Supply chain and selling

The state of plant growers and tips for selling your company were some of the education sessions at Cultivate’22.

Editors from Greenhouse Management magazine, Lawn & Landscape’s sister publication, attended Cultivate’22 in Columbus, Ohio, in mid-July. Here is some coverage from the event, which sheds some light on the plant supply chain.
Greenhouse Management staff photo

Industry overview

The Short North Ballroom in Columbus, Ohio at Cultivate’22 was packed to capacity for the AmericanHort State of the Industry Address, with attendees standing along the walls to hear the Monday morning keynote speech. Ken Fisher, president and CEO of AmericanHort, led off the morning’s presentation with an overview of the association’s vision, mission and strategic goals. From there, he examined consumer spending — a key indicator of economic health. In fact, it represents 70% of our economic output, he said.

Between the stimulus payments and more Americans continuing to get paid to work from home, we have “more money chasing the same amount of goods,” Fisher said. The question is, how long will Americans continue burning through their $2.7 trillion in personal savings?

Legislative update

AmericanHort’s Executive Vice President of Advocacy, Research and Industry Relations, Craig Regelbrugge, began his part of the address by reviewing the association’s legislative priorities: Securing and development of the workforce; plant health; solutions through research; and protecting profitability for its members.

Green industry employers that rely on H-2A should be aware that new wage rules may be coming, Regelbrugge said. Regarding H-2B, AmericanHort staff is lobbying for changes like the Returning Worker Exemption Act. There was some good news for the year, like the fact that the Biden administration released the largest amount of supplemental H-2B visas ever.

Regelbrugge discussed the 2022 midterm elections as well. He said that there is deep dissatisfaction among Americans with the leadership of both major political parties. This has set up an environment that is ripe for major change, he said. He does not expect any legislation on the topic of immigration reform to happen before the November election.

Citing research from FiveThirtyEight, he said that Republicans are projected to take control of the House of Representatives in 87 of 100 simulated projections. The Senate races are more of a toss-up, with only 54 of 100 simulations going in the Republicans favor. There are also a few major wildcards that could affect the election outcomes: the ongoing Jan. 6 hearings, the Dobbs decision and its consequences and global conflict like Russia’s invasion of Ukraine.

Regelbrugge urged attendees not to give up, even when it appears our elected officials are making no progress toward stated goals.

“No matter how frustrating our political system may be, opting out does not help,” he said. “I happen to be a fervent believer in the notion that democracy is precious, and democracy is not to be taken for granted. It requires care, like the plants we cultivate in our industry.”

Economic update

Dr. Charlie Hall, AmericanHort’s chief economist and the Ellison Chair of Texas A&M University’s Department of Horticultural Sciences, said that 2021 was mixed performance within a great year.

Growers reported sales up 20% across the board. Despite that, their profitability ranged from barely profitable to very profitable. Still, he asked growers to consider where they were a few years ago. When comparing gross sales year-to-date to 2019, 63% of growers are up more than 25%.

Part of this is due to input cost increases. Hall showed aggregate input costs increased 10.1% in 2021, 8% year-to-date in 2022, and he is forecasting another 3.6% increase in 2023.

He hopes the industry can continue raising prices to compensate. However, in his research, he found that only 40% of green industry companies are passing 100% of their input cost increases on to their customers — which essentially means they are sharing their margins with their customers.

“That’s magnanimous of you,” he said, “but you won’t be in business for long.”

He also discussed a compensation study with data from the Bureau of Labor Statistics. In 2022, 21% of businesses said they increased wages more than 10%, 58% of businesses reported increasing wages between 6-10%, and 21% said they increased wages 1-5%. If green industry businesses want to attract or keep employees, their wages must keep up with the cost of living and inflation, Hall said.

Dr. Hall pointed to an Axiom marketing survey showing that 19% of respondents plan to add new shrubs or trees to their landscape, a number that compared favorably to other home improvement projects listed as choices.

And finally, although nearly every indicator he showed was positive, Dr. Hall said he believes there is a 50% chance of a recession occurring between now and Cultivate’23. A correction is coming, he said, so what should green industry businesses do? Establish your value proposition, don’t expect massive sales and overleverage your business, or you may be left holding excess inventory.

September 2022
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