Overview of the

Green Industry

Special thanks for some of these slides to

Dr. Charles R. Hall

Professor & Extension Economist

Texas A&M University

Outline

1. The economic importance of the GREEN industry.

2. Interesting technological advancements that have caused structural changes in the green industry.

3. Marketing systems in the GREEN industry.

Largest flower auction in the world

Dutch-based – Amsterdam

See highlights

Aalsmeer Flower Auction

Source: Images from Aalsmeer Dutch auction

Dutch Auction

• Auctioneer starts with one high price and goes down until there is a bid – first bid takes the lot.

• Advantage of moving large number of lots of flowers quickly

1.1.Economic importance of the Economic importance of the GREENGREEN industry. industry.

Green Industry

• Also referred to as “environmental horticulture”

– Nursery & floriculture

– Sod

– Greenhouse for ornamental and annual vegetable/tobacco plant stock

– Landscaping services

• Markets include– Home construction/home improvement

– Golf courses, parks, outdoor sport facilities, public spaces

– Retail garden centers, florists

Kentucky’s “green” industry includes …Nursery and greenhouse growers/auctions, firms providing landscape services such as contracting and maintenance, and retail operations including independent garden centers, home improvement centers, and mass merchandisers/chain stores.

The nursery and greenhouse industry comprises the fastest growing segment of U.S.

AgricultureNumber of nursery and greenhouse farms continue to increase

Grower cash receipts increasing at ~ $500 M per year

Third most important sector in U.S. crop agriculture

Seven states account for 2/3 of all U.S. nursery crop production--- CA, TX, FL, NC, OR, OH, MD

Perspective on Nursery, Greenhouse and Sod Industry

U.S. value of agriculture production

U.S. value of all crops

U.S. value of nursery, greenhouse, sod

$202 Billion

$ 143 Billion

$ 17 Billion

Note: Source: 2007 Census of Ag; 2009 Census of Horticulture Specialties.

1.1. Farm sales for nursery & Farm sales for nursery & greenhouse for U.S.: $14.5 billion greenhouse for U.S.: $14.5 billion in 2012 ($16.6 billion in 2007)in 2012 ($16.6 billion in 2007)

2.2. $6 billion in floriculture crops $6 billion in floriculture crops

3.3. $5.1 billion nursery stock$5.1 billion nursery stock

4.4. $1 billion in sod$1 billion in sod

5.5. 68% of cut flowers are imported, 68% of cut flowers are imported, primarily from Columbia and primarily from Columbia and EcuadorEcuador

6.6. California, Florida & Hawaii major California, Florida & Hawaii major U.S. producersU.S. producers

85 sod farms: 52% acres, 53% sales

Recession Impacts

• Highly dependent on housing starts

• Consumer disposable income

• Major industry contraction during recession

National Nursery and Greenhouse Sales2000-2014

Source: USDA/ERS Farm Income and Wealth Statistics, 2014Economics

Economics

Greenhouse & Nursery Sales ($million)

2007 2012 change Percent change

KY 87.748 79.283 -8.465 -9.6%

OH 444.855 437.723 -7.132 -1.6%

IN 126.241 110.838 -15.403 -12.2%

IL 435.073 332.104 -102.969 -23.7%

TN 325.079 294.740 -30.339 -9.3%

Natl 16632.734 14517.593 -2115.141 -12.7%

Source: 2012 Census of Agriculture

Business Issue % Rating as #1 Issue

Excessive Overhead 21

Recession impact on premium/specialty products18

Labor management & availability 17

Uncertainty of government regulation 16

Retaining key buyer relationships 13

Retaining key personnel 10

Most Important Factors Facing Nursery Business During Next 2 Years

Source: Woods, 2011 Nursery Buyers Survey

Output of US Green Industry Sectors, 1987-2003

0

5

10

15

20

25

30

35

40

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03

Bill

ion

Do

llars

(d

efla

ted

200

4)

Landscape &HorticulturalServices

Nursery &Greenhouse

Lawn & GardenEquipmentManufacturing

RetailNurseries &Garden Stores

Year Employees Annual PayrollMillion $

Firms

2011 5128 146.7 876

2010 4931 135.7 898

2009 5025 136.8 889

2005 4801 124.0 839

2000 4186 76.8 702

Landscaping Services in Kentucky

Source: U.S. Census Bureau, County Business Patterns

Demand factors impacting nursery products and services

1. New construction (and mortgage rates)

2. Disposable income

3. Home improvement trends

4. Multiple worker households

• U.S. New Housing Starts: Where we came from

• Thousand Homes. Annual Rate Seasonally Adjusted.

2014-15 Housing Outlook

Housing starts trending upwards

Source: www.census.gov/construction/nrc/

*

Estimates of the Total Housing Inventory for the United States: 2000 to Present

thou

sand

s recession

Source: U.S. Census Bureau; Housing Vacancies and Homeownership

Home improvement sector showing recovery signs

Lowes Home DepotDaily Stock Prices 2008-2013

2. Technological advancements 2. Technological advancements in the in the GREENGREEN industry that industry that have revolutionized plant have revolutionized plant production and marketing production and marketing systems.systems.

tissue culture and plug production

biotechnology

container technology

slow-release and soluble fertilization

automation technology

climate control systems

irrigation technology

All of these technologies have been important, but…

the technological driving force that is shaking things up the most today in the

Green Industry is…

INFORMATION technology!INFORMATION technology!

examples of information technology in green industry

precision agr. applications

bar code and scanner technology

Allied Input Suppliers

Shipping Point Firms- nursery growers- greenhouse growers- combination growers- B2B alliances

Re-Wholesale Distribution Centers

Infomediaries

RetailRetailHome Centers 38% Garden Centers 32%Mass Merchants 30%

Final ConsumersFinal Consumers

E-commerceE-commerce

Direct toConsumer

LandscapeLandscape

Contractors &Maintenance

Flowchart of the Green Industry Marketing System

Allied Input Suppliers

Shipping Point Firms- nursery growers- greenhouse growers- combination growers- B2B alliances

Re-Wholesale Distribution Centers

Infomediaries

RetailRetailHome Centers 38% Garden Centers 32%Mass Merchants 30%

Final ConsumersFinal Consumers

E-commerceE-commerce

Direct toConsumer

LandscapeLandscape

Contractors &Maintenance

The NEW Green Industry Structure