Thursday, September 27, 2018

Dark at the end of the tunnel

It has been a great couple years in the nursery business.  Business has been brisk.  But there are storm clouds and to whistle them away means one must have blinders on or believe in flying unicorns. 

Here's what has happened.  Pent up construction has slowed.  Money is still flowing but there is a lull in new starts for large projects.  Money for large form federal projects is no longer being allocated.

At the same time in response to the prior shortages in the market, there is a surplus of nursery stock finishing right now.  Product ready to dig but not yet finding a buyer.  There are still spot voids, right now in the 3" brackets but things grow and soon that hole will be filled as well.

Growers of liners are singing a happy tune that they are sold out.  It's a lot like the car dealer who lets it slip to his potential customer that they are overstocked on used cars and have to move them.  Never heard that before have you?

So now we enter a new phase in the supply demand cycle.  It's expected, it is normal, knowing it and responding to it properly is what management is all about.  Some are full tilt on and hoping things will hold up.  They could be right but probably are not.  I was asked in 2016 how long we had to enjoy these markets.  I said that we had two maybe three left.  It's still true.  It's a 7 year cycle peak to peak?  So we are on the back of the peak swing.

There will be a sag in the economy.  Probably about the middle of 2020.  There are a lot of factors that lend to this reality.  I won't bore you with all of them here, but globally there are not just storm clouds but rain.

This won't last forever. When it gets dark, then it's time to put in SMALL liners and let them grow.  Stop trying to line out for cash flow.  It only works in a high sales price market.

I'm not hanging crepe, I'm just letting you know that there is going to be a lull and when it comes it's not the end of the world.  That's not been scheduled for a while yet. 
 
 

Wednesday, September 26, 2018

The value of a penny

I stole this, but it was so good I needed to share.

From Matthew Chappell

 My grandfather never passed a penny laying on the ground that he didn't pick up. I'd like to say I didn't either, but I've been known to when I'm in a hurry. I was recently conducting a Cooperative Extension program and had a group of nursery folks all standing in a cold frame with black landscape fabric covering the floor. I noticed a shiny penny sitting right there in plain view. Do you think anyone picked up the penny? Nope … until I walked back in and did so.

But first, we exited the cold frame and I stopped them and asked, "Who saw the penny on the floor?" Of 16 participants, 12 said they had. I asked why didn't they pick it up? I received two responses: "It's only a penny" and "I didn't want to interrupt you."

Both of these, while interesting and valid, were also quite disturbing. First, a penny is equal to a 1% profit laying right there on the floor. If your contracting firm or nursery has a gross profit of $100,000, that penny on the floor is now equal to $1,000. Is it still unimportant? I certainly hope not.

Second, sometimes a business needs to disturb the peace to make that extra 1% profit. No business has ever grown market share without disturbing (negatively) a competitor. If someone wants to leave that 1% on the floor, you better believe someone is going to see the value in it and bend over, regardless of who's watching. I'd hope that person is you. At some point in the life of a business, it will separate failure and success. 


 

Wednesday, March 15, 2017

Spring has a Way.. and what a way it has been

Two weeks ago everyone was jumping the gun.  It seemed like there would be an early and productive spring.  Then the hammer down came.  It was 16 degrees here this morning.  In St Louis it has been below 25 for 48 hours.  This means a lot of flowers aren't going to be there.  Forsythia is gone.  Some pears.  Some crabs. 

It's going to be a less showy spring.

And some nurseries who jumped the gun were burned.  This cold did no one any good. 

It's a wild and woolly spring..  and it looks like shortage will be the name of the game.

OH WELL..

If work and risk are four letter words to you... this isn't the business to be in. 
 
 

Tuesday, October 25, 2016

What I have seen in the last few weeks on the Farms of America

I have been traveling a great deal on assignment.  That means that I get to tour nurseries everywhere.  I also get an inside look at production.

Here's a truth some may not want to hear.

There are a LOT of young trees in the ground right now.  I saw whips to 1 1/2" everywhere.  The crop looks good.  There is land being put into production that has been out for the last 5 years.  Old overgrown trees are being removed by bulldozer.  The land is being reclaimed and new stock is going in.

In Tennessee's McMinnville area which had been pronounced dead, is very much alive.  And expanding.

And the quality is up a great deal.  All this means that pressure on supply that kept product in shortage is about to change.  We are about to see that old bugaboo surplus hit the fan again.  Not for a year or two but that train is already on the track and moving.

So, do your best, keep up the narrative but be ready to move with the market as it moves.  It will.

Bob Dylan just won the Nobel Price for Literature.  Well deserved.  I"m a fan.  But he has a comment on the nursery stock shortage... "The times they are a changin"
 
 

Saturday, October 1, 2016

It's been a Year like we haven't had for a while

 Lots of product being moved.  But the pipeline is filling up.  I see a train a-coming, coming round the bend.  There are going to be more sales and consolidations. 

Recently I was involved in the Marketing and Sale of the Former Anna Nursery to Schowpe
Brothers Tree Farms.  It was a 6 month project.  From time to time I am hired as a nursery marketing arm.


I think the next several months will see a shift.  The election in a bit more than a month will tell a tale.  I won't tell you who to vote for, but I want to see America Great.... again.

So..

Keep your eyes open and your ears clear.  We are about to go thru a transition.

 

Monday, April 18, 2016

Race to the TOP always leaves people at the BOTTOM

It's amusing and sad at the same time to watch the circus and have to take part in the center ring when things are like they are. 

Product is short, mostly, people are planting too much too fast, Prices are goofy. 

What makes it worse is the tendency to think this will go on forever.  Or the occasional sale to an entity that has no common sense in buying indicates the market.

Just because one guy bought 100 trees 2" at $250 doesn't mean everyone will.  So the insanity ensues.

Waiting right now is the best strategy.  Wait until things get normalized.  Yes the day of the $95 2" Red Maple is gone.. but so is the fantasy of the $250 2".

I have people ask me how long before we enter into the next inevitable cycle down in price up in supply.  I have been saying 3-5 years with emphasis on the 3.

So enjoy but don't extrapolate this to be a permanent condition.  Save some money and in 5 years at the bottom, buy a bunch of smaller liners and plant like crazy.  You'll be ready next time.

OH, and how do I know all this?  First we do this all the time in the nursery trade.  Second the economy isn't that robust. IF we elect a conservative to the White House and keep the House and Senate there will be a restart and it will be painful.  That will put a clamp on the economy for a little while.. THEN if we are smart.. it will be katie bar the door for the next move.

Cue the clown theme

 
 

Tuesday, October 13, 2015

Why Raising Prices too much in the Nursery Business in GOOD TIMES will create BAD TIMES later

Drunken sailor alert.

When business is poor in the nursery trade, many nurseries get too aggressive reducing prices and therefore leave money on the table.  I warn of that.  This other than a full liquidation.  Pricing lower doesn't increase demand, much.  People buy what they need and if they need it they will pay a fair price.  You do not create significant incremental demand with a lower price. 

On the other hand, pricing too HIGH in good times has an effect that many don't grasp.  Nurseries have good customers, people who have bought from them for years and who use them as core suppliers.  When a nursery gets too far out of the center of the price spectrum as many do in these good days the net result is they become to existing customers an unreliable supplier.  I am not talking about brand new customers, yes you can gouge them a few times but at some point they will walk away.

What happens too often in these markets is long time customers drift away, cease to call, find other suppliers.  Not always cheaper either.  Sometimes these suppliers are just more consistent.  Predictable.  Quality the same, but without the drama.

Sure you are selling everything you can dig or grow, the question is, when the market turns as it always will, can you get those burned over customers back?  Will your desire to capture an additional ten or twenty dollars per tree from your existing customer base require you to spend much more money you won't have then to try to woo them back later? 

It's a false economy (unless you are intent at going out of business) to raise prices too quickly or too radically.  There is a perception that the marketplace has when a radical increase in price is made, it signals desperation or incompetence.  We see that too much and it's causing upheaval.

So where is the right price point, if you were doing your job well up till now you will be slightly below the averaged up price of your high priced competitors and slightly above the low priced ones.  And you will have a "Deal" for the volume buyer.  A too high price Can cause you to MISS business and burn customers you cultivated for a long time.  Right pricing is an art.. learn it.  It starts with throwing out the high price outliers and the bargain basement sellers.  Then start analyzing the middles.  Find the price that will work.

The longest operating nurseries profitable in the USA are that way because they have been consistent and at the right price for a long time. They didn't have to liquidate when things got tough, they didn't have to fire sale, they simply kept their price structure within the range of sanity for decades.  Always just on one margin or the other.  Never a price leader up or down.  I won't name them here, but they are the ones who survived and prospered in the hard times and cultivate new business in the good times that will stay with them in the days to come.