The Nursery Bandwagon: Proceed with Caution

Brian Walker
The Capital Press, Feb. 16, 2001

Oregon's hot nursery and greenhouse game is giving chess a run for its money, requiring more strategic planning then ever.

That's essentially what John Aguirre, Oregon Association of Nurserymen (http://www.nurseryguide.com) executive director, recently told a group of growers, including some pondering entering the industry.

Those hoping to cash into one of the bright spots of agriculture should have a clear strategy because the windows of opportunity are narrowing, Aguirre said.

"There's been a substantial increase in production in Oregon and other areas of the country," he said. "Can the market continue to absorb all of the plant material?"

Nursery acreage in Oregon has increased from 31,730 acres in 1991 to 41,100 in 1999, a 23% increase. Sales increased every year in the 1990's, ending at a record $584 million in 1999. That number is expected to top $600 million for 2000. Similar trends were reflected nation-wide.

But Aguirre said several factors, in addition to potential oversupply, make it difficult for the wave to continue, including:

• consolidation;
  
• pest and labor issues;
• competition from other regions;
• industry expansion;
• government regulation; and
• transportation disadvantages.

"We may be seeing some clouds on the horizon" that will make it harder to make a living in the nursery and greenhouse business," Aguirre said, adding that slower industry growth is expected. He wonders how long the quality plant material Oregon is known for will offset labor and transportation costs bearing down on producers, especially during a cooling economy.

Oregon is saddled with the highest minimum wage in the nation, and the industry ships over 70 % of its products to other regions and countries. Recently, rising fuel and energy costs have added another wrinkle.

Aguirre said customer service is becoming more critical for Western nurseries because growers in other regions appear to be closing the quality gap. "We can see producers elsewhere investing in new technology and production systems put out a better product, he said. "The key is to be aware of growers in other areas are doing. This marketplace is changing, and it's all too easy grow too comfortable to what you're doing."

Marketing Critical
During his first year at the OAN, Aguirre was impressed at how market savvy the industry is.

"It's more so than you find other ag commodities," he said. "There's always a discipline to stay on top because if you grow it, you have to find a home for it. You can't take it to co-op or a local grain elevator. It's no easy task to develop customer base for your product."

Aguirre also warned the audience that nurserymen don't get an immediate return for their crop. "With woody ornamental plants, you're looking at a 3-5 year horizon, depending on the kind of product you're selling," he said. "If you're going to get into the nursery business in big way, you have to have the financial wherewithal to do that."

Yet nursery acreage is increasing nationwide. "There's concern about new entrance into the industry, but frankly a lot of the expanded production is coming from people already in the industry," he said.

Aguirre said many established, expanding producers have a mind set that prepares for an economic downturn, but new entrants may not have a handle on lower prices and demand.

Other Challenges
He sees an increasing need for the OAN and industry to be vigilant about pests and diseases, which can limit markets.

"We're concerned about how quick new pests and diseases appear on the horizon, often resulting in a quarantine being thrown up," he said, using sudden oak death and the glassy-winged sharpshooter as examples. "We really need to focus our attention and resources in this area."

Producers and retailers also to back consolidation trends in the industry and adjust their business strategies accordingly. Responding to the changing needs of mass merchandisers is also critical.

"It's going to take strong commitment by growers to supply over the long term," he said. "Mass merchandisers can be demanding in what they want. They have economic clout because of the volume purchasing."

Some mass merchandisers require unique branding of products, certain shelving systems and custom distribution rules, he said.

"As mass merchandisers expand their share of the market in terms of plant sales, they introduce new business strategies in how they deal with suppliers," Aguirre said. "Trends of big companies becoming bigger and more versatile certainly affects the competitive landscape on the supply side."

One OAN member keeps his competitive edge by focusing on efficient shipping. "He believes that's how his business made money," Aguirre said. "Another may focus on niche markets, another high quality plant material, another being a one-stop shopping supplier." There is a lot of room for different strategies.