Factors Affecting Demand in Horticulture

Jason NiclaouLast week, at the Farwest 2016 national nursery and greenhouse tradeshow in Portland, I had the privilege of hearing a presentation on the factors affecting demand by Dr. Charlie Hall, a professor at Texas A&M University who is a nationally recognized expert in the Green Industry.

Here’s my interpretation of what Dr. Hall had to say about factors affecting greenhouse growers demand:

Uncertainty drives the market by creating opportunities for those that know how OR those that are willing to address this uncertainty.  Ever changing retail price levels are a major cause of uncertainty for growers.  Currently, retail price levels are at about the same level as in the 90’s.

Uncertainty can also be created based on your location.  For example, there is a lot of political discussion about raising the minimum wage.  However, a minimum wage of $15.00 in California equates to roughly $10,000 in additional taxes for that California business per FTE (full-time employee equivalent). That’s a major factor to account for, but the growers who address that issue and plan for it will have a leg-up on those who do not.

Some major global issues that will affect your predicted future state include:

  • Housing starts are directly correlated to Green Industries. Millennials delaying home buying caused a temporary drop in housing starts.  This was influenced by the trend of moving out of the parents’ household later and the $1.1 trillion student loan debt load.  This trend is now trending upward.
  • By 2023 China will start to feel the impact of the 1 child policy because there will not be enough young, production people to replace those that are leaving the workforce. The population of China will have a heavy concentration of seniors.
  • The time interval between recessions is growing. The current average is every 6.5 years, but the last time between the last few is trending upward.  Current models predict that the next 18-24 months will be strong.

In order to turn the uncertainty into opportunities for your business, you need to keep a finger on the pulse of economic change.  Popular media cannot be allowed to shape the strategic vision for your future.  Instead, you should be leveraging Economic Monitoring Indexes:

Contrary to what you might think, there isn’t a strong correlation between how we feel and what we spend because people afford what they want.  The Green Industry needs to continue to grow and evolve so that we are always offering new, fresh products that people want to buy.

Dr. Hall’s presentation concluded by presenting the principle of a contingency business plan and the importance of preparing for the next recession.  His metaphor compared business strategy planning to that of a NFL Head Coach.  A NFL football game moves so quickly that each scenario has to be analyzed beforehand including the development of contingency plans before they are needed.

It is very easy to constantly work in your business, but time has to be committed to working on your business to drive growth.