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Plant Pricing, Production and
the beginning of the new year, nurseries have found themselves in the middle of
a new operational dilemma that is buttressed by the economic turbulence, fuel
pricing, and rising material cost on one side, and supplying contractors with fair
market value pricing, and quantity, as well as quality material on the other.
anyone may have expected, the economic turbulence has forced quite a few number
of nurseries into insolvency with others on their coattails. Rising petroleum
costs have translated into rising material costs, i.e. fertilizer, herbicides,
lumber, plastics, etc and the need for the introduction of freight, or fuel
surcharges. However, the market has not allowed for nurseries to pass those
increasing material costs on onto their customers. In fact, plant material unit
costs have dropped to a thirty year low due to market over-saturation, nursery
liquidations, the need for nurseries to maintain their customer base, and their
need to prepare for the next growing season(s).
order to reduce overhead and stay lean, nurseries have had to downsize and
lower their payroll, hold off on plant maintenance, and lower production. It is
not uncommon these days for nurseries to stretch their watering cycles, delay fertilizing
schedules (or hold off altogether), curtail pruning, but most damagingÖ has
been to halt production. The ripple effect of halting production will be felt
for the next half a decade. The outcome may be questionable quality, overgrown,
and just adequately maintained, plants.
As nurseries sell out of one size
plant material without anything to back it up, it will take them and extra
year, at least, for salable ones to become available.
other words, if one wants to plant a 15 gallon plant, a 5 gallon plant is
typically required. If one sells out of their entire stock of 1 and 5 gallon
(downsizing remember) and has none for production one will have to wait either
for the next group to grow to size, trade them in, or purchase them from
another nursery. These latter two options, for many, are not really options.
That same ripple effect has affected them as well and we find that we are both
out of the same item or that their cost would make our respective sales,
improbable. So one is left with the former option which is to wait for the liners
to plant to 1ís, 1ís to plant to 5ís, and then 5ís to plant into 15ís.
Depending on the season, that may amount to a minimum of three years till a
crop of 15ís is available for sales.
issue nurseries have had to contend with is the amount of time a plant sits on
the ground. Any Nurseryman will tell you that the pricing of the plant material
is in direct correlation to how long it takes to grow that plant. The harder it
is to grow, or the longer it takes to get to salable size, the higher the
price. A salable plant that has not sold not only becomes a liability; it also
becomes an inhibitor by preventing other plant stock from growing on the same
ground currently occupied by that plant. As sales slowed, the material sitting on the
ground became root-bound and overgrown in that container. While some Landscape
Architects and homeowners prefer large, overgrown material, and do not mind
girdling roots, others prefer younger, well rooted stock. Again, this cost
cannot be passed on, on to the customer as the price of the plant would exceed
What this will mean to
contractors and developers:
The inherent pitfall of this model
is obvious to landscape professional that survived previous economic upheavals.
Contractors have been bidding projects at the lowest material quoted during the
current economic situation; when that vendor runs out of stock of that
material, goes out of business, or raises their pricing structure due to
previously mentioned factors, you will be hard pressed to find matching pricing,
or a single source supplier. That means having to write more purchase orders,
having material from different vendors, writing more checks, more preliminary
information and releases to be acquired. Assuredly this will cut into the
profit and overhead, and possibly, delay your projects, incur liquidated
damages, cause damage to your company reputation, and jeopardize employment.
Not to mention seriously dissatisfied customers!
But pricing will not be our only
mutual concern. Shortages will begin to
materialize progressively and dramatically as stocks are further depleted from
sales or from quality. No nursery can afford to keep a plant that is overgrown,
root-bound, or requires extra maintenance, for too long. Room will need to be
made for the next cycle. Eventually these shortages will become a pricing
factor as the demand increases. Pricing increases will not be driven by greed,
but by survivability; the need to stay afloat.
news from our government, that for a balanced budget more cuts will have to be
made, and as many are aware landscaping and watering are very low on the totem
pole of their priorities, has inhibited contractors and developers from fully
committing to projects. We have seen the same projects revisited and revised
several times in order to lower material costs and preserve their viability.
This has shown true for both the public and the private sectors.
at Performance Nursery believe that it is in our mutual best interest to inform
our customers, and they in turn, their customers, as well as our employees. As
the shortages evidently materialize, pricing will surely not only increase, but
exceed former levels. Estimators, project managers, foremen, production teams,
and sales representatives, who are beholden to a budget, may have to be
consulted, and/or retrained, to accommodate these trends.
for their part, will have to start preparing for market trends arising from the
economy upheaval. What to devote priorities to? What lines to invest in? What
to exclude or abandon? What other alternatives can we develop for our customers
in order to save them money and provide them with quality material while
keeping cost down and profits up?
next five years will be a critical period in which survival will depend on how
we adapt. Contractors are accepting projects at record breaking losses just to
keep their doors open. Some contractors have been placed on COD basis due to
payments taking longer and longer. We all need to begin to plan how to adapt,
put that plan in place, and execute that plan.
We wish you all the success!
crew at Performance Nursery
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