Man W. Hodges Economic Information
lohn Haydu Report 270
South Florida's Ornamental Nursery
Industry in the 1980's
SMAY 2: 1990
S University of Florida
ood & Resource Economics Department
agriculturall Experiment Stations and
cooperative Extension Service
istitute of Food and Agricultural Sciences April 1990
University of Florida, Gainesville 32611
South Florida's Ornamental Nursery Industry in the 1980's
Alan Hodges & John Haydu1
A comprehensive survey of 250 firm managers in the South Florida nursery industry was
conducted in 1985 to document trends occurring in the industry since studies in the early 1980's.
Topics addressed in the survey included business and manager history, product sales, market outlet
types and areas, market practices, and labor management. Data were analyzed by firm size to identify
special needs of larger and smaller firms. Results are discussed in relation to current industry
problems with marketing, increased competition, and labor management. This information may be
used to develop policy and guide research efforts for the ornamentals industry.
Key Words: Nursery industry, South Florida, ornamentals.
The ornamental horticulture industry in Florida grew rapidly during the 1980's, with total
sales climbing from $650 million in 1983 to $933 million in 1987, or 11 percent annually (ERS,
1989). In spite of this tremendous overall growth, some sectors of the industry grew very little or
actually declined. During the period of 1986 to 1988, sales of tropical foliage products, the state's
largest ornamental commodity, declined 10 percent from the historical high of $309 million in 1986
(NASS, 1989), and following a period of growth by eight fold during the 1970's (ERS, 1980).
Moreover, the "other ornamentals" category reported by USDA statistics, which includes the woody
ornamentals products, did not increase sales during the mid-1980's, remaining constant at $420
million (ERS, 1989).
Problems associated with the maturation of the ornamentals industry are shared in common
with other parts of U.S. agriculture: overproduction, depressed product prices, and rising inputcosts
(Haydu, 1989). Other industry problems often cited include a lack of cooperation and a lack of
professional management. Also, potential high returns for real estate investments motivate
unprofitable operation of nursery enterprises to maintain agricultural property tax exemptions. The
structure of the ornamentals industry poses some special difficulties, with minimal barriers to entry
of firms in the marketplace due to relatively low capital requirements giving rise to a large number
of small, family operated firms, with little or no professional training. In order to intelligently guide
research and policy development by public agencies and industry leaders, reliable information is
needed to characterize the structure and organization of the industry.
Mathis and Degner (1981) analyzed the Florida nursery industry's marketing problems from
secondary data and selective interviews with industry leaders. Smith et al. (1981) provided an
economic overview of Florida's tropical foliage plant industry.
A major center of growth in the Florida ornamentals industry, and an area where these
problems have been especially acute is the southeast coast area of Dade, Broward, and Palm Beach
counties. The South Florida nursery industry is particularly complex because the sub-tropical climate
allows unique production practices, and permits many tropical foliage products to be used locally as
landscape ornamentals. To adequately address the fundamental problems in the ornamental
horticulture industry, such region-specific peculiarities must be recognized and understood.
Therefore, an in-depth survey of the South Florida nursery industry was undertaken.
1 Alan Hodges is an Economic Analyst, and John Haydu is an
Extension Economist and Assistant Professor, IFAS, Food and
Resource Economics Department, University of Florida, Gainesville.
Industry firms in Dade, Broward, and Palm Beach counties were selected to participate in the
survey by a randomized sampling of the Florida Division of Plant Industry's (DPI) 1984 registry of
certified nurseries. A total of 250 firms were surveyed, representing 14 percent of the entire
population of firms. The distribution of firms surveyed by county were as follows: Dade, 115;
Broward, 54; Palm Beach, 77.
The sampling procedure was designed to give greater representation to larger, strictly
commercial firms by using a graded sampling intensity for each of the 10 categories of the DPI
classification of firm size, which is based upon number of plant units inventoried during their annual
inspections. For instance, 77 percent of firms in the largest firm classification (#10, over I million
plants) were sampled, whereas 16 percent were sampled in the middle category (#5), and 3 percent
were sampled in the smallest category (Figure 1).
The survey questionnaire was administered
in-person by temporarily employed enumerators in Percentage of Population
each county. At each firm, the top ranking person
present was interviewed: in some cases this was .. ...... ............-..........-.....-...... ............................
the owner, and in some instances it was an
employed manager. 4N
The questionnaire asked managers to
identify their firm's annual sales in 1984 in one of ............... ........... .. ....
17 categories, ranging from less than $500 to over a a'
$10 million. To find possible effects of firm size o EM ipa S
on business characteristics, data were analyzed Dp class
according to the following four annual sales volume
categories: small, less than $250 thousand; medium, Fig. 1. Sampling Intensity by DPI Class.
$250 thousand to $1.5 million; large, $1.5 to $3
million; very large, greater than $3 million. Firms
were also classified by primary product types, representing greater than 50 percent of sales value:
tropical foliage, woody ornamentals, flowering plants, mixed and other products.
Results and Discussion
Business, Manager & Employee Characteristics
Figure 2 shows the distribution of firms by
primary product type. Thirty nine percent of firms ,NuLter of firms
sampled were primarily woody ornamentals
producers, 38 percent were tropical foliage, 5 t "
percent were flowering plants, and 18 percent were .
mixed or other product types.
Although commercial ornamentals a
production has been in existence in South Florida
since before the turn of the century (Smith, 1980), n
survey results indicate that the industry was -a pm r.. WWW p.m" OnoLa 0~
generally very young at the time of the survey. Prirary Product
Over 50% of firms were less than 10 years old, and
over three-fourths were less than 20 years old Fig. 2. Firms Sampled by Primary Product
(Figure 3). The current competitive situation is Type.
probably the first such business experience for
One of the oft cited problems with the Florida ornamentals industry, is that management is
essentially production oriented, rather than market oriented. In evaluating potential new products,
58 percent of managers expressed the opinion that
production characteristics, such as ease of growing 0 4opXt on o f irns
or handling, rather than product marketability were
the most important attributes. This finding =,
generally held true regardless of firm size, and
reflects the fact that most managers consider
themselves primarily as horticulturists, rather than 2
business professionals. For instance, many managers
began in the business as hobbyists. '
In spite of these results, there appears to be oa t B 10 t
a growing awareness about the importance and role Years
of marketing. The 42 percent of managers who __
placed marketing concerns highest represents a Fig. 3. Number of Years in Business.
significant increase from the one third of managers
reporting marketing problems in 1981 (Mathis &
Managerial training has been emphasized
repeatedly as a critical need by industry trade High school
associations. The results of this survey support this .R143%
contention: 43 percent of managers were educated .
through high school or less, and among small firms com,. college
it was 54 percent of managers (Figure 4). Forty six 3% ^ g ess than H.S
percent of managers in small firms had some college 2M
education in contrast to 58 percent of managers in
very large firms.
Employee education and training is another Co I lege
serious concern in this labor-intensive industry. 52%
The survey found that less than 6 percent of the
work force had any vocational or technical training. Fig. 4. Owner/Manager Education.
Most individuals were either trained on-the-job or
had some nursery work experience. In spite of this,
only 64 percent of managers indicated a need for continuing employee education/training. Since
employee training and quality of work were considered important issues, why didn't a higher
percentage of managers express a need for it?
In regard to labor compensation practices, surveyed managers reported paying average hourly
wages of $4.89 for non-family production workers, and $8.48 for supervisory employees. On a
weekly basis, this represents $201, and $362 per worker, respectivley. These wages are not
competitive with many other job opportunities for unskilled agricultural labor. There are probably
many ways in which Florida ornamentals producers can better motivate employees. For example,
piece rate workers in fruit and vegetable harvesting earn 20 to 40 percent more than this on an
hourly equivalent basis (FASS, 1989a).
Many studies have shown that fringe benefits are as important as wages or salaries in
employee motivation. According to managers surveyed, the average percentage of total payroll spent
on fringe benefits was 10.5 percent. This contrasts with expenditures of 20 to 30 percent of payroll
on fringe benefits in similar industries. Better benefits may be provided in through increased
vacation time, for instance. The most common employee vacation policy reported by managers (93%)
was 1 week per year, after 1 year of employment.
Product sales reported by survey respondents totaled $160.4 million (Table 1). Tropical
foliage products were the dominant ornamental commodity in South Florida, amounting to over $100
million, and representing 63 percent of total industry sales.
The remaining three product categories comprised 37 percent of total sales, with a value
exceeding $60 million. Of these, woody ornamentals constituted the largest category with $38.9
million in sales (24%), followed by potted flowers ($3.3 million, 2%), and "mixed and other" plants
($17 million, 11%). Although potted flowers were not a major part of the Florida ornamental
industry in 1985 (2%), the importance of this sector has increased substantially, in view of the
dramatic growth of the floriculture industry at the same time foliage sales have declined. Between
1984 and 1988, total sales of potted flowering plants by Florida producers grew from $18.8 million
to $64.4 million, or 240 percent (NASS, 1989).
Table 1--Total Sales of Major Nursery Products, by Size of Operation.*
PRODUCT -.-----------------FIRM SIZE-------------------------
CATEGORY Small Medium Large V-Large Total
---------------- Million Dollars ------------------
Tropical Foliage 2.03 18.87 35.00 44.75 100.66
(2%) (19%) (35%) (44%) (63%)
Woody Ornamentals 2.90 23.75 7.75 4.50 38.90
(7%) (61%) (20%) (12%) (24%)
Potted Flowers 0.61 2.75 0 0 3.36
(18%) (82%) (0%) (0%) (2%)
Mixed and Other 1.09 5.12 2.50 8.75 17.47
(6%) (29%) (14%) (51%) (11%)
TOTAL 6.65 50.50 45.25 58.00 160.40
(4%) (32%) (28%) (36%) (100%)
"Figures in parentheses represent percentages for that category.
Table 2 shows nursery product sales for each county and by size of operation. Dade and Palm
Beach counties dominated with nearly identical sales of $69.7 (45%) and $68.2 (44%) millions,
respectively. Broward county was a distant third with nearly $18 million (11%). With the exception
of the smallest category, analysis by firm size shows a relatively even distribution of market share.
Table 2--Sales of Nursery Products for Palm Beach, Broward, and Dade Counties, 1985.*
COUNTY ---------------------------FIRM SIZE---------------
Small Medium Large V-Large Total
................. ---------------Million Dollars -------------------
Palm Beach 2.11 22.62 17.75 25.75 68.23
(3%) (33%) (26%) (38%) (44%)
Broward 1.19 8.00 8.75 0 17.94
(7) (44) (49) (0) (11%)
Dade 3.31 19.87 18.75 27.75 69.69
(5) (28) (27) (40) (45%)
TOTAL 6.61 50.50 45.25 53.50 155.86
(4) (32) (29) (35) (100%)
"Figures in parentheses represent percentages for that category.
Several measures are available to determine the distribution of sales within an industry. One
measure, the number of firms selling the good, offers little information regarding the competitive
environment, unless the number becomes very small. Concentration ratio's are used to measure the
importance of a few leading firms (Marion, 1985). Although the data collected in this study were not
sufficient to determine specific concentration ratio's, they are suggestive of what the nursery
industry was like in 1985. In Table 1, analysis by size of operation illustrates a substantial difference
in sales between the smallest and the largest producers.
As a whole, the ornamentals industry was rather concentrated, with 64 percent of total sales
accounted for by large and very large firms. Although the smallest category constituted 127 firms,
it contributed only 4 percent ($6.65 million) to total sales. Conversely, the largest producer category
with only 7 firms sold 36 percent ($58 million) of nursery products in southeast Florida. Put
differently, the average largest firm sold more product (5% of total) than the combined sales of all
the smallest firms. The dominance of larger firms was especially true for the tropical foliage
industry, with 79 percent of sales by firms in the large and very large category. This situation,
coupled with the fact that foliage products constituted nearly two thirds of total product sales (63%),
is what accounts for the overall industry structure. Also, mixed product firms had a high proportion
of sales (66 percent) by large and very large firms, suggesting that product diversification (more
products) is associated with larger firm size.
In contrast to these results, the structure of the woody ornamentals and potted flower
industries were rather unconcentrated. For woody ornamentals, 70 percent of sales were by firms in
the small (7%) and medium size (61%) categories. For potted flowers, small and medium firms
accounted for 100 percent of industry sales, however, this extreme result is probably an artifact of
Market share by itself, however, does not necessarily imply a proportionate access to market
power. Other factors come into play as well, such as the overall stability of the market and the degree
of product differentiation. The latter refers to the extent to which offerings of competing sellers are
imperfect substitutes. When substitutability is perfect, no firm may sell their product for a higher
price. Given the pervasive use of tissue culture by this industry (which creates enormous quantities
of "starter" plants with uniform quality), nurserymen have a more difficult task of differentiating
their plant products. Because of this homogeneity feature, the ornamentals industry is particularly
vulnerable to problems resulting from over-supply.
Evidence of factors that contribute to over-supply are not difficult to establish. In 1981,
Florida's Division of Plant Industry classified 1,882 commercial-sized nurseries. Yet in 1985, there
were more than 1,620 commercial nurseries in the three southeast counties alone. This growth in the
number of firms is attributed primarily to, 1) the low entry and exit barriers characteristic of this
industry, and, 2) some plant products remained profitable which provided the economic incentive
to draw more firms into the industry in spite of problems that accompany over-supply, such as low
product prices and shrinking profit margins (Haydu, 1989). Therefore, despite the substantial
economic role of the largest producers, factors like homogeneity of product and the continued entry
of new firms, effectively made this market environment highly competitive.
Market Distribution Areas
Table 3 illustrates several noteworthy features concerning the distribution of Florida foliage
products. First, foliage plants were sold over a broad geographic area of the United States. This
distribution pattern was similar to that found in the Mathis and Degner (1981) study. A second
observation is that the vast majority of foliage (81%) was shipped out of Florida, which is markedly
different from distribution patterns of other ornamental products. Generally, larger firms shipped
a greater portion of products to more distant markets than smaller firms.
Table 3--Percentage Sales to Various Market Distribution Areas for Foliage Products by Firm Size, 1985.
MARKET AREA -----------------FIRM SIZE-----------------------
Small Medium Large V-Large Total
-.---------------- Percent -------------------
Florida 66 22 20 9 19
Southeast 5 12 10 22 13
Northeast 16 20 30 20 24
Midwest 6 14 16 17 16
Southcentral 1 11 8 17 15
West 2 11 1 13 7
Canada 4 5 12 1 7
Export 0 5 3 1 3
Total 100 100 100 100 100
The share of exports in total sales in 1985 (3%) had increased relatively greatly from the one
percent share exported in 1981. One would anticipate that as the domestic market becomes more
competitive, nurserymen will examine more closely the potential opportunities available in offshore
markets. This point is particularly salient given the obvious comparative advantage Florida growers
had by producing in a subtropical climate, in addition to the considerable importance European
consumers placed on ornamental plants (Dunn, 1981). From a policy perspective, an "ex post"
analysis would also be useful to determine if the upward trend in export sales that transpired during
the '81-85 period (from 1 to 3 percent) actually continued into the present.
The major market for woody ornamental products was (and continues to be) new housing
developments, both within and outside Florida. In 1981, Mathis & Degner reported that 50 percent
of woody materials were shipped out of state. In contrast, figures in Table 4 show that growers in
southeast Florida sold nearly all their product (98 percent) within Florida. In fact, the greatest
portion of statewide sales (33 percent) took place within a 25 mile radius. A logical explanation for
this practice is that local demand for landscape materials was more than adequate to absorb local
supply. Markets close to home have obvious economic advantages over more distant markets, such
as lower shipping costs, less potential plant damage from transportation problems, and easier access
to critical market-related information.
Differences by firm size show that the largest producers (in the sample) did not produce
woody ornamentals. In terms of selling patterns, small and medium-sized firms tended to sell closer
to home, with nearly 60 percent of sales within 50 miles. When compared to smaller nurseries, large
growers shipped nearly twice as much product to markets further than 50 miles.
Table 4. Percentage Sales to Various Market Distribution Areas for Woody Ornamentals, 1985.
LOCATION ..-----------FIRM SIZE--------------
Small Medium Large V-Large Total
-------........ Percent ----------------
Within 25 mi. 37 39 8 0 33
25-50 mi. 21 27 32 0 27
50-100 mi. 20 23 57 0 29
Elsewhere Florida 20 9 2 0 9
Outside Florida 2 1 1 0 1
Export 0 1 0 0 1
TOTAL 100 100 100 100 100
Table 5 provides a breakdown of market areas for potted flowers produced by southeast
Florida nurserymen in 1985. Most of the product was distributed to local markets (72 %). In terms
of firm-size characteristics, very large growers behaved differently from their smaller counterparts
by shipping half of their total sales out of state, particularly to the southeast (25%), northeast (10%),
and midwest (10%). All other firm sizes shipped only minor amounts (12 percent or less), with
nothing sold further than southeastern markets. The remainder of potted flowers were shipped to
other states in the southeast (16%), northeast (5%) and midwest (4%).
Table 5. Percentage Sales to Various Market Distribution Areas for Potted Flowers, 1985.
LOCATION ------.......-------FIRM SIZE---------------
Small Medium Large V-Large Total
------------------ Percent ----------------------
Florida 84 87 100 50 72
Southeast 12 10 0 25 16
Northeast 3 1 0 10 5
Midwest 0 1 0 10 4
Southcentral 0 0 0 0 0
West 0 0 0 0 0
Canada 0 0 0 0 0
Export 0 1 0 5 3
Total 100 100 100 100 100
"Marketing" has become an industry buzzword today. The mere mention of the word is often
meant to summarily describe all of its problems. As commonly understood by many, marketing means
"how can I get more return for the products I have now?" But the real meaning of marketing has to
do with determining consumers needs, and providing products that meet those needs. If the
ornamentals industry is to remain competitive with other luxury consumer goods, a more market-
based business philosophy must be developed. Consumer preferences for plant products have changed
substantially in recent years. For instance, a 1987 national consumer survey conducted by the Gallup
organization found an overall 26 percent decline in consumer purchases of houseplants from the
previous year (Butterfield, 1989).
Strong personal sales are at the heart of Owner
marketing programs. Effective personal selling 75%
requires specialized skills and time commitments
that are often at odds with the demands of general
business management. According to surveyed firms,
the owner was the primary salesperson for 75
percent of all firms, and for 90 percent of small
firms (Figure 5). Only 22 percent of firms
employed the services of a professional salesperson, Sa I esman
indicating a lack of understanding of the time and 22%
effort required to be effective at personal selling. ana
Sales methods were an important marketing 2%
consideration. The telephone was the primary Fig. 5. Primary Salesperson.
channel of direct sales for 78 percent of firms, and
for 89 percent of large and very large firms (Figure
6). Smaller firms tended to rely less on the telephone, which is a relatively expensive means of
communication. Personal visits were a primary sales method for 10 percent of firms, and printed
hand-out materials were used by 7 percent. Trade shows were another important sales tool. However,
only 43 percent of firms attended a trade show, and only 19 percent attended two or more shows.
In the realm of advertising media, price
lists were the main form for 79 percent of firms,
trade publications were used by 14 percent, and 4
percent used local media (Figure 7). The high T*Iepho 71
degree of dependence on price lists for advertising
media is an indication that industry marketing is
done on the basis of price rather than value. | other 4
Me cdia advertising 2%
PrF I nt.e nr)-OUt 7%
Pesormal visit QX
One indicator of business development
efforts is support for research on new products and
markets. In this area, Florida ornamental producers Fig. 6. Primary Sales Method.
have exhibited little initiative. According to
managers surveyed, less than 10 percent of annual
sales were budgeted for market expansion efforts. Also, less than 0.3 percent of production area was
used for research or product testing. Roughly half of managers favored generic product promotion
regardless of firm size. Although the recent defeat of the proposed foliage marketing order was
widely blamed on the small grower class, these results indicate that the proposal was probably equally
unpopular across the firm-size spectrum.
Conclusions Price lists 7%B
Florida's ornamentals industry faces great
challenges to remain a sustainable and profitable other i%
industry. Many standard business practices were Local mfedla 3%
found to be lacking or absent entirely, according Trade srcows
to results of a large survey of producers in South
Florida in 1985. Needs were emphasized for Trade pl 15%
increased training of employees and management,
more attention to employee fringe benefits
programs, greater use of professional sales Figure 7--Primary Advertising Method
personnel, and more industry support of research Employed.
and development activities.
Butterfield, Bruce, 1989. Participation level; sales off. Lawn and Garden Marketing, Feb.,p. 6-9.
Dunn, Charles W. 1981. European Market Potential for United States Tropical Ornamental Foliage
Plants. A foreign market development report for the USDA, F.A.S., project # 508301.
Economic Research Service (ERS), 1989. Economic Indicators of the Farm Sector, State Financial
Summary, 1988, USDA, Washington.
Florida Agricultural Statistics Service (FASS), 1989. Farm Labor, Florida, May, 4pp. Orlando, FL.
Haydu, J. 1989. What's Happening to Florida's Ornamental Industry?. Florida Nurseryman 36(9),
Sept., pp. 25, 27, 29, 30.
Marion, Bruce W. 1985. The Organization and Performance of the U.S. Food System. NC 117
Committee, USDA, Univ. Wisconsin, Madison.
Mathis, K. & Degner, R. 1981. The Florida Nursery Industry: Current Economic Status and Market
Trends. Industry Report #81-13, Fl. Ag. Market Research Center, Food & Resourc
Economics Dept., Univ. Fla., Gainesville.
National Agricultural Statistics Service (NASS), 1989. Floricultural Crops. USDA, Washington, D.C.
Smith, C., Miller, M., Scarborough, E., and Strain, J.R. 1981. An Economic Overview of the
Tropical Foliage Plant Industry. Econ. Info. Report 156, Food & Resource Economics Dept.,
Univ. Fla., Gainesville.
Smith, C.N. 1980. Evolution of the Florida Foliage Plant Industry. Proc. Fla. State Hort. Soc. 3:208-