Last year, Greenhouse Management unveiled an exclusive State of the Industry report looking at where the market was heading going into 2012, and this year we present an even larger, more comprehensive State of the Industry report for you. While we kept many of the questions we used last year, we also added more questions that would help us get a true picture of the market going forward, as we begin to have multiple years’ worth of data to compare results with. Here’s an overview of the results from this year’s survey and what to look for heading into 2013 and beyond.
The big picture
In just one year, players in the greenhouse industry have gone from about one-half having no confidence at all that the market will improve, to just slightly higher than one-third sharing that sentiment. It’s proof-positive that things never stay the same, and sometimes they even get better.
The biggest take-away from this year’s State of the Industry is that confidence is up. Last year, most respondents said that sales had been flat over the last three years, but this year they reported that sales were up 10 to 20 percent.
While sales have increased, profits are still flat or down for the majority of operations. Only 32.8 of respondents said that profits were up over the past three years.
We asked owners what they anticipated happening with both their sales and profits next year, and in both cases, they predicted the numbers would increase, so 2013 should be a bright year across the board.
While confidence is up, so are expenses, according to 82.8 percent of our survey responders. On top of that, 75 percent also overwhelmingly agreed that expenses would increase next year as well. In fact, of 10 different options, increased expenses is the No. 1 response when asked what the single greatest problem facing the industry next year is. It received 18.7 percent of the responses, narrowly beating out good ol’ weather, which came in at 15.7 percent, and finding new customers, which got 12.7 percent of the votes.
There were also some shifts in growers’ plans for future plant production. Namely, they plan to produce more holiday crops and fewer annuals and perennials. The other surprise was that more growers plan to produce fewer vegetable starter plants, as compared to last year, which seems to fly in the face of the popular vegetable trend. We thought that perhaps they’re simply planning to produce more finished produce, but those numbers didn’t indicate an increase.
Another encouraging factor heading into 2013 is the case for pre-bookings, an area where growers have struggled in recent years as garden centers have shifted to ordering throughout the season instead of committing to crops in advance. While half of growers said they don’t do pre-bookings, 23.9 percent said that their pre-bookings for this past year had increased over 2011, and nearly one-third said they anticipate that they’ll continue to increase next year.
Labor is always an issue that generates ongoing discussion for growers, and 2012 seemed to be an interesting year on this front. In the last year, total number of employees has decreased for 23 percent of growers, so industry players are needing to do more with less human resources. It’s probably frustrating for owners and employees alike but the positive outlook is that heading into 2013, 17.6 percent of owners are planning to increase their total number of employees, and 72.4 percent expect their employee count to stay the same.
Attitudes toward what changes to make to the business seemed to have shifted slightly in the past year as well. Last year, more than half of respondents said that offering a better product mix was the best area of focus to yield the best possible gain in retaining or improving profit margins. Last year 25.7 also said “having new product introductions” was the way to go. But this year, while 38.9 percent still said offering a better product mix was the solution, it represents a significant decline. On the other side, those saying “price increases” and “better packaging and merchandising” increased slightly. Economists have been advocating that greenhouses need to raise their prices, and many haven’t for fear of losing customers, but our research indicates that this mindset might be starting to shift and could be an interesting facet of the industry to watch in upcoming years.
New products can always be nerve-racking to try because of the unknown factor involved, but doing your research helps minimize the risk. We asked the industry what they use when evaluating new products, and the trusted sources shifted a bit from 2011 to 2012. Last year, growers’ own field trials was the No. 1 source for evaluating new products, but this year, they’re trusting suppliers more, as 54.5 percent said they depend on supplier recommendations for trying new products, making it the No.1 response. Their own field trials was still at the top of the list in the No. 2 spot, followed by trade publication ads, which made a giant leap from the last-place response last year to No. 3 this year.
The industry has seen a lot of shake-out in light of the economic downturn, but experts have repeated that it hasn’t come to an end. They said that as the industry adapts to new market conditions and changing consumer patterns, we could see more shake-up and competition. When asked what sets you apart from your closest competitor, last year the No. 1 response was quality of products, and while that was still the top vote-getter this year, some other responses saw slight increases that will be important to watch in upcoming years — those saying product mix and added services went up just a tad, and those saying price went down a tad. This could indicate that greenhouse operators are starting to look at other business elements to compete on beyond simply having the best products in their respective categories.
Research by Greenhouse Management Magazine