Taking stock of the industry
What’s the state of ornamental horticulture? From our view, it’s looking good!
With the bulk of 2023 behind us and fall officially here, it’s a good time to look back and take stock of the year. As we’ve talked with many of you nationwide, it feels like pandemic pressures have finally lifted—after 3.5 years. Collectively, the industry seems stronger than ever, and we have to describe the mood as bright. For those of you still racking up strong fall and holiday sales, we expect your mood is even brighter.
Tallying up sales and profits for the season
Bad weather hampered spring sales in some regions. But once the weather broke, sales soared. Even as wildfire smoke continued into fall, mums and alternate fall crops were flying off lots. And greenhouses are banking on big sales from poinsettias and innovative, alternative holiday crops.
From what you’ve shared with us, 2023 wasn’t just another good year. It was a great year. Many of you enjoyed your fourth straight season of record sales. As one horticulture pundit pointed out: “No pandemic required.”
If you were at Cultivate’23 for the State of the Industry address, you heard Dr. Charlie Hall proclaim 2023 sales were strong. At mid-year, 76% of growers surveyed reported gross sales were up from last year. Even more importantly, bottom lines looked good. Compared to 2022, profits were up for 69% of you.
For even more perspective, consider this. Compared to our last pre-pandemic spring in 2019, 100% of growers surveyed reported higher 2023 sales.
Leaning into new labor approaches
It’s no surprise that labor issues still hang heavy over horticulture businesses. Across the country, it’s tough to find workers willing to do the job—whether they’re qualified for the work or not. As August ended, the U.S. Department of Labor reported more than 1.4 job openings for every unemployed person. While that’s better than spring, it means competition for workers remains high.
Rising labor costs don’t offer relief. As Dr. Hall shared in July, agricultural wages—which include the greenhouse and nursery industries—have risen 25% nationally since 2018. That’s seven percentage points higher than non-agricultural wages rose in that time.
As we’ve shared before, more and more growers have turned to the H2-A visa program for temporary agricultural workers to fill the gap. And more than one of you has told us the program has been a lifesaver. More ornamental growers are considering that path if labor shortages don’t ease soon.
More growers are also leaning into labor-saving technologies, from automation to artificial intelligence, along with lean production practices to save on labor and free up valued staff to focus on areas where you need them most. This approach will continue to grow.
Getting supplies and pricing in line
Many of you are still working through the supply stockpiles you built up during the pandemic. Horticulture industry supply chains have been normalizing, but prices aren’t static as the season ends. Forecasts predict a 1.6% increase in 2024 input costs. While that sounds great compared to the 22% rise the industry has seen since 2020, it’s still an increase.
As Dr. Hall reiterated again this year, many growers still haven’t increased their prices enough to offset rising costs. Until you do, shrunken profit margins will keep shrinking. He also hypothesized that failing to adjust prices to keep pace with rising costs could explain the 31% of growers who didn’t see profits rise this year.
Along those lines, many of you are seeing price adjustments come your way from seed and cutting suppliers—which trickle down to higher plug and liner prices fast. Even with shipping costs stabilizing, now’s the time to get your prices where they need to be for continued success.
Recognizing optimistic economic news
If you’re worried about continued inflation and consumer reactions to higher prices, there’s still good news. Even though personal savings rates have dropped, consumers are still buying. And the “capacity to spend”—i.e., excess income or savings—remains high among the hort industry’s traditional bread-and-butter demographics.
While it’s counterintuitive, challenging economic times typically bode well for horticulture as people focus on their homes. The U.S. Census Bureau reports new residential construction trended up this summer, and it’s expected to rise even more. The number of people in the traditional home-buying age range is higher than it’s ever been. And surveys say they plan to buy homes, plants, and landscaping.
In a final bit of good news, independent garden center retailers report transactions didn’t drop this year. Houseplant buyers translated their love of plants to outdoor gardening, and pandemic gardeners are sticking around.
Here at ICL, we’re ready to help you take stock of your year and be prepared for the next. Give us a call, and let’s chat about your plans. We’re here to help you and your business grow.