College Station, Texas
April 12, 2006
The multi-billion-dollar U.S.
floriculture industry is maturing, and suppliers will have to be
creative to retain a youthful growth pattern, according to Dr.
Charles Hall, University of Tennessee Extension agricultural
economist.
"The crystal ball may be somewhat fuzzy in terms of the growth
and nature of consumer demand, but there is little doubt that
innovativeness will continue to be a requisite skill in ensuring
the survivability of profitability of floriculture firms," Hall
said.
Hall presented "The U.S. Floriculture Industry: Structural
Changes, Marketing Practices, and Economic Impacts" Tuesday
for the inaugural International Floriculture Distinguished
Lecture series at Texas A&M
University.
Floriculture, often referred to as the "Green Industry,"
includes production, distribution and services associated with
plants, landscaping, supplies and equipment, according to Hall.
In the United States, he said, the industry accounts for almost
2 million jobs and an economic impact of almost $148 billion a
year, making it one of the fastest-growing sectors in
agriculture.
"Environmental horticulture often experiences growth and
expansion even during recessionary periods," Hall said. "The
nursery and greenhouse sector has experienced considerable
growth in the last two decades. The outlook for the Green
Industry is promising, yet there are several challenges that
will increase competitive pressures."
Hall noted that both growers and retailers have consolidated in
recent years. That has created marketing opportunities for
growers and new retail services for consumers, he said.
One mass marketing retailer, for example, provides a
computerized gardening and landscaping course - written by a
university horticulture department - to help their employees
provide better information to customers, Hall said.
"These trained salespeople, in turn, offer workshops on such
topics as weed control and garden planting much like the store's
clinics on laying tile or hanging wall paper," he noted.
Another large retailer is working with selected breeders to
devise exclusive plant varieties for its own premium plant
brand, he said.
But many independent garden centers, nurseries and smaller
landscape companies - supplied by small- to medium-sized growers
- still thrive, he added.
"Proximity and premium product quality are more important to
these smaller-sized buyers than low price because their targeted
end consumer is more interested in quality and the breadth of
retail selection," Hall explained. "Keeping plants alive and
healthy is a challenge for many consumers, and smaller retail
operations typically have more knowledgeable staff than mass
retailers to assist customers with expert plant care advice."
He said new gardeners are attracted to the smaller retailers
because of the specialized service available and unique
selections of plants.
"Some garden centers are adding cafes, coffee bars, meeting
spaces or other amenities. Others offer extensive how-to
workshops or provide free landscaping advice," he said. "And
should a plant have problems, in-house 'experts' will assist in
diagnosing what went wrong."
Hall said the long-term outlook for the industry - whether the
mass marketing or small retailers will continue to coexist - is
uncertain.
"It's imperative that we continue to recognize and closely
monitor consumer expectations, tastes and preferences," he said.
"Keeping the consumer intrigued and sufficiently motivated is
important."
Still, a trend toward maturity - moving from rapid growth to
significantly slower growth - is evident in the floriculture
industry, Hall said, citing:
- Slowing growth in demand
leading to stiff competition for market share.
- Buyers becoming more
sophisticated, often driving a harder bargain or requiring
additional services in order to repeat purchases.
- Competition producing a
greater emphasis on cost and service.
- Growers experiencing a
topping-out problem in adding new facilities.
- Product innovation and new
end-user applications becoming harder to come by.
- Increasing in
international competition.
- Industry profitability
being influenced by tighter margins.
- Stiffening competition
leading to mergers and acquisitions among former
competitors, driving out the weakest firms.
"Perhaps the biggest strategic
mistake a company can make as the floricultural industry matures
is steering a middle course," Hall said. "Such strategic
compromises typically result in ... an average image with buyers
and little chance of springing into the leading ranks of the
industry."
by Kathleen Phillips |