created within the green industry, an additional .52 jobs are created within the state economy. For every dollar paid in green industry wages and salaries, an additional $1.70 in wages and salaries are paid within the overall state economy.
- The maintained turfgrass area in Illinois totaled about 1.54 million acres.
- In 1999, Illinois consumers spent $2.89 billion to purchase and maintain indoor and outdoor plant materials including turfgrass. In addition to this amount, the same group paid more than $1.397 billion to contractors working in the green industry.
- The green industry service sector generated more than $1.643 billion in total receipts. More than 88 percent of these receipts are attributed to landscape contractors and lawn care firms. About 6 percent of total receipts are attributed to tree care, while the remainder - 4 and 2 percent, respectively - comes from landscape design firms and interiorscape companies.
| MERGERS & ACQUISITIONS |
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Novartis And Zeneca Complete Merger GREENSBORO, N.C. - The honor of being the Biggest Kid on the Block now goes to Syngenta since Novartis and Zeneca completed their merger to form this multi-billion-dollar specialty pesticide manufacturer. As pesticide suppliers get so much bigger through consolidation, the question is how end users of their products will benefit. Syngenta plans to use its considerable research and development budget to develop products not traditionally expected from pesticide suppliers. "Syngenta will provide customers with value-added technologies and expertise," explained the company in a press release. "Plans include development of digital predictive pest forecasting models, GPS/GIS chemical program application software, and online access to professional chemical and business management information." The question of what pesticide suppliers, especially those new multi-billion-dollar companies, can do to better serve lawn care operators (LCOs) is something Syngenta managers hope to answer. "We want to become more knowledgeable about LCOs’ businesses," explained Chuck Buffington, lawn and ornamental market manager. "By focusing in on this market, we can understand it and its needs, whether they are packaging, improved products or new products. We’ve got that focus. "The other thing we’re able to do is take a solutions-oriented approach," Buffington continued. "This is not a one-product company. We’ve got a new grub-control product coming, and we fill most of the LCO’s pesticide needs." Being bigger also means having access to bigger dollars, and Buffington this can help LCOs. "We’re working with a pest forecasting group that uses models and weather maps to predict where disease or insects will occur so, in essence, an LCO can pull up the map and see that the grubs are heading his direction or that conditions are right for brown patch," he explained. "This gives that person a heads up to identify which lawns in his area are sensitive to different problems." Don Breeze, head of turf and ornamentals for Syngenta, explained that mergers such as the union that yielded Syngenta also create greater critical mass for the turf and ornamental market, which means more research dollars. "Our product range is so broad that we want to be careful not to cannibalize our own line, but there are a lot of things we want to bring to the market, such as resistance management," he explained. "We may actually recommend a competitor’s product in rotation with one of our products on occasion if that will help avoid resistance. If we can do that then we are bringing a long-term solution to the market." An area of real interest for pesticide users is product development, Buffington confirmed. "We’re seeing more of a focus on premium products with lawn and landscape professionals," he observed. "Performance counts more now than ever, and LCOs are somewhat more willing to pay for performance because they are figuring out that customer retention is the key. Getting a new customer to replace the one I lost because of poor product performance costs more than paying up front for better products." Buffington also said LCOs can expect to see more "reduced-risk" products entering the market because "the only products getting through the EPA right now are reduced risk or organophosphate replacements." That presents greater challenges to manufacturers who must deliver safer products with increasing performance characteristics. "We think the things we can bring to the LCO are going to be value added because having efficacy is really the entry level for playing in this business today," added Breeze. "There are a lot of ‘me-too’ products on the market, and everyone expects that whatever they buy will work pretty well. So we’re trying to look at what else we can do, such as the pest forecasting group." ECI, OneSource Make Acquisitions CALABASAS, Calif., and TAMPA, Fla. - Environmental Care made its first move into the Midwest with the acquisition of Fullbach Services, Louisville, Ky., while OneSource Landscape expanded its presence in Florida’s landscape installation market by acquiring Austin Outdoor Services, Palm Coast, Fla. ECI’s acquisition of Fullback, which had 2000 revenue of $10 million, gives it five new Midwest locations: Chicago, Ill.; Detroit, Mich.; St. Louis, Mo.; Lexington, Ky.; and Louisville. Ted Ennenbach, owner of Fullbach, is now the vice president and regional manager of ECI’s new Midwest organization. Burt Sperber, president of ECI’s parent company, Environmental Industries, said the company has made more acquisitions in the past 12 months than during any other 12-month period in its history, but he emphasized that the company continues to only pursue strategic acquisitions. "We are not interested in consolidating the industry solely for the purpose of getting bigger," he stressed. "And getting into the Midwest was not necessarily a strategic goal of ours." ECI’s most recent acquisitions included STM in Oakton, Va., and North Haven Gardens in Dallas, Texas. In addition to picking up the $8-million Austin Outdoors, which will now operate as OneSource Landscape Construction and Installation, OneSource president Rich Kissane said OneSource gained some key personnel. "The company has a young and experienced management team," he noted. "Their addition expands our service offerings of landscape construction and installation services." GreenZebras, Green2go To Unite FORT LAUDERDALE, Fla. - GreenZebras and Green2go (www.green2go.com) announced plans that would unite two Internet companies specializing in different areas of the green industry. "For years, there have been enormous inefficiencies in the wholesale green industry," according to Michael Apfel, co-founder of Green2go. "Together with GreenZebras, we are the first and only green industry Web site to deliver both a comprehensive selection of live and hard goods together with national shipping services." Green2go is in the process of expanding its service reach on a region-by-region basis, having started in the Southeast last year. It expects to be in most U.S. markets by the end of this year. GreenZebras offers contractors Internet-based applications designed to help them manage their businesses and make product purchasing more efficient. "We help contractors improve the two largest cost areas in running their businesses - labor productivity and purchasing," explained Ted Gramer, formerly president of GreenZebras (www.greenzebras.com) and now chief operating officer of Green2go. |
IN THE NEWS
ServiceMaster Names New CEO
DOWNERS GROVE, Ill. - ServiceMaster, the parent company of TruGreen-ChemLawn and TruGreen LandCare, named Jonathan Ward its new chief executive officer.
Ward, replaces the retiring C. William Pollard, is confident ServiceMaster is well-positioned for success, even after TruGreen-ChemLawn’s annual growth dropped from 13 to 5 percent last year and the purchase of LandCare USA drained the company’s growth over the last 12 months due to poor expense management, according to one financial analyst.
"This is not a business that needs to be turned around and flipped on its ear," Ward noted in a conference call with investors. Ward also discussed the potential for creating an "umbrella brand" for the company’s various service offerings in order to simplify matters for consumers.
But the lawn care and landscape operation’s lagging performance will be one of Ward’s first areas of business. The company disclosed that its year 2000 operating revenue of $1.563 million was 12 percent higher than the previous year, but profitability fell 25 percent in that same time from more than $228 million to $172 million.
IN THE NEWS
Blower Bans Heat Up Texas And California
HOUSTON, Texas, and PALO ALTO, Calif. - City officials implemented a new leaf blower ordinance after months of negotiations with residents, the California Landscape Contractors Association and other industry groups.
As of Jan. 1, all commercial gardeners must be certified by the Palo Alto Police Department to operate any type of leaf blower. In a letter to Palo Alto residents, Assistant Police Chief Lynne Johnson explained that the local police staff and representatives of the Bay Area Gardeners’ Association have been training, testing and certifying commercial gardeners during the last several months.
"Gardeners have been told that they can expect citations to be issued if they are found in violation of the ordinance," Johnson said.
Blowers may be used in the city from 9 a.m. to 5 p.m., Monday through Friday and from 10 a.m. to 4 p.m. on Saturday. The use of any type of leaf blower by anyone, including residents, is prohibited Sundays and holidays. The only exception in the ordinance for these hours of operation is for city crews who are cleaning the municipal golf courses, city, parking lots and business districts.
Additionally, professionals or homeowners cannot use leaf blowers that are not rated at 65 dBA. Blowers must have certificates indicating their dBA rating (A list of leaf blowers that will meet this standard can be found here: Palo Alto Regulates Blowers.). Police staff will not be taking sound meter readings, but they will be checking users’ equipment to determine whether blowers being used are approved.
In other news, the Texas National Resource Conservation Commission (TNRCC) proposed banning the morning use of all outdoor power equipment in the Houston metropolitan area.
The Outdoor Power Equipment Institute argued against the ban, so the final regulation contains an exemption for contractors who submit an acceptable emission reduction plan. Homeowners and non-commercial operators of gasoline-powered outdoor equipment are exempt from the ban.
The new law will not take effect until 2005 as details relating to the type of emission reduction plans that commercial operators must submit are finalized.
For more about the Texas law click here: Texas Issues Final Modified Rule On Outdoor Power Equipment
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