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WASHINGTON, D.C. – On June 23, the American Nursery & Landscape Association (ANLA) had a timely opportunity to provide valuable insight to the U.S. Senate as it considered comprehensive energy legislation. At a Senate-targeted press conference, ANLA Member Kevin Warhurst of Merrifield Garden Center in Virginia spoke on the major concerns of the green industry regarding increasing energy costs facing garden centers, landscape companies, greenhouse and nursery growers from coast to coast.
Warhurst commented on the impact of spiraling energy costs on green industry businesses – on everything from heating greenhouses using natural gas, to transportation costs and shipping surcharges for plants and related supplies, right down to the costs of production of plastic pots and trunk liners. An additional, though less obvious, concern is the reduction in consumers’ discretionary income for home and garden improvements when it costs more and more to fill up their cars or heat their homes.
Natural gas costs were a central theme of the press conference, and Warhurst shared the experience of Bordines, a prominent Midwestern retailer-grower that heats more than 1 million square feet of greenhouse space. With the cost of natural gas going up more than 22 percent in just a year, and unable to increase prices accordingly, Bordines has scrambled to cut usage through conservation, such as installing heat retention curtains. Looking to 2006, if nothing is done, the costs are expected to rise another 20 percent, leaving growers with little choice but to cut back production or eliminate some crops altogether.
“The rising cost of energy is easily among the most significant issues facing green industry businesses today” said Buzz Bertolero, of San Francisco Bay area retailer Navlet’s Garden Centers, and president-elect of ANLA. “It is critical that independent retailers and landscape businesses – which sometimes don’t seem fully aware of how things that happen in Washington affect them – have a voice promoting common sense solutions to real world problems.”
| THE IMPACT OF INCREASED FUEL COSTS ON OUR BUSINESSES |
Good morning. My name is Kevin Warhurst, and I am here today representing our family-owned business, Merrifield Garden Center. Our business is a diversified venture that includes a full service garden center, nursery and landscape design/build firm located in northern Virginia. Our industry is vibrant and growing, with an annual economic output of nearly $80 billion per year when you combine production, retail sales, and related services. Merrifield Garden Center serves homeowners and commercial contractors throughout the region, as well as our landscape design and installation clients. We have been in business for over 34 years, and with two nursery locations and a staff of more than 600 people, we have grown to become one of the larger independent nurseries in the country. We are proud members of the American Nursery and Landscape Association, as well as the Virginia and Northern Virginia Nursery and Landscape Associations. The increase in fuel costs, particularly that of natural gas, have affected our business and industry in several important ways. Greenhouse space must be heated to ensure a continuous ready supply of plant material for use in the United States. In the past year, the cost of natural gas has gone up more that 22 percent and, if nothing is done, 2006 will see our costs rise another 20 percent or more. Since consumers cannot bear a 22% rise in the cost of our products, these increases in energy cost must be absorbed in other ways. Unfortunately, in many cases that also mean the elimination of good paying jobs. The increased cost of natural gas and crude oil has meant an increase in other petroleum-based products that ultimately affects businesses in our industry, but countless other industries as well. One example of this is resin, a byproduct that is used in the manufacture of plastics. At Merrifield, this affects the cost of everything from the millions of plastic containers that we use to grow plants, to the polyethylene covering on some of the greenhouses I just spoke about, to the packaging that is used for many of the products that are sold on our shelves. Just this week we will need to place another order for plastic trunk liners, which are used in loading customer vehicles to keep them neat and clean from the gardening supplies they purchase. Despite changes that we have made to lessen the cost on these products, our costs have nearly tripled since 2002. Perhaps the most obvious impact of higher energy costs is the cost of getting products shipped from our suppliers to our stores, and then delivering and installing those products for our customers on the other end. Merrifield and countless others in our industry stock a large and diverse inventory, including thousands of varieties of plants, trees, annuals, perennials, and houseplants, which are shipped to us from various points across the country. With the dramatic increase that we have seen in fuel costs for the last several years, most suppliers and independent trucking companies have either raised their delivery charges, or instituted a “fuel surcharge” on top of the standard freight charges that we already pay. Last year alone, Merrifield had a net increase of $62,000 in shipping costs above the year before. The previous year was even more dramatic, with a net increase of $259,000 in increased shipping costs - an amazing 24% increase above Fiscal Year 2002/03. On the other end, the significant rise in fuel costs has obviously meant spending more money gassing up our own fleet of vehicles to deliver products to our customers. We have a fleet of more than 175 trucks, which range from pickups, one-tons and dump trucks to landscape trucks, tree spades and concrete trucks, that we use everyday in our operation. In fiscal year 04 / 05, the adjusted price we paid for fuel alone for our fleet increased an additional $104,000, which represents a net increase of 20% over the year before. The previous year also saw a 20% increase over the year before with $92,000 in higher fuel costs. Rising energy costs hurt the American economy. We all know from our own experiences the incredible prices we have had to pay to fill up the family car. So from a consumer standpoint, this means less discretionary disposable income for all of us, which could otherwise be spent on items such as beautiful plants and flowers. And items such as these not only bring people joy and enhance the beauty of their homes, but also increase property values, and help the environment. I would like, for a moment, to highlight a small but very important provision in the energy bill currently under consideration in the Senate. It is the extension of daylight saving time. It has been reported that the current bill extends daylight saving time one month earlier in the spring, and one month later in the fall. Not only will this facilitate some energy savings; as a garden retailer, the spring extension will generate additional evening retail sales at the front end of the season. Frankly, we would love to see daylight saving time start even earlier in March, and respectfully request Chairman Domenici and your colleagues to consider whether this would be possible. In closing, it is my hope that the Congress will work in a bipartisan effort to bring real-world solutions to problem of rising energy costs, and enact legislation that will bring relief to American business, and American families. Thank you. |