Investing in Growth

Abe VanWingerden

As we head into Spring 2012, my belief is that this will be a very pivotal year for our industry. Continued consolidation of breeders, growers and retailers and the ever-increasing costs of doing business are enough to scare the savviest businessperson. Add a potential peat moss shortage, a longer list of banned chemicals, and a growing list of new labor laws that could harm our industry, and even the most optimistic folks could find reason to not feel good about the future.

But I’m going to go the other direction and say that we’re on the cusp of huge potential growth in our industry. And at our business, we’re putting structure to that talk. Literally. We’re adding 7 acres of greenhouse, adding an incremental 8,000 carts, adding an incremental 40 trailers, and we’re investing heavily in information technology infrastructure to support a more robust product, logistics and marketing planning process.

Why would you invest in growth in a down economy and a slow-growing industry? Three main reasons:

You must create growth; don’t just expect or hope for it. Too many times I hear this: “When the economy turns around, the business will grow” or “When the weather is right, my sales are strong.” We must create growth by investing in marketing programs to drive demand, new product development to drive increased consumption, and testing to drive increased idea generation. Only 60% of people regularly garden, so we have 40% to go. That’s huge untapped potential, but today’s marketing and product plans are mainly geared to the 60% who already garden, and even those programs are geared to the 5% of the top-tier gardeners.

Costs are key and you need infrastructure to drive them down. Even if you plan to keep your business static for the next few years, then your only mechanism to increase profitability is to cut the costs of doing the same revenue each year. The best way to do this and be ready to achieve growth in the future is to invest in infrastructure. Rather than cutting employees by 10%, put in incentives for employees who find ways to cut costs by 10%. Rather than cutting department budgets 10%, invest in cost-saving technology to drive costs down 10%. Rather than cheapening the carry tray you use by 10%, work with your retail partners to have consumers/stores return 10% of the trays for re-use, thus saving you 10% next year on tray purchases. Invest in signage to encourage consumers to bring them back as a service to the environment and increase that number to 20%. Offer your retailer a solution to pick up plastic regularly, and you can increase that savings by 30%.

Consolidation can lead to sales for someone else. When a grower/breeder/retailer consolidates, somebody will pick up the business… why not be ready for it? Consolidation will happen and as the natural course of business occurs you need to be ready to seize the opportunity. It’s not abnormal for somebody to want out of the business, so why not offer them a deal to buy their inventory or lease their greenhouse to keep that existing customer in-stock during a transition. You can probably find good terms and a willing partner if you offer an exit plan that keeps their customers in business and provides a transition plan that is better than just shutting the doors.

Where do you start? What can you invest in? 1) Consumers—invest in finding out about what our consumers want. There are options out there today so you don’t invest a ton of money in a new idea before you introduce it to consumers; 2) Quality—invest in increasing your quality. There’s no bigger area of need in our industry than to get fresh, high-quality product in front of our consumer. It’s the No. 1 way to drive growth; 3) Technology—invest in ways to drive efficiencies through technology, like ERP systems to track your cost of doing business; 4) People—invest in your people so they drive out costs … don’t drive them out via cost-cutting. We as an industry only succeed through the hard work and dedication of our people and our teams.  

Make a wise investment and find ways to invest in your business to drive growth as we begin 2012. GT

Abe VanWingerden spent eight years working for Procter & Gamble in Sales and Marketing and is now part owner and President of Sales/Marketing at Metrolina Greenhouses, Huntersville, North Carolina.