In early January, SAF sent out the fourth-quarter installment of its Economic Outlook Survey to check the industry’s pulse and ultimately answer the question: “Who’s still standing?”
The response from suppliers provides an interesting perspective up and down the supply chain.
Wholesalers: Flat is Where it’s At
Survey results indicated that wholesalers (both suppliers and importers) were evenly divided (44 percent each) over whether sales would increase or stay the same in the next six months. Only 7 percent predicted their sales would decline.
Some wholesalers admit that number might be good too good to be true. For example, if Wholesaler A has seen a 10 percent decrease in sales, said Scott Kitayama of Greenleaf Wholesale Florist in Pleasonton, Calif., but Wholesaler B has seen a 20 percent drop, Wholesaler A might decide his business is fine. After all, he’s doing better than the next guy, right?
Shawn Seagroatt of Seagroatt Riccardi in Latham, New York joined Kitayama in taking the results with a grain of salt.
“Do I expect that (the vast majority) of wholesalers will experience either flat or increased sales over the next 12 months” he said. “No way! Some wholesalers are positioned well to benefit from changes in the competitive landscape, but most aren’t.”
For those “prepared wholesalers,” Seagroatt expects an unprecedented and disproportionate revenue shift coming their way in the next few years.
Small victories do exist and deserve to be savored, said Kevin Priest, AAF, of Cleveland Plant & Flower Company in Parma, Ohio. He’s especially encouraged by how his company has creatively slimmed down to better survive the slump in sales.
“Sales are terrible, but profits, for the most part, are a little better than recent past years, because of cuts we made in expenses,” Priest said. If the downward sales spiral doesn’t level off, there won’t be any fat left to cut. “Eventually the bottom line will be impossible to hold on to,” he said. “Some fixed expenses cannot be cut.”
The challenge is getting the recession-hit consumers back into the habit of buying flowers. Eric Levy of Hillcrest Garden Inc. in Paramus, New Jersey, cautioned that sales to mass marketers weakened only recently. “My fear is that some ultimate consumers may have only recently stopped purchasing flowers at grocery stores, 10 months or so after the recession actually started.” Levy said.
Growers Grapple to Grow, Cheer Steady Sales
Like wholesalers, many growers in the industry have redefined success in the current economy.
“In June 2010, (if) we see we have met the prior year’s sales, plus the inflation factor, then that is a success,” said Troy Lucht of Plant Source International & Malmborg’s in Rogers, Minnesota.
The survey found that more than half of the surveyed growers (56 percent) expected sales to remain about the same over the next six months. A third expected improvement. About 11 percent anticipated sales declines in the same period. As for the economy at large, about two-thirds of surveyed growers said they expected the economy to remain steady.
Dave Self of Wyld West Annuals in Loxahatchee, Florida said he expects the economy to remain unchanged for the next two years. That sustained pressure to perform at peak levels with little waste may be too much for some, leaving new opportunities for well-positioned growers.
Buyers should be cautioned that companies are not going to “keep as much as they did in waiting, which will create a real supply and demand problem,” Self said. “If (suppliers) can closely predict when the demand will begin and the supply will run out, and you are well stocked and ready to run, well, as they say on tv, you might be ‘smarter than a fifth grader’”
A student of human nature, Self believes we’re wired for a rebound. “(People) can only take being down for so long until they rise from the ashes and start rallying again.” he said.
Reprinted with permission from Floral Management, February 2010, www.safnow.org
Ira Silvergleit is SAF’s director of research and information. Contact him at [email protected]