• TABLE OF CONTENTS
HIDE
 Front Cover
 Abstract
 Introduction: Florida's ornamental...
 Methods
 Results
 Conclusion
 Literature cited
 1994 survey questionnaire














Group Title: Economics report - University of Florida Agricultural Experiment Station ; 96-1
Title: The changing structure of Florida's ornamental plant nursery industry, 1989-1994
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 Material Information
Title: The changing structure of Florida's ornamental plant nursery industry, 1989-1994
Series Title: Economics report
Physical Description: 22 p. : ill. ; 28 cm.
Language: English
Creator: Hodges, Alan W ( Alan Wade ), 1959-
Haydu, John J
Publisher: University of Florida, Institute of Food and Agricultural Sciences, Florida Agricultural Experiment Station, Florida Cooperative Extension Service, Food and Resource Economics Dept.
Place of Publication: Gainesville FL
Publication Date: [1996]
 Subjects
Subject: Ornamental plant industry -- Florida   ( lcsh )
Bedding plant industry -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
bibliography   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographical references (p. 21.)
Statement of Responsibility: Alan W. Hodges, John J. Haydu.
General Note: Cover title.
General Note: "March 1996".
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Bibliographic ID: UF00027541
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 002094348
oclc - 35023846
notis - AKT3047

Table of Contents
    Front Cover
        Front Cover
    Abstract
        Page 1
    Introduction: Florida's ornamental plant industry
        Page 1
        Page 2
    Methods
        Page 3
        Page 4
    Results
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
        Page 19
    Conclusion
        Page 20
    Literature cited
        Page 21
    1994 survey questionnaire
        Page 22
        Page 23
        Page 24
        Page 25
        Page 26
        Page 27
        Page 28
        Page 29
        Page 30
Full Text







The Changing Structure of Florida's
Ornamental Plant Nursery Industry, 1989 to 1994

Alan W. Hodges and John J. Haydu1
March 1996


Abstract

Florida's large ornamental plant nursery industry has undergone significant
structural changes during the latter-1980s and 1990s in response to slowed market
growth and increasing competition. Industry surveys conducted in 1989 and 1994
provided information to evaluate these economic trends from questions concerning
product sales, marketing practices, and employment. Mailed questionnaires were
received from 104 firms in 1989 and 183 firms in 1994. Results showed that the
industry is evolving toward larger firms, with increasing diversity of ornamental plant
products, a shift in markets from landscaper to retailer outlets, and wider distribution
of products outside the state of Florida.

Key words: ornamental plants, Florida, sales, marketing, industry structure.


Introduction: Florida's Ornamental Plant Industry

Nursery and greenhouse crops represent the sixth largest agricultural
commodity group in the United States, with a farmgate value of $7.6 billion in 1992
(US Census Bureau, 1994). Floriculture and environmental horticulture is the fastest
growing segment of U.S. agriculture, averaging 9 percent annual growth during 1982-
91 (Johnson and Johnson, 1993). Florida is the second leading producer of
ornamental plants in the US, with an industry value of $1.0 billion in 1992 (Census
Bureau, 1994). The state of Florida dominates the US market for tropical foliage
crops, with over 90 percent of sales. Ornamental crops are the third largest
agricultural industry in Florida, following citrus and vegetables.
Sales of ornamental plant products from Florida rapidly increased during the
1970s and early 1980s, then experienced slower but steady growth during the latter
1980s as shown in Figure 1. As the ornamental horticulture industry matured during
the 1980s it incurred problems common to other parts of U.S. agriculture, including
over-production, depressed prices, reduced profitability and an increased rate of
business failure (Hodges and Haydu, 1989). Rates of return on equity for floricultural
and environmental horticulture firms in the United States declined from 6.9 percent
in 1987 to 2.3 percent in 1991 (Johnson and Johnson, 1993). In contrast, Florida
ornamentals producers experienced a decline in rate of return on equity during an
earlier period, then began to recover during 1990-91 (Hodges, 1992 and unpublished
data), as shown in Figure 2.


SAlan Hodges is an Economic Analyst; John Haydu is an Extension Economist and Associate Professor;
Food & Resource Economics Department, University of Florida, Gainesville.


UNIVERSITY OF FLORIDA LI1:' i '








The Changing Structure of Florida's
Ornamental Plant Nursery Industry, 1989 to 1994

Alan W. Hodges and John J. Haydu1
March 1996


Abstract

Florida's large ornamental plant nursery industry has undergone significant
structural changes during the latter-1980s and 1990s in response to slowed market
growth and increasing competition. Industry surveys conducted in 1989 and 1994
provided information to evaluate these economic trends from questions concerning
product sales, marketing practices, and employment. Mailed questionnaires were
received from 104 firms in 1989 and 183 firms in 1994. Results showed that the
industry is evolving toward larger firms, with increasing diversity of ornamental plant
products, a shift in markets from landscaper to retailer outlets, and wider distribution
of products outside the state of Florida.

Key words: ornamental plants, Florida, sales, marketing, industry structure.


Introduction: Florida's Ornamental Plant Industry

Nursery and greenhouse crops represent the sixth largest agricultural
commodity group in the United States, with a farmgate value of $7.6 billion in 1992
(US Census Bureau, 1994). Floriculture and environmental horticulture is the fastest
growing segment of U.S. agriculture, averaging 9 percent annual growth during 1982-
91 (Johnson and Johnson, 1993). Florida is the second leading producer of
ornamental plants in the US, with an industry value of $1.0 billion in 1992 (Census
Bureau, 1994). The state of Florida dominates the US market for tropical foliage
crops, with over 90 percent of sales. Ornamental crops are the third largest
agricultural industry in Florida, following citrus and vegetables.
Sales of ornamental plant products from Florida rapidly increased during the
1970s and early 1980s, then experienced slower but steady growth during the latter
1980s as shown in Figure 1. As the ornamental horticulture industry matured during
the 1980s it incurred problems common to other parts of U.S. agriculture, including
over-production, depressed prices, reduced profitability and an increased rate of
business failure (Hodges and Haydu, 1989). Rates of return on equity for floricultural
and environmental horticulture firms in the United States declined from 6.9 percent
in 1987 to 2.3 percent in 1991 (Johnson and Johnson, 1993). In contrast, Florida
ornamentals producers experienced a decline in rate of return on equity during an
earlier period, then began to recover during 1990-91 (Hodges, 1992 and unpublished
data), as shown in Figure 2.


SAlan Hodges is an Economic Analyst; John Haydu is an Extension Economist and Associate Professor;
Food & Resource Economics Department, University of Florida, Gainesville.


UNIVERSITY OF FLORIDA LI1:' i '









Production and
marketing patterns in Florida's
tropical foliage industry were
described by Smith et al
(1981), and practices in the
state's woody ornamental
industry during the middle
period of its evolution were
described by Mathis and
Degner (1981). Hodges and
Haydu (1992) reported
findings of a 1989 survey on
marketing practices for the
woody ornamental sector of
the nursery industry in Florida
at a time when increasing
competition was beginning to
be felt. The present paper
summarizes results of an
updated survey to describe
changes occurring in the
ornamentals industry during
the past five years as the
Florida nursery industry
underwent an economic
recovery from the recession
during the 1980s.





[b0



rr 3 Q~C.o'
f^^L~
F"^on.'


1,200


1,000


600


200


Flor feuturQ
Other Ornamentals
Al Ornaenftael


1994 19I5 1986 1997 199B 1989 1990 1991 1992
Year


Figure 1. Sales of ornamental plant
Florida, 1984-1992.


--- US


products from


S- South US F lor Ida


Figure 2. Rates of return to equity, ornamental
horticulture firms in the US, Southern US and
Florida, 1987-91.


L ii '.. i


SI I I I I I I


'.








Methods


Surveys of Florida's ornamental nursery industry were undertaken as part of the
National Nursery Survey sponsored by the Southern Regional Association of
Agricultural Economists (S-103 Committee). Survey questionnaires were mailed to
selected firms in 1989 and 1994 requesting information on business activity for fiscal
years 1988/89 and 1993/94, respectively. Information was collected on age and
organization of the business, annual sales volume and monthly distribution,
employment, product types, production systems, interstate trade, sales transaction
and advertising methods, market outlet types, product pricing, use of computers, and
factors limiting firm expansion. Response categories used for each question are
summarized in Table 1. Questionnaires used in the two survey years were very similar,
with minor exceptions. A copy of the questionnaire used in 1994 is presented in
Appendix A.
Survey sampling was concentrated on the largest 10 percent of firms in the
industry. Two source lists used to select firms in the population were the state of
Florida's Department of Plant Industry (DPI) registry of certified nurseries, and the
membership list of the Florida Nurseryman and Grower's Association (FNGA, Orlando).
The DPI list was used to select firms having greater than 50,000 units in plant
inventory, and the FNGA list was used to select additional firms having 8 or more full-
time employees that did not meet the first criterion. A total of 409 firms were
contacted in 1989 and 610 firms were contacted in 1994. Survey questionnaires
were sent to selected firms by first class mail, with a cover letter from the trade
association (FNGA) president, and an addressed, postage-paid return envelope. Two
separate mailings were done approximately two months apart to increase the response
rate. The survey was administered without identification of respondents, so matching
of repeated observations and estimation of total industry values based upon expansion
factors were not possible. Returned questionnaires were forwarded to the project
leader for data entry and consistency checking, and compilation of a national
database. Data sets for Florida respondents for both years were combined for analysis
of changes between 1989 and 1994.
Analysis of marketing practices was based upon the annual sales reported by
survey respondents. Annual sales for each firm were estimated at the midpoint of the
sales range indicated (see Table 1), except for the largest sales range ($10 million or
greater), in which sales were estimated at $10 million. Sales for each product type,
media type, outlet type and destination were estimated by multiplying the firm's total
sales against the percentage of sales reported for each category, and these results
were normalized in relation to the reported totals to account for missing data. Results
were compiled for four annual sales volume classes: small, less than $500 thousand;
medium, $500 thousand to $1 million; large, $1 million to $3 million; very large,
greater than $3 million. In some cases where explicitly noted, sales reported in the
1994 survey were adjusted for inflation during the 1989 to 1994 period by applying
a deflator factor (0.949) based upon the producer price index (US Commerce Dept.)
to state results in constant 1989 dollars.










Table 1. Summary of information collected in survey questionnaires, 1989 and 1994.

Information Nature of Response Response Categories

Sales in previous year Check appropriate category or less than $50M, $50-99M $100-499M, $500-999M, $1-
(1988-89, 1993-94) give actual amount 1.99MM, $2-2.99MM, $3-3.99MM, $4-4.99MM, $5-
5.99MM, $6-6.99MM, $7-7.99MM, $8-8.99MM, $9-
9.99MM, $10MM or more.

Employment Number of employees Permanent, temporary employees

Nursery products sold Percentage of sales Deciduous shade trees, deciduous shrubs, broad-leaved
evergreen shrubs, narrow-leaved evergreen shrubs,
evergreen trees, vines and ground covers, roses,
herbaceous perennials, fruit trees, small fruits, foliage
(1994 only), propagating material, other.

Production area used Acres Field, open container, greenhouse/shadehouse, other,
(1994 only) total.

Rooting media Percentage of sales Bare root, balled/potted, balled/burlapped, process balled,
production system types container, field grow bags, in-ground containers, other.

Sales transaction Percentage of sales Trade show, telephone, and in-person, for both
methods negotiated and non-negotiated orders, and mail order.
Percentage of sales Repeat customers.

Yes/no and percentage of sales Brokerage for other growers.

Yes/no and percentage of sales Contract sales (1994 only).

Market seasonality Percentage of sales Months (Jan, Feb, Mar, etc.).

Market outlet types Percentage of sales Retail, wholesale. Within wholesale category: retailers,
landscape firms and re-wholesalers. Within retailer
category (1994 only): mass merchandisers, garden
centers.

Market areas Percentage of sales to top 5 List of states and wholesale market outlet type (retailers,
destination states or foreign landscapers, re-wholesalers).
markets

Origin of plant material Percentage of purchases from List of states.
used top origination 5 states

Factors determining Rank factors 1 to 5 Cost of production, inflation, comparison to other firms,
product pricing grade of plants, market demand, time of year, inventory,
last year's price, other.

Factors limiting firm Rank factors 1 to 5 Weather, market demand, water supply, own
expansion management, environmental regulation, other government
regulation, ability to hire competent management, land,
labor, capital, competition

Factors limiting Rank factors 1 to 5 Capital, marketing, personnel, production, transportation.
geographic scope of
trading

Advertising Expenses Percentage of sales allocated Yellow pages, billboards, trade journals, trade shows,
for advertising, percentage of newspapers, radio, catalogs, newsletters, other.
budget by media type.

Age of business Year established

Business functions Check any that apply Word processing, accounting, inventory, financial,
computerized marketing, communications, plant location, landscape
design, production scheduling; now and within next 5
years:









Results


Completed questionnaires were received from 104 firms in 1989 and 183 firms
in 1994, representing response rates of 25 and 30 percent, respectively. Sales
information was given by 94 firms in 1989 and 177 in 1994.

Sales and Firm Size

Sales reported by survey respondents totaled $100 million in 1989, and $249
million in 1994. Average sales per firm rose from $1.06 million in 1989 to $1.41
million in 1994. After adjusting for inflation during the 1989-94 period, average sales
per firm in 1994 were $1.34 million in constant 1989 dollars, a 26 percent increase.
The number of firms and sales for each firm size class are summarized in Table 2.
Firms having $1 million or more in annual sales rose from 35 percent of survey
respondents in 1989 to 45 percent in 1994 ("large" and "very large" in Table 2). The
share of industry sales by these same firms increased from 74 percent in 1989 to 82
percent in 1994. Thus, the ornamental plant industry in Florida became increasingly
dominated by larger firms.

Table 2--Number of firms and product sales by firm size class, surveyed ornamental
nurseries in Florida, 1989 and 1994.
Firm Firm Sales Number and Percentage of Total Sales (millions $ and Percentage
Sales Range Class Firms Reporting Sales of Sales)
($ millions)
1989 1994 1989 1994
N % N % SM'M % SMM %
Less than .50 Small 36 38 60 34 8.5 8 16.1 6
.50 to .99 Medium 25 27 38 21 18.0 18 28.5 11
1.0 to 2.9 Large 26 28 58 33 41.8 42 100.0 40
3.0 or greater Very Large 7 7 21 12 31.9 32 104.5 42
Total 94 100 177 100 100.2 100 249.1 100


Employment and Labor Productivity

Total employment reported by survey respondents increased from 3,300
employees in 1989 to 5,400 in 1994, or an average employment per firm of 26.4 in
1989 and 29.6 in 1994. This is another indicator of increasing firm size in the
industry. Table 3 presents permanent and total employment (including temporary
employees) and average sales per employee by firm size class. As a fundamental
measure of labor productivity, sales per employee increased from $43.7 thousand in
1989 to $49.5 thousand in 1994. When adjusted for inflation during the 1989-94
period, the labor productivity in 1994 was 47.0 thousand per employee, only 7.5
percent higher than in 1989. Larger firms generally had higher sales per employee in
both survey years, although very large firms in 1994 were below average for that








year. A higher ratio of production workers to managers (non-production workers) for
larger firms represents an important labor economy of size. These findings are
consistent with results for detailed financial analysis of ornamental nurseries in Florida
(Hodges, 1992). Firms in 1994 indicated a greater use of permanent rather than
temporary or part-time labor, with 92 percent of total employment as permanent
employees, compared to 84 percent in 1989.

Table 3--Employment and sales per employee, by firm size class, surveyed
ornamental plant nurseries in Florida, 1989 and 1994.
Firm Persons Employed Sales Per
Sales Permanent
Class 1989 1994 Employee
(thousands $)

Perma- Total (%) Perma- Total (%) 1989 1994
nent nent
Small 259 344 13 432 490 9 32.7 37.1
Medium 437 523 19 541 612 11 41.2 52.7
Large 975 1,105 40 1,682 1,864 34 42.8 59.5
Very Large 621 771 28 2,374 2,443 45 51.4 44.0
Total or 2,292 2,743 100% 5,029 5,409 100%
Average 43.7 49.5


Production Area and Space Productivity

Total acreage reported by 1994 survey respondents was about 7 thousand
acres, or 38.6 acres per firm. Table 4 summarizes production areas for field,
container, greenhouse or shadehouse, and other production systems by firm size
class. Field production systems for growing crops in native soils were rather space
extensive, representing 43 percent of the acreage reported. Container production,
using an artificial rooting media in growing containers placed in open sun represented
35 percent of total acreage. Greenhouse and shadehouse production systems with
enclosed structures for intensive cultivation of ornamental crops in a favorable
microclimate made up 15 percent of total acreage. Changes in production area since
the 1989 could not be evaluated because comparable data were not collected in the
first survey.








Table 4. Production acreage by production system type and firm size class for
surveyed ornamental plant nurseries in Florida, 1994.


Firm Sales
Class


Field Container


Greenhouse
Shadehouse


Small 885 244 98 137 1,127 16%
Medium 701 447 124 85 1,421 20%
Large 1,024 973 362 323 2,636 37%
Very Large 416 833 449 348 1,889 27%
Total 3,026 2,497 1,033 894 7,073 100%
Column 43% 35% 15% 13% 100%
Percent

Sales per acre of production area is a measure of nursery space productivity.
Nursery firms in 1994 had sales averaging $35 thousand per acre. Sales per acre
varied directly with firm size, ranging from $14 thousand for small firms to $55
thousand for very large firms (Table 5). This result is consistent with Hodges' (1992)
finding that larger and more profitable nursery firms in Florida had greater space
productivity due to higher inventory turnover and higher levels of capital investment
and labor.


Table 5. Sales per acre by


firm size class for surveyed ornamental plant nurseries in
Florida, 1994.


Firm Sales
Class


Sales Per Acre
($ thousands)


Small 14.2
Medium 20.1
Large 38.9
Very Large 55.3
All 35.2


Other


Total


Total
Row
Percent








Product Sales


Sales of specific nursery products are summarized in Table 6. Nearly all itemized
categories of plant products were significantly reduced as a share of total sales
between 1989 and 1994, except herbaceous perennials and propagating materials.
The five largest categories of plant products representing all trees and shrubs declined
from 71 percent of sales in 1989 to 40 percent in 1994. Only one of these five
categories (broad-leaved evergreen shrubs) held over 10 percent of market share in
1994. Sales of "other" plant products, i.e. those not otherwise classified, grew from
5 to 35 percent of total sales. These trends are evidence of increasing diversity and
variety of plant products in Florida's ornamental nursery industry. Tropical foliage was
the largest single product in 1994 ($97 million), however, this category was not
included in the 1989 survey.


Table 6--Product sales of surveyed

Product


ornamental plant nurseries in Florida, 1989 and
1994.


1989


Millions $


Percent


1994


Millions $


Percent


Deciduous Shade & Flowering
Trees


Deciduous Shrubs


11.8 13


6.0 6


Broad-leaved evergreen shrubs
Narrow-leaved evergreen shrubs
Evergreen trees
Vines and ground covers
Roses
Herbaceous perennials


Fruit trees
Small fruits


Propagating Material (liners)
Other (not classified)
Total (excluding foliage)


22.5 24
12.6 13
14.1 15
8.1 9
2.8 3
1.1 1


5.8 6


0.3 <1
4.1 4
4.5 5


93.7 100%


25.5 17
12.4 8
12.0 8
9.1 6
4.7 3
4.0 3
3.9 3
0.3 <1


9.1 6


57.5 39


149.3 100%


Tropical foliage plants na* 97.2 39
Total (Including foliage) 246.5 100%
Data on sales of tropical foliage was not collected in 1989 survey.


8.5 6

2.2 1








In order to better gauge changes in market share of various nursery products,
the distribution of product sales reported by surveyed firms in 1989 and 1994 (from
Table 6) were applied to official figures on total Florida ornamental sales to estimate
sales of each product type. Total Florida sales of nursery and floriculture crops
reported in the Census of Agriculture (US Census Bureau, 1994) increased from $620
million in 1987 to $778 million in 1992. The percentage share of each product type
was applied within the product groupings recognized by USDA for "nursery crops"
and "floriculture" as shown in Table 7. The change in sales between 1987 and 1992
in constant dollar terms was expressed on a percentage basis. Sales were significantly
increased during this period for evergreen shrubs, vines and ground covers,
propagating material and "other" products. Total sales of "other" non-itemized
products grew 121 percent from $60 to $149 million. Sales substantially decreased
for deciduous shrubs, roses and herbaceous perennials. Foliage sales taken directly
from the Census figures increased from $280 to $297 million. Although the sales of
foliage and deciduous shade and flowering trees increased during 1987-92, these
changes did not keep pace with inflation.

Table 7. Estimated industrywide product sales of Florida floriculture and nursery
crops, 1987 and 1992.
Estimated Sales
Group Product Industry Sales Change
(Millions $) (%) in
constant
1987 1992
1987 $

Nursery Deciduous Shade & Flowering Trees 31.5 31.6 -10
crops
Deciduous Shrubs 16.0 8.3 -54

Broad-leaved evergreen shrubs 59.9 95.0 42
Narrow-leaved evergreen shrubs 33.5 46.3 24
Evergreen trees 37.5 44.6 6
Vines and ground covers 21.5 33.8 41
Fruit trees 15.4 14.6 -15
Small fruits 0.7 1.2 53
Propagating Material (liners) 10.9 33.8 178
Floriculture Foliage 280.3 297.4 -5
Roses 37.3 12.3 -70
Herbaceous perennials 14.8 10.4 -37
Other 60.3 148.6 121
Total 619.7 777.8 12








Rooting Media Production Systems


Nursery product sales in Florida became increasingly dominated by container
production systems, from 78 percent of total industry sales in 1989 to 85 percent in
1994 (Table 8). Florida's mild winter climate allows year-round plant production in
above-ground containers without risk of freeze damage to roots, and the state's poor
native soils are generally unfavorable for field production systems. Sales of all types
of bare-root and root-balled stock decreased from 22 percent in 1989 to only 7
percent in 1994. On the other hand, in-ground container production systems,
including fabric "grow-bags", increased from a negligible level in 1989 to 7 percent
of sales in 1994. The trend toward container systems has occurred throughout the
United States due to their greater labor and space productivity.

Table 8--Sales by rooting media production systems, surveyed ornamental plant
nurseries in Florida, 1989 and 1994.
Rooting Media Production 1989 1994
System Millions $ Percent Millions $ Percent

Container 77.5 78 204.5 85
Bare Root 6.0 6 5.5 2
Root Balled (potted, 15.4 16 12.4 5
burlapped or processed
In-ground containers and <0.0 <1 17.9 7
other
Total 98.9 100% 240.3 100%


Market Outlets

Over 92 percent of Florida's ornamentals were sold through wholesale outlets
rather than direct retail outlets. Wholesale outlets include re-wholesalers, landscapers
and retailers. Re-wholesalers are brokers, distributors, or other nursery firms, who buy
and handle plants for resale to retailers or landscapers. Retail merchandisers of nursery
products include garden supply stores and large chain stores with garden and plant
departments which sell directly to consumers. Commercial landscapers use nursery
products for use in new landscape construction or renovation.
Sales through wholesale market outlets for Florida ornamentals are summarized
in Table 9. Retailers became the largest outlet in 1994 with 45 percent of total sales,
which was a substantial increase from 26 percent in 1989. Landscapers declined in
importance as a market outlet from 45 percent share in 1989 to 24 percent in 1994.
Re-wholesalers represented nearly the same share of the market in both years. Among
retailer market outlets in 1994, mass merchandisers, garden centers and other
retailers accounted for 20 percent, 19 percent and 7 percent of total sales,
respectively.








Table 9. Sales to wholesale outlets, surveyed
ornamental nurseries in Florida, 1989 and 1994.


Wholesale Outlets


1989


1994


Millions $ Percent Millions $ Percent


Retailers
Mass merchandisers


24.1 27


Garden Centers
Other Retailers


Landscapers
Re-wholesalers


41.0 45
25.2 28


102.5 45
44.8 20
42.5 19
15.1 7
54.8 24
69.5 31


90.3 100%


226.9 100%


Data on not collected in 1989 survey.

Other nurseries are an important re-wholesaler outlet for many firms in order to
offer wider product lines and take advantage of a strong marketing organization. Fifty
one percent of firms reported re-selling finished nursery products purchased from
other growers in 1994, representing 8 percent of total sales.


Total








Market Distribution Areas


Destinations of ornamentals sales are summarized by region in Table 10. Foliage
product specialty firms in 1994 were excluded from this analysis to make appropriate
comparisons between 1989 and 1994 survey data. The state of Florida was the
largest market area, but sales within the state declined from 77 percent of industry
sales in 1989 and 67 percent in 1994. This decrease in within-state sales was
matched by a commensurate increase in sales to other regions. Sales to the
southeast, southcentral, northcentral, and western US markets, all increased as a
percentage of total sales between 1989 and 1994, while sales to the northeast and
exports to foreign countries were decreased.


Table 10. Sales by


Destination
Region


region, non-foliage specialty surveyed ornamental nurseries in
Florida, 1989, 1994.


1989


Millions $


Percent


1994"


Millions $


Percent


Percent
Change


Florida
Southeast
Northeast
Southcentral
Northcentral


West
Export
Total


60.8 77.3
8.1 9.7
6.8 7.8
0.3 0.4
0.3 0.4
0.2 0.2
3.4 4.2
80.0 100


63.5 67.3
16.2 17.1
3.2 3.4
8.6 9.1
1.1 1.1
1.6 1.6
0.3 0.3
94.3 100


S1994 sales represent non-foliage firms only.

Trends in sales by Florida's non-foliage ornamental firms to individual US states
were consistent with the regional picture above. Sales to the top 10 states and their
percentage of industry sales are shown in Table 10a. Sales to all major individual
states, except Florida and New Jersey, were increased both in dollar value and as a
percentage of total sales in 1994. Sales were notably increased to Texas, the
Carolinas, Louisiana, Virginia and California. Eight of the top destination states for
Florida ornamentals were in the Southeast or Southcentral US regions.


-10.0
7.4
-4.4
8.7
0.7


1.4
-3.9








Table 10a--Sales by non-foliage firms to top 10 states, surveyed ornamental
nurseries in Florida, 1989 and 1994.
Destination 1989 1994"
State
Millions $ Percent Millions $ Percent
Florida 60.8 77.3 63.5 67.3
Texas 0.3 0.4 5.8 6.1
Georgia 4.4 5.6 5.5 5.8
South Carolina 1.2 1.6 3.3 3.5
Alabama 1.1 1.3 2.5 2.6
North Carolina 0.7 0.4 2.2 2.4
Louisiana <0.1 <0.1 1.8 1.9
Virginia <0.1 <0.1 1.4 1.5
California 0.2 0.2 1.3 1.4
New Jersey 2.0 2.4 1.1 1.2
S1994 sales represent non-foliage firms only.


Sales of ornamental products through the three types of market outlets, within
Florida and outside the state are summarized in Table 11. For all outlet types, the
share of within-state sales declined between 1989 and 1994, mirroring the results
presented above. The share of within-state sales was highest for landscaper outlets
in both survey years, and lowest for rewholesalers.

Table 11. Sales by market outlet and within state vs. out-of-state, surveyed
ornamental nurseries in Florida, 1989 and 1994.
Outlet Region 1989 1994
Millions $ Percent Millions $ Percent

Retailers Florida 16.3 82.2 49.0 73.1
Non-Florida 3.6 17.8 18.0 26.9
Landscapers Florida 31.0 93.2 34.1 89.1
Non-Florida 2.3 6.8 4.2 10.9
Rewholesalers Florida 8.5 71.9 25.7 66.9
Non-Florida 3.3 28.1 12.7 33.1









Market Seasonality


The percentage of
annual sales reported for each
month in 1989 and 1994 are
shown in Figure 3. The
seasonality of Florida's
ornamentals sales was not as
marked as for other states
(Bryan and Brooker, 1989),
due to the very moderate
climate allowing year-round
growing and landscaping
activity. However, sales
generally became more
seasonal in 1994 as indicated
by the higher peak months and
lower slack months. Sales for
the peak months of March,
April, and May, represented 35
percent of annual sales in
1989, and rose to 38 percent


.n Feb Mar Apr May Jun JuI Aug 5;p Oct Nov Doc
Month

Figure 3--Percentage of annual sales for each month,
surveyed ornamental nurseries in Florida, 1989 and
1994.


in 1994. The lowest monthly sales occurred in July, August and September. This
pattern generally held true regardless of firm size, but very large firms had slightly
more peaked springtime sales and small firms had greater sales during the late fall and
early winter months. The change in seasonal distribution of Florida ornamentals sales
may be due to the increased sales to northern states with more seasonal landscaping
and gardening activity (Tables 10 and 10a).


12 -


I I








Sales Methods


Methods used for selling are a key part of marketing. Strategic considerations
include how contacts are made (trade shows, telephone, personal visit, mail order)
and whether or not sales are negotiated (prices adjusted for volume discounts, repeat
customers, etc.). The telephone was the most important sales medium in this survey,
accounting for 48 percent of total sales in 1989 and 63 percent in 1994 (Table 12).
In-person sales were the next most important medium, but declined from 43 percent
of sales in 1989 to 30 percent in 1994. Trade shows and mail order together
represented 6 to 9 percent of total sales in both 1989 and 1994. Among the
telephone and in-person sales, there was a greater share of non-negotiated sales (52
to 53%), than negotiated sales (38 to 39%) in both survey years. Firm size was
unrelated to the pattern of contact media used, but larger firms had a greater share
of negotiated sales, suggesting greater use of pricing incentives for marketing, and
some size economy in employment of sales personnel. Using a national data set for
the 1989 survey, Hinson, Turner and Brooker (1995) showed that firm age, sales
volume, legal organization, and regional location all significantly affected choice of
sales methods.

Table 12. Sales by type of contact and negotiation method, surveyed ornamental
nurseries in Florida, 1989 and 1994.
Sales Method 1989 1994
Millions $ Percent Millions $ Percent
Trade show orders 7.9 8% 12.3 5%
Telephone-negotiated 18.9 19% 60.7 25%
Telephone-non negotiated 28.7 29% 90.1 38%
In-person-negotiated 18.9 19% 33.9 14%
In-person-non negotiated 23.5 24% 38.8 16%
Mail order 1.5 1% 2.4 1%
Total 99.4 100% 238.3 100%

Repeat customers are the foundation of most businesses and are generally more
profitable because of lower overhead costs associated with the sales transaction. The
overall share of ornamentals sales to repeat customers remained steady at 84 percent
in 1989 and 85 percent in 1994. Very large firms had a somewhat higher share of
repeat business (90%), consistent with their greater emphasis on negotiating sales
transactions. The high percentage of business conducted with repeat customers
suggests that competition for customers in this industry may be characterized as a
zero-sum game, in which the acquisition of a new customer by one firm means loss
of a customer from another firm (Haydu, 1988). These findings, however, are contrary
to beliefs widely expressed by growers that customers have low loyalty to suppliers.








Forward contracting or preselling is an important strategy to reduce market
uncertainty in many businesses. In the nursery industry, most products have
traditionally been grown on speculation. In 1994, surveyed firms reported over $51
million in contract sales, or 20 percent of industry sales.


Advertising

Advertising is an important sales tool for the ornamental nursery industry
because of the wide diversity of products and lack of centralized market channels.
Expenses on advertising by type of media are shown in Table 13. Advertising budgets
represented 1.9 and 2.1 percent of sales in 1989 and 1994, respectively. Average
advertising expenses increased from $17,000 per firm in 1989 to $28,000 in 1994.
Trade shows were the most important form of advertising in 1989, representing 43
percent of total dollars spent, and trade shows and trade journals were equally
important in 1994 with 30 percent of expenses. Catalogs and newsletters were also
an important advertising medium with 19 percent of total expenditures in both years.
Radio, billboards and other media became more used in 1994 (up from 4% to 14%),
while the yellow pages and newspapers became less used (down from 8% to 4%, and
11% to 3%, respectively).

Table 13--Advertising expenses, surveyed ornamental nurseries in Florida, 1989
and 1994.
Advertising Medium 1989 1994
Thousands $ Percent Thousands $ Percent

Yellow Pages 143 8 204 4
Trade Journals 280 16 1,580 30
Trade Shows 757 43 1,579 30
Newspaper 192 11 134 3
Catalogs, Newsletters 334 19 972 19
Radio, Billboards and Other 70 4 716 14
Total 1,776 100 5,185 100


Use of Computers for Nursery Management

Use of computers in business has surged in recent years with the availability
of low cost, high performance microcomputer technology. Reported use of computers
currently and planned adoption within the next 5 years for major business functions
in ornamental nursery firms are presented in Table 14. In general, use of computers
in the industry advanced rapidly between 1989 and 1994, with rates of usage in
1994 exceeding the rate of planned usage in 1989. Over two-thirds of all firms








reported using computers in some way in 1994. The most common use for computers
was accounting (payroll records, accounts payable, accounts receivable), with 58
percent of firms reporting this use in 1989 and 69 percent in 1994. Use of computers
for word processing increased strongly from 37 to 63 percent of firms. Marketing and
inventory management were reported as computer uses by 35 and 39 percent of firms
in 1994. Other computer functions with use rates of at least 20 percent in 1994
included production, plant location, financial management and communications. Plant
location was the function with the highest planned rate of adoption over the next 5
years (21%), and may represent a large potential for software developers.

Table 14--Business functions computerized (percentage of firms), currently and
planned within next five years, surveyed ornamental nurseries in Florida, 1989 and
1994.
Computerized Function 1989 1994
Current Planned
5 years
Word Processing 37 63 5
Accounting 58 69 1
Production <1 21 11
Plant Location <1 20 21
Marketing 19 35 9
Inventory Management 34 39 8
Financial Management 7 21 10
Communications 14 27 18
Design <1 2 6
Other 5 14 7


Product Pricing

Pricing of products is a major issue in the ornamentals industry because of
widespread below-cost sales (Hodges and Haydu, 1989). While costs of production
have risen along with inflation in the general economy, prices for ornamental products
have remained relatively stable for a decade, resulting in a cost-price squeeze that
requires producers to analyze costs more carefully than ever before. Survey data
were collected on rankings of factors used to determine prices on a scale of one to
five, from most important to less important. The percentage of respondents who rated
each factor first or second, or within the top 5 are given in Table 15. Generally, the
pattern of results was similar for both survey years, indicating that growers'
perceptions of factors determining prices had not changed. Cost was the most








important factor determining prices. It was ranked first by 49 percent of respondents
in 1989 and 52 percent in 1994. Comparison to other firms was ranked first by 17
percent of growers in 1989 and 24 percent in 1994. Market demand was ranked first
by 17 percent in 1989 and 14 percent in 1994. These latter two factors were also
ranked second in importance by a high percentage of growers in both years. Grade of
plants was another factor which was considered secondarily in price determination,
and inventory levels (availability) of product were a tertiary consideration. Inflation,
time of year, and last year's price were considered important by a very small
percentage of respondents.

Table 15--Percentage of respondents ranking factors affecting pricing of products,
surveyed ornamental nurseries in Florida, 1989 and 1994.
Factors Determining Year 1994 Year 1989
Prices 1st 2nd All 1st 2nd All

Cost 52 16 19 49 13 19
Inflation 1 4 4 1 6 6
Comparison to other firms 24 17 17 17 30 19
Grade 2 17 13 11 12 12
Market demand 14 31 18 17 29 19
Time of Year 1 4 8 <1 2 4
Inventory 3 8 12 <1 7 13
Last year's price 1 4 6 3 <1 7
Other 2 <1 1 2 1 2




Business Growth and Limits to Expansion

In view of the maturation of ornamentals industry during recent years, there
is concern about what factors are limiting further expansion of the industry. Table 16
presents survey respondents' ratings of factors limiting business expansion, analyzed
in the same manner as pricing factors above. Market demand was the most important
limiting factor recognized. In 1989 it was first-ranked by 25 percent of firms, and in
1994 was top-ranked by 33 percent. Availability of capital was ranked as the most
important factor by 21 percent of respondents in both years. Environmental regulation
and other governmental regulation became more prominent factors in 1994. In
contrast, availability of land and labor, became less prominent factors in 1994. Thus,
there was a shift in perception that market and regulation factors were now more
important, while production-related factors were less important.








Table 16--Percentage of respondents ranking factors affecting potential for
business expansion, surveyed ornamental nurseries in Florida, 1989 and 1994.


Factors Limiting
Expansion


Weather
Market demand
Water supply
Own management
Environmental regulation
Other government reg.
Hired management
Land
Labor
Capital


Year 1994
1st 2nd


I


1 4
8 15
3 5
4 5
6 12
4 11
7 7
0 7
8 9
7 14


Year 1989


1st 2nd All


<1
25
2
6
1
3
5
17
14
21


Competition 6 13 6 12 10


6 12 10


6 13


Competition








Conclusions


Florida's ornamental nursery firms have adapted to changes in this increasingly
competitive industry by growing to larger size, developing new products and markets,
and achieving greater efficiencies through the use of new technologies such as
computers. During the 1989 to 1994 period, average sales per firm grew by 26
percent on constant-dollar terms, and average employment increased by 15 percent,
resulting in an 8 percent increase in sales per employee. The product mix of Florida's
nurseries become much more diverse, with sales of "other" plant products increasing
by from 5 to 39 percent of total sales. Markets for Florida ornamentals were
substantially expanded in other regions, with sales to destinations outside the state
increasing from 23 to 33 percent of total sales. Retailers such as garden centers and
mass merchandisers (chain stores) became the dominant market outlet for Florida
ornamentals rather than landscapers. The competitiveness of Florida ornamentals was
reflected in growers recognition of cost as the most important factor determining
prices, and market demand as the most important limiting factor for expanding
business. Use of computers in the industry has advanced rapidly, with over two-thirds
of all firms using computers in some way in 1994.








Literature Cited


Bryan, H.D. and J.R. Brooker. 1989. Tennessee's Ornamental Nursery Industry: Trade
Flows and Marketing Practices. Research Report 89-01 (Feb), Dept. Agricultural
Economics & Rural Sociology, Univ. Tennessee, Ag. Experiment Station.

Economic Research Service (ERS). 1989. Economic Indicators of the Farm Sector,
State Financial Summary, 1988, USDA, Washington.

Haydu, J.J. 1988. Barriers and Opportunities Facing Cooperatives in Improving the
Economic Coordination of the Farm Supply Industry. Ph.D. Dissertation, Mich. St.
Univ., East Lansing.

Hinson, R.A., S.C. Turner and J.R. Brooker. 1995. Transaction methods among US
wholesale nurseries. Agribusiness 11(2): 147-154.

Hodges, A.W. 1992. Business Analysis of Ornamental Plant Nurseries in Florida,
1990. Economic Information Report EI92-1 r, Food & Resource Economics Dept, Univ.
Florida, Gainesville.

Hodges, A.W. and J.J Haydu. 1992. Structure and Market Organization of Florida's
Landscape Plant Industry. J. Environ. Hort. 10(1): 32-36.

Hodges, A.W. and J.J Haydu. 1989. Major Issues Confronting the Florida
Ornamentals Industry. Proc.Florida State Horticultural Society 102: 86-89.

Johnson, D.C. and T.M. Johnson. 1993. Financial Performance of US Floriculture and
Environmental Horticulture Farm Businesses, 1987-91. StatisticalBulletin 862. USDA
Economic Research Service, Washington, D.C.

Mathis, K. and R. Degner. 1981. The Florida Nursery Industry: Current Economic
Status and Market Trends. Industry Report 81-13, Food & Resource Economics Dept.,
Univ. Florida, Gainesville.

US Bureau of the Census. 1994. Census of Agriculture, 1992. US Dept. Commerce,
Washington, D.C.



























Appendix A
1994 Survey Questionnaire













Second



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ac











Second National
Nursery Industry Survey


This data collection project is coordinated by the
S-103 Regional Research Committee. The
following states have active membership:
Alabama Arkansas Delaware
Florida Georgia Illinois
Kentucky Louisiana Mississippi
New Jersey New Mexico Nevada
Ohio Oregon Pennsylvania
South Carolina Texas Tennessee

Researchers and state nursery associations in
several more states are collaborating with S-103
to ensure coverage of all the major production
states.

Your participation is important to the success of
this multi-state project. Participation is voluntary,
so returning the questionnaire will imply informed
consent to record submitted data. All individual
responses to this survey will be kept strictly
confidential.

Your help and cooperation is greatly appreciated!

Thank You,

Marketing Research Committee (S-103)
Cooperating Agricultural Experiment Stations


Dear Nursery Manager:


The nursery/greenhouse industry has bee
the fastest growing segments of U.S. agr
However, the growth has not always bee
across all products and/or production reg

In 1989, the S-103 Regional Research C
conducted the "first" national survey and
1,500 usable questionnaires from nursery
managers in 23 states which accounted f
75 percent of production. Collecting dat
nurserymen in 1994 will provide us with
data set at a five year interval from the f
will permit us to identify trends and stru
changes that are impacting the relative ci
position of producers in various parts of
country.

The results of this market analysis should
you as a nursery manager anticipate and
adjustments in your firm's marketing stra
Our data collection effort and subsequent
will not alter the broad market forces tha
firm competitiveness and/or efficiency, b
identify broad trends that have occurred
past five years and perhaps identify eme
adjustments that affect the competitive p
among regions.

Your input is needed for an accurate
representation of the industry.


ie U1wrni-y o1 Tee- .w
El l-1215-OO7-94


* '1
[








NATIONAL


SURVEY


4. Does your business operate a nurse
state?


-yes


GENERAL INFORMATION


If yes, what percentage of total sal
nursery operating at this location?


In what year was your finn established?


How many people does your firm employ at this
location?


PRODUCTS


Permanent employees
Temporary employees


(average number)


What percntage of your sales are
categories?


What functions of your firm are computerized?


Function


Using computer
for task now


Planned


% Deciduous shade and
% Deciduous shrubs
% Broad-leaved evergre
% Narrow-leaved everg


within next
five years


( please check if yes )


Evergreen trees


Word pr-cessing


Accounting ____


Inventory


Financial investments
Marketing
Commmnicadotis
Plant location
Designing (landscape)
Production scheduling


Vines and grounds cc
Roses
Herbaceous perennial
Trees fruits
Small fruits
Foliage
Propagating material
(liners, cuttir
Other
Total


Other










What is the total acreage of your operation and
what proportion is devoted to the following:

_ Acres in field production
-___ Acres in open container production
___ Acres in greenhouse or shade production


Acres in buildings, roadways, etc.


Total acreage


9. What percentage of your sales are doi
repeat customers?

10. Do you publish discount (price) inform
large-volume purchases?


- What percentage of your sales transac
made using the following methods?


Percent


Method


7. Considering all plants sold by your firm, what
percentage of your sales are in these
rootlmedia holding categories?


Percent
of Sales


Trade show orders (nej
Trade show orders (nor
Telephone orders (negc
Telephone orders (nonw
In-person orders (negot
In-person orders (nonni


Method Used


Bare root


Balled and potted


Mail orders
Total sales


Balling and burlapping


Processed balled


Container


12. Identify the five factors that most lim


expansion potential of your firm.


Ra


Field grow bag


of 1 through 5. with 1 being the mos


In-ground containers (pot-in-pot)
Other


Total l
Ii


SALES CONSIDERATIONS
8. At how many trade shows was your firm
represented in 1993?


Weather uncertainty
Market demand
Water supply
Own management


L
L
C
C


Environmental regulations
Other government regulations
Ability to hire competent manal










PRODUCT FLOW


What are the top five states from which you
purchase seedlings, liners, whips, or grafted
material?


16. If you sell any product outside of you
what are the top five destinations by
terms of dollar sales ?


Toy Five States


Percent


Too Five


States


Percent


of purchases


All other states


All other states


Total


Total


100 %


What percentage of your firm's total annual sales
occur during each month?


Do you handle/resale items from other
Ct zrf.Tjfl


If yes, what is the percentage of total i


January
February


March
April


August


September
October
November
December


What percentage of your total sales an
contract, in other words, sold or comm
being planted/potted?


What percentage of your total dollar s


Do you export nursery products out of the U


Wholesale


Retail


If yes, what percentage of total sales are from


exports?


Total


percent


!


I











If you sel wholesale, what percentage of your
wholesale sales (from question 19) are to:


Retail Anns
Retail finnrms
Retail firms


100 %


- Mass Merchandisers
- Garden Centers
- Other (grocery, etc.)


Ladscape finrs
Re-wholesalers (brokers, growers, etc.)
Total


21. For dollar sales to mass merchandisers (from
question 20) what are the top five destinations by
state and what percentage of sales
does each state represent?


TOo Five


States


Percent


of total sales


All other states


Total


100%


22. For dollar sales to garden centers (I
20), what are the top five destination
what percentage of retail sales does
represent?


Too Five


States


Percent


All other states


Total


23. For dollar sales to other retail store
question 20), what are the top five (
state and what percentage of retail s
state represent?


Top Five


States


Percent


All other states


Total


.9










24. For dollar salto ladsapers (from question
20), what are the top five destinations by state and
what percentage of landscape sales does each state
epesent?


Too Five States


Percent


of total sales


All other states


Total


100 %


25. For dollar sales to re-wholesalers (from question
20), what are the top five destinations by state and
what percentage oft sales does each state
represent? "


Top Five


States


Percent


of total ales


All other states


Total


100%


PRICE


DETERMINATION


26. Identify the fAe most huportai
to determine prices. Rank in ord
with 1 beinm the most important.

Cost of production
Inflation
Comparison to other growe
__ Grade of plants
Market demand
___ Time of year
__ Based on inventory
___ Based on last yas price
__ Other (please specify)


What do you see as the greatest
terms of expanding the geography
trading? Rank in order of i thru
beinz the most important.


Capital
Marketing
Personnel
Production
Transportation









ADVER


28. What peretage of sates do you annually allocate
to advetisng?
How do you allocate these advertising dollars?


Yellow pages
Biloads
TIade joumra
-ifde shors


% Radio
% Catalogs
% Newsletters
% other, please


specify
100%


Total


SALES


Wht ws the goss value of product sales from
your nursery in 1993, or your most recently
completed fiscal year? Please check the
appropriate categoy.


Less Umn $50,000


50,000
100.000
500,000
1,000,000
2,000.000
3,000,000
4,000,000
5,000,000
6,00O.000
7,000o,0
8,000,000
9,000,000
10,000,000


99,000
499,999
999,999
1,999,999
3,999,999

4,999,999
5,,99,999
6,999,999
7,999,999
8,999,999
9,999,999


or more


- 'r n k- 1 in. .





Thanks for partiptig In p thsre


In order for us to make full i
questions regarding product s
question regarding total sales
essential. If you skipped que
reconsider providing an answ
regarding individual nursery
strictly confidential.


ise of allith
ales, the la
is absolute
stion 29, p
if. All int
firms will I


As researchers in the are of landscape !
need the type of data collected from this
facilitate marketing research intended to
contribute to the overall efficiency and
development of this industry.


TISIN




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