Plant sales have cooled off since the highs of the COVID era, but 2023 is shaping up strongly so far for the green industry
It got cold in Atlanta this past winter. One day in December, the mercury topped out at a frigid 7 degrees.
“I can’t ever remember a single-digit day since I moved here in 1989,” said Danny Summers, managing director for The Garden Center Group (www.TheGardenCenterGroup.com), an alliance of garden centers, service providers and vendors that works together on business solutions designed to help garden centers improve operations. “It was a horrendous December.”
That Atlanta chill would cast a cool shadow well into the spring all across the country. The spring months were wet and cold, giving nurseries and growers a bit of a slower, longer start to the growing season. With that came a little worry that 2023 might be the year that the boom of the prior three years might finally taper off.
But while there has been some softening since the height of the stay-at-home-and-garden-because-of-COVID trend, 2023 is turning out to be another solid year for nurseries. Inflation has tapered a bit, prices remain solid, housing is holding, and high shipping costs and supply chain slowdowns have eased up. Nurseries are being a little more conservative lest they get burned like they did during the Great Recession, but overall, there is optimism on the outlook for 2023.
“The nursery industry is in a really healthy spot right now. Nurseries are being cautious and really smart about the economic outlook for the next couple years,” said Todd Hatley, a relationship manager at AgWest Farm Credit, an agricultural lending cooperative serving farmers, growers and other related businesses in the West.
Loosening up
As anyone in the industry knows, nurseries fared well during the COVID years, fueled by record sales as people stayed close to home, tended to their landscapes and delved into gardening.
According to The Garden Media Group, more than 18.5 million new gardeners gave it a go during the pandemic. As people returned to work and their more normal lives, that phenomenon dropped off some, but sales remained strong.
Here in Oregon, nurseries rode that wave as well. In 2022, nursery sales hit nearly $1.4 billion, topping the list of the state’s agricultural commodities. That happened even though inflation was at a record high, fuel and shipping prices were soaring, and global supply chains were backed up.
Now, some of those challenges have loosened, making the way at least a little smoother for growers here.
“We are actually going to be up from last year a little bit,” said Tom Fessler, owner of Woodburn Nursery & Azaleas Inc., an azalea and nursery stock production operation in Woodburn, Oregon. “We’ve increased production of some key items, and we ship throughout the U.S., so the diversity helps spread that out for us.”
Leveling off
Retailers and garden centers are off to a decent start this year as well. According to Summers, retail sales among the more than 120 centers in The Garden Center Group were up just over 2% year to date in mid-June over the same time period last year. The Gulf Coast region was up more than 6%, the Mid-Atlantic was up almost 5%, and Ohio was up nearly 8%. Here in the Northwest, sales were up less than 3%.
“I think we’d be up more overall if it wasn’t for you guys in the West,” Summers said. “You had such a late winter, tons of rain, tons of snow. I was talking to someone in Colorado who said they had so much snow that the aquifer where they are has enough to last three years. It’s just been a tough spring for the industry out West.”
Summers added that, contrary to 2022, sales transaction counts are up in 2023 while average sales prices are down, likely the result of easing inflation and other factors. “Most of the inflationary effects on pricing really happened either in late 2021 or into 2022,” Summers said, “but that, along with fuel pricing and importing costs … much of it has leveled off now.”
Housing help
The strong sales so far in 2023 are being helped by the lingering effects of the COVID lockdowns. However, as he noted in his “2023 Outlook for the Green Industry,” Charlie Hall, professor and Ellison Chair in International Floriculture at Texas A&M University, is unsure just how much longer that might last. One question he cannot answer, Hall wrote, is “whether or not consumers will continue to spend on lawn and garden products and services at the same elevated rate as they have during the pandemic.”
“Historically, their consumption has retreated back to trend levels as the industry has not been successful in retaining many of the new consumers that engaged in gardening and landscaping when they stayed at home more during periods of downturns (or now pandemics),” Hall wrote. He also noted that supply chains impacting the industry have been improving and should be “functioning closer to normal by late 2023.”
While not nearly booming, the housing market has also been fairly good for nurseries. According to the National Association of Homebuilders, a lack of existing inventory and stabilizing mortgage rates helped drive single-family home production up to its highest point of 2023 in April. That month, housing starts were up about 2% over the same time in 2022 and on pace to hit 1.4 million starts this year. While still an increase, the association did note that the overall number of starts for 2023 is expected to be 28% lower than 2022.
Even so, other signs of housing strength are showing in the multifamily sector and in home remodeling, both of which can help drive demand for nursery products.
From a higher level, Summers said Millennials continue to impact the nursery industry as well. Not only are they buying or building homes in both urban and rural areas, but they are getting into gardening as part of their overall lifestyles.
“They are more bought-into nature and organics and recycling than the Boomers ever were,” Summers said. “The Millennials are more truly built around our customer profile.”
Costs and caution
Looking out over the rest of 2023, nurseries can probably expect more of the same: some easing of demand compared to past years but steady sales in the near term.
Fessler said he is concerned about interest rates remaining high, and also new regulations in Oregon. Among the latter are new rules that require employers to provide workers with more breaks and access to shade during hot weather, which adds time and money to a nursery’s operations. Additionally, a new Oregon law will phase in overtime limits so that employers must pay overtime to farmworkers who work more than 55 hours a week. That limit will drop to 40 hours per week in 2027.
“That’s going to cost us more money,” Fessler said, “and so our costs are going to go up. Our pricing isn’t built for that.”
One thing that’s not likely to happen amidst the continuing strength for nurseries — overconfidence that leads to a collapse like the one that happened in 2008. Then, nurseries were overproducing to keep up with demand from the housing market tidal wave. When that crashed, many nurseries did too.
“A lot of them were expanding pretty heavily and things went south in 2008,” Hatley said. “There were a lot of burn piles back in those days.”
This time around, however, nurseries are being more cautious. Hatley said nurseries seem to be holding on to their profits and not over-investing in expansions or large capital projects. They’re maintaining their lines of credit but not using them and otherwise being mindful about the present and the future.
“I think the industry is very cognizant about the fact that we have come through some really, really good years,” Hatley said. “They’re being smart about planning so that they can continue to have healthy operations in the future.”
From the August 2023 issue of Digger magazine | Download PDF