Lessons From 2008 Can Help Plan for the Future
CNGA’s NewsLeaf reached out to key people in five greenhouse or nursery businesses to talk about what happened during the 2008 recession, what was learned and how they may respond if there is another recession.
Respondents include (alphabetically): Stan Brown and Steve Brown, Alameda Wholesale Nursery, Inc., Englewood; Al Gerace, CEO, Welby Gardens, Arvada; Jan and Beth Gulley, Gulley Greenhouse, Fort Collins; Terry Shaw and Sharon Harding-Shaw, Harding Nursery, Colorado Springs; Dan Wise, CCNP, Fort Collins Wholesale Nursery.
Stan Brown and Steve Brown, Alameda Wholesale Nursery
The company has been in business since 1945 and has been through many economic ups and downs. We learned to pay attention to the economy early in the recession and be cautious about replenishing inventory. Do we really need to buy those plants? While we realize you can’t sell from an empty cart, taking care of excess inventory can be expensive to maintain good quality.
Another lesson my dad [Stan’s dad] taught us is you can withstand a pretty bad recession if you have your trucks and equipment paid for. His theory was “Don’t buy it until you can pay cash for it.” That is a rule we still follow 77 years later. It meant that we got by with used trucks and tractors for years. A new truck is shiny and cool, but it is no fun to see it get repossessed. During times of recession our customers sometimes bought smaller trees or shrubs and generally the orders were smaller. We didn’t resort to any mass layoffs, but we didn’t replace staff members who left voluntarily.
Dan Wise, CCNP, Fort Collins Wholesale Nursery
Our market is split between landscape contractors, and nurseries and garden centers. The groups were both affected by the economic downturn, but in different ways.
For nurseries and garden centers, we have a pre-order program. Orders are placed and confirmed in the fall before spring shipment, allowing buyers to lock in orders ahead of spring. We saw a general decline in orders. Individual companies varied in their reaction/preparation for the downturn in the economy. We saw everything from complete cancellations or non-ordering, to status quo level ordering and everything in between. Since nursery buyers have to speculate on their future needs, we saw a variety of reactions to what each business anticipated their needs would be. For landscape contractors purchasing is different in that almost all purchase plants specifically for projects they will be planting, and there is limited speculative buying. Each contractor has niches, and depending on whether they were more focused on residential versus commercial, their exposure to the downturn varied. Since the housing market came to a near complete stop, contractors that were in the residential landscaping market saw an almost complete collapse in demand, and therefore had no need to buy plants. Contractors with commercial projects still in progress didn’t stop as abruptly, but the pipeline of new commercial work also slowed to a near halt and eventually work for those contractors declined immensely.
Price competition became almost insane. Growers were trying to move product at any price just to “keep the lights on,” and those heavily invested in live, growing inventory were in a precarious position. Many of those operations were not able to survive that economic downturn and that is a main reason we have general plant shortages these past few years.
We were fortunate to retain all our permanent staff. We did hire fewer seasonal employees during that time. For most nursery and greenhouse businesses, the two biggest expenses are always labor and plant purchases. We reduced our spending on plant material where we could, as well as paid particular attention to general frugality at all levels in the business. During that time period we were also hit by a very damaging hail storm, and we received payment for a sizable crop insurance claim that was very helpful in getting our company through the worst of that recession. The shrinking of the nursery industry nationwide after the 2008 recession, while painful for many operators, should leave those remaining in a more stable situation. I would anticipate that due to the smaller number of nursery operations compared to before, those remaining stand a better chance of weathering future economic downturns if they are financially sound.
Some things we in the nursery and greenhouse business can all keep in mind when strategizing for difficult economic times are:
- Diversity, in both in your customer base and your product offerings, is a way to spread your resources in different directions. When one segment might be more negatively affected by a downturn, others can experience a surge in demand. For example, edible plants tend to become more in demand during difficult economic times because people want to grow their own food.
- Always take great care of your existing customers. Those partnerships often come with loyalty that can help your business persevere when times are tight.
Focus on things you do best and that are unique to you. Also beware of poor performing plants or product groups – marginal products can be a real drain of resources.
Jan and Beth Gulley, Gulley Greenhouse
During the last recession, suppliers did not have as much ‘spec’ availability – we saw a shift in the supply chain toward more custom/lead-time orders placed with us and also noticed that suppliers we purchased from were the same. Everyone expected an order well ahead of time.
“COVID produced a whole new generation of gardener.” – Jan and Beth Gulley
Spring was still a big season, but sales slackened off during the shoulder season and were not as large as they were before and during COVID. Customers tended to purchase smaller-sized items and not the expensive large-sized plants. Sales were also well-attended.
Our staff became very flexible – no one was here to perform just one job. The most versatile employees that could learn multiple tasks/jobs became the most valuable. That allowed us to downsize a bit and reduce costs because one person could cover multiple areas.
COVID produced a whole new generation of gardener. We believe that the ‘minimum’ consumer threshold for spending is actually higher than it was in the past. People have gotten used to staying at home. If they are not spending on travel, they will still invest a bit in their landscape – more than 2008 levels! So, although people may not be buying as much, the entire green industry’s reach is still farther than it was in the past.
If there’s another recession, we will be more conservative when planning our crops and produce to order so as to not have an excess of availability. We are not planning any large renovations or expansions until we know what the next few years look like.
Al Gerace, Welby Gardens
During 2008 and the years following growth was slow. Even though many basic costs were increasing, we were unable to raise prices for five years, which meant profit margins continued to decline. Increasing efficiencies became even more important. We seldom reduced labor numbers but needed to improve output to turn a profit.
During recessions, the government usually has incentivized capital investment, so it is a good time to buy labor saving equipment. The federal government has still an accelerated depreciation program that was implemented during the early days of the pandemic. At the state level, certain counties with designated Economic Development Zones can provide tax credits for capital investment and additional employment opportunities.
Traditionally recessions have not had a great deal of negative effect on sales of plant material. If anything, volume can increase at the retail level since green goods are a less expensive good compared to taking vacations or buying a new car or home. Landscape contractors usually plant the same square footage, though they may select lower cost items or increase spacing of plants in beds. The recession of the early 1980s gave birth to the mass planting of color for commercial buildings to keep or to fill leased space.
If we experience a recession soon, this time around it will be inflation driven by monetary policies to cool down the economy. It will not be from oversupply of real estate or too many goods on the market. Employment is extremely high, but prices are outpacing wages. Much of the inflation today is caused by supply chain issues, caused by interruption in production, labor scarcity and lack of a comprehensive immigration policy, as well as other global challenges to do with international trade and war.
Terry Shaw and Sharon Harding-Shaw, Harding Nursery
During the last recession our retail sales dropped. Wholesale sales had some landscape projects for which we had brought in plant material. Jobs got delayed or canceled so we sat on plant material for prolonged periods of time.
We laid people off during the winter for the first time in Harding Nursery history. They were job-attached and came back for the spring. We reduced expenses where we could. We reduced the number of plants we brought in and used as much as we could of our own product – plants we grew ourselves. As owners we reduced our salaries to get by.
It is tough to predict if we’ll see a recession soon. We do see consumer spending slowing and we think a slight recession might be headed our way but we hope it won’t be as severe as 2008. We see the signs and we are taking steps now to be fiscally responsible and not order as much as we typically would during a regular season. We are being self-reliant on product that we have grown ourselves and making sure our production fields are full.