During a presentation today (click here to view) at the 2008 Tennessee Nursery and Landscape Association Winter Education conference, I emphasized what I feel is the key business strategy that growers, landscape service firms, and retailers must embrace in order to survive the maturity stage of the green industry life cycle – differentiation – that is, specializing by product, services offered, customer type, or geographic area. Of course, in setting the stage for this differentiation discussion, current industry trends had to be reviewed to prove the initial supposition that the green industry is indeed maturing. Trends in grower-level nursery and greenhouse sales, DIY lawn and garden activities, and the recent growth in lawn & landscape services were presented, with several anecdotal observations including the industry’s historical recession resistance, correlation to housing starts, and factors affecting the cost-price squeeze being felt by all industry participants. No sooner had I packed away my laptop away and turned my blackberry back on did I receive an email from my esteemed colleague, Dr. Marvin Miller of Ball Horticulture, sharing a recent pontificating regarding the very concept of recession resistance that I had just discussed. Marvin writes:
“You might hear comments suggesting our industry has always been recession proof, but that is a piece of “ancient history.” Historically, when the industry was dominated by cut flowers and many of these were used for funerals and other traditional occasions, the industry may have been somewhat resilient even in times of economic stress. Over the last 30 years, our society’s use of funeral flowers has dramatically declined, but more importantly, the majority of purchases of our industry’s products are now focused in less tradition-bound occasions. Indeed, during the late-1980s recession, our industry was affected, as hotel after hotel removed foliage plants from their atria and lobbies in cost-cutting initiatives; it was the weekly maintenance of these plants that was more of concern than the cost of the plants per se. Similarly, supermarket sales of floricultural products slowed during that recession, as consumers found a way to cut back on their grocery bills by reducing self-consumption.
Today, the bedding/garden category so dominates domestic production and accounts for a major share of consumption. If a recession does come, we may be writing a different story altogether on its effect on industry sales. Some would argue that we will be affected as consumers find another way to save money. Others might argue that consumers will save on vacations and other travel costs and instead spend that time at home, perhaps, spending even more effort on their own garden. I know if I owned a garden center right now, I would certainly be preparing POP materials that expressed the sentiment that one should “plant a little vacation paradise in your own backyard.” Certainly, one could argue that a good share of our industry’s sales go to folks that will feel proportionately less pain during a recession; in this scenario, independent garden centers may fare much better than chain stores focusing on consumers with more modest incomes. Whatever the outcome, the next few months will be interesting.”
I couldn’t agree more Marvin. In a follow-up phone conversation later in the day, we agreed that this phenomenon of recession resistance can be validated quite readily anecdotally, but proving it with actual data is a little trickier. Personally, I like to point to the most recent recessionary period (2001) for comparative purposes due to its similarity to the current economic conditions in which we find ourselves (see earlier posts). In the 2001-02 period, grower-level sales continued to expand, as well as DIY lawn & garden activities and landscape services demanded. It wasn’t until after the recession was over that DIY lawn & garden retail sales started declining. This was perhaps more a result of Boomers maturing and demanding more DSIFM (do-some-of-it-for-me) services than any post-recessionary effects. A perfect proof of our theorem? Maybe. I think I’ll reserve that conclusion until at least the 1st quarter of 2009!