• TABLE OF CONTENTS
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 Front Cover
 Abstract
 Introduction
 Methods
 Results
 Marketing practices
 Business, manager & employee...
 Conclusion
 Literature cited














Group Title: Economics report - University of Florida Agricultural Experiment Station ; 120
Title: An economic overview of Florida's woody ornamental industry
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027542/00001
 Material Information
Title: An economic overview of Florida's woody ornamental industry
Series Title: Economics report
Physical Description: 14 leaves : ill. ; 28 cm.
Language: English
Creator: Hodges, Alan W ( Alan Wade ), 1959-
Haydu, John J
University of Florida -- Food and Resource Economics Dept
Publisher: Food and Resource Economics Dept., Florida Cooperative Extension Service, Institute of Food and Agricultural Sciences, University of Fla.
Place of Publication: Gainesville
Publication Date: 1990
 Subjects
Subject: Ornamental woody plants -- Economic aspects -- Florida   ( lcsh )
Nurseries (Horticulture) -- Economic aspects -- Florida   ( lcsh )
Ornamental plant industry -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Bibliography: Includes bibliographical references (leaf 14).
Statement of Responsibility: Alan Hodges, John Haydu.
General Note: "June 1990."
General Note: Cover title.
 Record Information
Bibliographic ID: UF00027542
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 001610195
oclc - 22236064
notis - AHN4551

Table of Contents
    Front Cover
        Front Cover
    Abstract
        Page 1
    Introduction
        Page 1
    Methods
        Page 2
    Results
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
    Marketing practices
        Page 9
        Page 10
    Business, manager & employee characteristics
        Page 11
        Page 12
    Conclusion
        Page 13
    Literature cited
        Page 14
Full Text







An Economic Overview of Florida's
Woody Ornamental Industry


Food and Resource Economics Department
Florida Cooperative Extension Service
Institute of Food and Agricultural Sciences
University of Florida, Gainesville, 32611


Alan Hodges
John Haydu


lIl1rlllllllllllllll11111111111111111111


/C 01~---
F6n 1990


Economics Report 120







An Economic Overview of Florida's
Woody Ornamental Nursery Industry

Alan Hodges and John Haydu1

Abstract

A comprehensive survey of the Florida woody ornamental nursery industry was conducted
in 1989. Responses to a mailed-out questionnaire were received from 104 firms. Questions addressed
in the survey included product sales, marketing practices, distribution areas, labor management,
pricing and exchange arrangements. Sales reported by responding firms totaled $125 million. Since
1981, market distribution areas have shifted to greater reliance on within-state sales, and greater
export sales. This information may be used to develop policy and guide research efforts for the
woody ornamentals industry.

Key words: woody ornamentals, Florida, marketing, sales, industry structure.

Introduction

Nursery and greenhouse crops represent the seventh largest agricultural industry in the
United States, with a total value of $6.94 billion at the wholesale producer level in 1988. Florida is
the second leading producer of ornamental plants, with an industry value of $948 million, following
California with $1.58 billion (Figure 1; ERS, 1989).

Florida $948

Texas $514

Pennsylvania $283

Oregon $250 California $1576

New York $224

New Jersey $221

N. Carolina $215

Michigan $212
Oklahoma $206


Other $2289
Figure 1--Value of nursery/greenhouse industry at producer level for ten leading states, 1988.
Values in million dollars.


1 Alan Hodges is an Economic Analyst; John Haydu is an Extension Economist and
Assistant Professor; IFAS, Food & Resource Economics Dept., Univ. Florida, Gainesville. The
authors wish to acknowledge the assistance of J. Robert Strain, Extension Economist.







An Economic Overview of Florida's
Woody Ornamental Nursery Industry

Alan Hodges and John Haydu1

Abstract

A comprehensive survey of the Florida woody ornamental nursery industry was conducted
in 1989. Responses to a mailed-out questionnaire were received from 104 firms. Questions addressed
in the survey included product sales, marketing practices, distribution areas, labor management,
pricing and exchange arrangements. Sales reported by responding firms totaled $125 million. Since
1981, market distribution areas have shifted to greater reliance on within-state sales, and greater
export sales. This information may be used to develop policy and guide research efforts for the
woody ornamentals industry.

Key words: woody ornamentals, Florida, marketing, sales, industry structure.

Introduction

Nursery and greenhouse crops represent the seventh largest agricultural industry in the
United States, with a total value of $6.94 billion at the wholesale producer level in 1988. Florida is
the second leading producer of ornamental plants, with an industry value of $948 million, following
California with $1.58 billion (Figure 1; ERS, 1989).

Florida $948

Texas $514

Pennsylvania $283

Oregon $250 California $1576

New York $224

New Jersey $221

N. Carolina $215

Michigan $212
Oklahoma $206


Other $2289
Figure 1--Value of nursery/greenhouse industry at producer level for ten leading states, 1988.
Values in million dollars.


1 Alan Hodges is an Economic Analyst; John Haydu is an Extension Economist and
Assistant Professor; IFAS, Food & Resource Economics Dept., Univ. Florida, Gainesville. The
authors wish to acknowledge the assistance of J. Robert Strain, Extension Economist.







The ornamental plants industry is comprised of several sub-sectors distinguished by markets
and production systems: interior and flowering products grown in climate-controlled or shaded
greenhouses, container and field-grown woody ornamentals, sod, and miscellaneous others. The
container and field-grown woody ornamental nursery industry produces trees, shrubs, and
groundcover plants for use in landscape plantings. A major outlet use is for new buildings, so the
industry is closely tied to local and regional population growth and building activity.

Although the overall ornamental plant
industry in Florida has steadily grown during the Dollars CMi l ions)
1980's, the rate of growth has not kept pace with 18oo
other leading sates (Figure 2; ERS, 1989). 15oo0
Moreover, much of the growth in the Florida 1
ornamental plant industry was due to floricultural 1 -o
products (foliage and flowers), while production of -_ -alifoni
other ornamental products (woody ornamentals, sod, "0o FI
etc.) has remained stable since the mid-1980's, with 0 -- Texas
total sales around $420 million annually (Figure 3; 0oo
ERS, 1989). 400
200 -
The woody ornamental plant industry in
recent years has shown signs of problems common s1 1985 19 1987 19as
to other parts of U.S. agriculture, including over- Year
production, depressed prices, and a growing rate of
business of failure (Strain and Hodges, 1989; Haydu, Figure 2--Nursery/greenhouse industry value
1989). In this environment, sound economic data at producer level during mid-1980's for 3
are needed to guide research and establish policy leading states.
that will help the industry to adapt to changing
conditions. The woody ornamentals industry has
been largely neglected by economists and government statistical reporting services in comparison to
other ornamental plants sectors and to agriculture generally. Mathis and Degner's (1981) study stands
as the most recent information available for the Florida woody ornamental industry. The extreme
diversity of products, markets, and production systems is probably responsible for this lack of
attention because of the difficulties posed for rigorous economic analysis. Also, the industry's
diversity poses difficulties in competing for public funding for research and education, compared
to traditional food crops.


The present survey research was undertaken
as part of a National Nursery Survey by the
Southern Regional Association of Agricultural
Economists (S-103 Committee).


Methods

The questionnaire used for this survey
contained 32 numbered questions covering subjects
in the following order: business age, business
organization, inter-state organization, use of
computers, employment, product types, root media
holding types, sales methods, trade show
participation, repeat customer sales, factors limiting
firm expansion, purchases of starter plant material,
monthly sales, exports, inter-state trade, sales outlet
types (wholesale, retail, landscape), pricing methods,
discounting practices, product transport, advertising
methods, professional sales personnel, and annual
sales range. The questionnaire was anonymous,
although several responding firms did reveal their
identity.


Dollars (Mill ions)
1Soo -------------------------------------------------..........................

son ....... ............ .. .. ......... ................ ..
88e
400 .....................................................

200 I....... .. -. -.. --- --- --- .......- .................................... ....

1980 1991 1982 1983 1984 1985 1986 1987 1988
Year
Floricultlue -tCOnarental other -- Total


Figure 3--Growth of Florida ornamentals
industry value during 1980's. Floriculture
represents greenhouse-grown crops. Other
ornamentals represents woody landscape plants,
sod, etc.







The objective of the survey was to sample only larger, strictly commercial firms, representing
a majority of total industry sales volume. This was accomplished by selecting firms from the 1988
Division of Plant Industry (DPI) registry, classified as having woody ornamental products and having
greater than 50,000 units in plant inventory. The 270 firms selected by this process represented a 10%
sampling of the population of registered firms. Questionnaires were sent by mail, with a cover letter
from the trade association (FNGA) president, and an addressed, postage-paid return envelope. A
second mailing 75 days later was sent to 186 firms selected from the FNGA membership list, for
firms with 8 or more full-time employees. This second mailing included 47 of the same firms in the
first mailing, giving an additional 139 firms, for a total of 409 firms contacted.

Completed questionnaires were received from 104 firms, representing a 25.4 percent response
rate. Returned questionnaires were forwarded to the project leader at Univ. of Tennessee, where
data were entered and checked. Compiled data were then returned to the authors for further analysis.

Analysis of all data was performed for firms categorized by annual sales volume: small, less
than $500 thousand; medium, $500 thousand to $1 million; large, $1 million to $3 million; very large,
greater than $3 million. In ten cases where sales figures were not reported, sales were estimated
from employment data by applying average sales per employee from the entire data set. Incomplete
data for other questions were not adjusted, and percentage results presented in tables below represent
actual reported totals.


Results

Industry Size and Value

Total industry sales reported by survey respondents for 1988 were $125 million (Table 1).
This value is 59% of woody ornamentals industry sales estimated by Hodges (1989), based upon
expansion of labor employment and payroll data. The number of firms in each size class were as
follows: 38 small, 25 medium, 31 large, 9 very large, 1 unknown.
The woody ornamentals industry in Florida is generally an un-concentrated industry,
compared to other U.S. agribusiness and to floriculture industries (Hodges & Haydu, 1990). Small
and medium sized firms comprised 21 percent of total industry sales reported in this survey, while
large firms represented 40% of sales, and very large firms 39% of sales (Table 1). However, because
the sampling procedure was biased in favor of larger firms, the actual market share of smaller firms
is greater than indicated here.

Table 1--Number of Firms and Product Sales by Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Firm Number Sales Percent Avg. Sales
Size Firms Total Per Firm
Class ($1,000) ($1,000)

Small 38 8,973 7.2% 236
Medium 25 17,657 14.1% 706
Large 31 49,962 40.0% 1,612
Very Large 9 48,311 38.7% 5,368

Overall 103 124,904 100.0% 1,213







Employment and Labor Productivity


Table 2 shows employment and average sales per employee, reported by responding firms,
by firm size class. Total employment reported, including permanent and temporary employees, was
3,339. Overall, sales per employee averaged nearly $42 thousand. Larger firms had considerably
higher labor productivity. This finding is consistent with Strain and Hodges' (1989) results for
woody ornamental nurseries in Florida. A higher ratio of production workers to managers (non-
production workers) for larger firms represents an important economy of size. Small firms had
considerably lower labor productivity, at less than $30 thousand per employee.

Table 2--Industry Employment and Sales Per Employee by Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Total Avg. Employees Avg. Sales
Class Employees Per Firm Per Employee

Small 356 9.4 31,367
Medium 517 20.7 43,936
Large 1,280 41.3 51,753
Very Large 1,186 131.8 51,808
---------------------------------------
3,339 32.1 41,954

Sales by Product Type

Table 3 shows sales dollars and percentages reported for major types of woody ornamental
products. Evergreen shrubs were the most important type of product, representing $40.7 million in
sales, or 39.6 percent of total industry sales, with broad-leaved evergreen shrubs accounting for 26.1
percent and narrow leaved evergreens 13.5 percent. Evergreen trees represented $15.2 million
(14.8%) in sales. Deciduous trees comprised $11.8 million (11.5%) of sales. Also having a significant
market share were vines and groundcovers (8.3%), fruit trees (7.4%), deciduous shrubs (5.9%),
propagating material (4.0%) and other unclassified products (4.2%).

Table 3--Sales by Product Type and Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Product Type Small Medium Large Very Large Total

-------------------1,000 dollars--------------------
Deciduous trees 856 2,424 4,190 4,325 11,795
Deciduous shrubs 392 208 1,800 3,619 6,019
Broadleaved evergrn shrubs 2,397 4,571 12,997 6,830 26,796
Narrowleaved evergrn shrubs 1,605 3,101 4,780 4,379 13,865
Evergreen trees 410 3,953 8,966 1,841 15,171
Vines & ground covers 838 1,371 5,518 765 8,492
Roses 90 7 323 2,272 2,691
Herbaceous perennial 300 345 591 68 1,304
Tree fruits 69 67 4,379 3,058 7,572
Small fruits 1 7 32 414 453
Propagating material 1,316 854 1,607 295 4,072
Other 0 0 972 3,310 4,282

Total All Types 8,273 16,907 46,155 31,176 102,511







Table 3 (continued)--Sales by Product Type and Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Product Type Small Medium Large Very Large Total

------------------percentages----------------------
Deciduous trees 10.3% 14.3% 9.1% 13.9% 11.5%
Deciduous shrubs 4.7% 1.2% 3.9% 11.6% 5.9%
Broadleaved evergrn shrubs 29.0% 27.0% 28.2% 21.9% 26.1%
Narrowleaved evergrn shrubs 19.4% 18.3% 10.4% 14.0% 13.5%
Evergreen trees 5.0% 23.4% 19.4% 5.9% 14.8%
Vines & ground covers 10.1% 8.1% 12.0% 2.5% 8.3%
Roses 1.1% 0.0% 0.7% 7.3% 2.6%
Herbaceous perennial 3.6% 2.0% 1.3% 0.2% 1.3%
Tree fruits 0.8% 0.4% 9.5% 9.8% 7.4%
Small fruits 0.0% 0.0% 0.1% 1.3% 0.4%
Propagating material 15.9% 5.1% 3.5% 0.9% 4.0%
Other 0.0% 0.0% 2.1% 10.6% 4.2%
--------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0%

Sales of deciduous shrubs were dominated by very large firms with 11.6% of their total sales.
Small and medium sized firms had greater sales in narrow-leaved evergreen shrubs: 19.4% and 18.3%,
respectively. Medium and large firms had significantly greater sales for evergreen trees (23.4% and
19.4%) than did small (5.0%) and very large (5.9%) firms. Roses were produced almost entirely by
very large firms, while propagating material was a specialty of small firms.


Sales by Root Media Holding Type

Table 4 shows survey results for industry sales compiled by root media holding type. The
largest share of sales were for plastic nursery containers, at $100.8 million, or 82% of total industry
sales. Also significant were balled and burlapped materials ($11.5 million, 9.3%), and bare root stock
($6.6 million, 5.4%). Surprisingly, the widely popularized production system of "field grow bags"
(in-ground fabric containers) accounted for only $129 thousand in sales, indicating that this system
has not gained acceptance by Florida growers, in spite of the many advantages claimed by vendors.
It is possible that sales reported for field-grown stock (balled and burlapped, process balled, field
grow bag) are under-represented because the survey sampling procedure may have excluded many
field producers due to the low densities plant units involved in growing large, specimen trees.

Table 4--Sales by Root Media Holding Type and Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Media Small Medium Large Very Large Total
..........................................................................
Bare root 0.3% 8.9% 8.2% 2.2% 5.4%
Balled & burlapped 6.4% 22.1% 9.0% 6.0% 9.3%
Container 92.8% 68.5% 77.0% 89.6% 82.0%
Balled & potted 0.2% 0.4% 5.5% 0.3% 2.4%
Process balled 0.2% 0.0% 0.0% 1.9% 0.7%
Field grow bag 0.1% 0.1% 0.2% 0.0% 0.1%
Other 0.0% 0.0% 0.0% 0.0% 0.0%

100.0% 100.0% 100.0% 100.0% 100.0%
100.0% 100.0% 100.0% 100.0% 100.0%







Sales by Month


Sales reported for each month
in 1988 are shown in Figure 4. Peak
months for sales were March, April, Percentage of Annua Sales
and May, with 13.9%, 12.9% and s16
11.4% of total annual sales,
respectively. Together, these spring
quarter months accounted for 38.2% 12% -
of annual sales. Lowest monthly sales 1%
occurred in July (5.9%), and August
(5.5%). This pattern generally held 81
true regardless of firm size, however, 6%
very large firms had slightly more
peaked springtime sales, and small 4%
firms had greater sales during the 2%
late fall and early winter months.
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec
The seasonality of woody Month
ornamentals sales was not as marked
for Florida producers as for other 5a II --+- ked ium --- Large ---- Very Large --- Tota
states (e.g. Bryan and Brooker, 1989),
due to the extremely moderate
climate allowing year-round growing
and building activity. Generally,
improved firm and industry Figure 4--Monthly sales, 104 woody ornamental nurseries in
performance is associated with lower Florida, 1988.
levels of volatility in resource use
(Haydu, 1988; Marion, 1985). Wide fluctuations in supply or demand compromise the ability of a
firm for to efficiently allocate resources, and satisfy markets.

Market Distribution Areas

Sales for Florida woody ornamental products by state of destination are shown in Table 5.
The vast majority of Florida's woody ornamentals, 71.5%, remained in the state. This represented
a substantial increase from the 52 percent of within-state sales reported by Mathis and Degner
(1981), and confirms the suggested trend that within-state markets were expanding, while out-of-
state sales were decreasing due to competition from other Southern states. To illustrate further, sales
to other Southern states reported in this survey totaled $9.1 million, or 9.5 percent of total sales. This
amount is down from 32 percent reported by Mathis and Degner (1981), providing further evidence
of the declining trend in out-of state sales. Sales to Mid-Atlantic and New England states totaled
$14.3 million, accounting for 8.9 percent and 6.1 percent of industry sales, respectively. Sales to
midwestern states were only $328.5 thousand, and this 0.3 percent of industry sales was down from
4 percent in 1981 (Mathis & Degner, 1981).







Table 5--Sales by State.
104 woody ornamental nurseries in Florida, 1988.


State


Sales
($1,000)

68,547
4,822
4,040
3,494
3,108
2,318
2,281
1,331
1,327
1,243
1,031
2,290


Florida
Georgia
New Jersey
Connecticut
New York
Export
Massachussets
South Carolina
Pennsylvania
Alabama
Canada
Other

Total


Exports

Sales to Canada and other foreign countries were
$4.3 million, representing 4.5 percent of. total industry sales.
This was a substantial increase from less than 1 percent
estimated by Mathis & Degner (1981). Table 6 shows export
sales (Canada and other countries) by firm size class and the
percentage of firms engaged in exports. Large and very
large firms accounted for most exports. Favorable foreign
exchange rates (Figure 5) and industry efforts to promote
exports of Florida ornamental products (e.g. Dunn, 1981)
are probably both responsible for this growth in export
sales.


Percent


71.5%
5.0%
4.2%
3.6%
3.2%
2.4%
2.4%
1.4%
1.4%
1.3%
1.1%
2.4%


95,830 100.0%


Export Price Index (1983=100)
10 .o.

10


97.0 O
"SO ~ L
",o ~ e


193 194 19e5
Year


Figure 5--Export prices for all U.S.
commodities. Sept. 1983 base date
(index = 100).





Table 6--Export Sales by Firm Size Class.


Firm
Size


Sales
$1,000


Percent


Small 109 1.2%
Medium 158 0.9%
Large 2,250 4.5%
Very Large 1,836 3.8%


4,352


Total


3.5%







Market Outlets


The vast majority ($114 million, 92%) of Florida's woody ornamentals were sold at the
producer level through wholesale market outlets, rather than retail outlets, regardless of firm size.

Market outlets were summarized in the categories of re-wholesalers, retailers, and
landscapers. Re-wholesalers include all brokers, distributors, or other nursery firms, who buy and
handle plants for resale to retailers or landscapers. Many nursery firms do substantial business in
re-wholesaling in order to offer wider product lines and take advantage of market contacts. Retail
merchandisers of nursery products include garden supply stores and large chain stores with garden
and plant departments, which sell to landscapers and directly to consumers. Commercial landscapers
use nursery products for installation on landscape jobs in new construction or renovations.

Landscapers represented the largest market outlet overall (40%) in this survey (Table 7). Re-
wholesalers were the second largest outlet (33%), and retailers comprised the remainder (27%). This
pattern was exaggerated for small, medium, and large sized firms, with 45%, 55%, and 52% of sales
to landscapers, respectively. Very large firms, however, had a greater share of sales to re-wholesalers
(49%), than to retailers (28%) and landscapers (23%). These results indicate that small to large firms
emphasized more direct sales to users in the marketing system, while very large firms made greater
use of the services of market middlemen.

Table 7--Wholesale Sales to Various Outlets by Firm Size Class
104 woody ornamental nurseries in Florida, 1988.

Outlet Small Medium Large Very Large Total

Re-wholesalers 27.9% 18.7% 23.3% 49.0% 33.1%
Retailers 27.0% 25.9% 25.2% 28.4% 26.7%
Landscapers 45.1% 55.4% 51.5% 22.6% 40.1%

100.0% 100.0% 100.0% 100.0% 100.0%

Sales to wholesalers, retailers, and landscapers, within Florida accounted for 72%, 83%, and
95% of total sales reported for each of these market outlets, respectively.


Product Transport

An overwhelming majority (98.7%) of woody ornamentals were transported to market by
truck (Table 8). The remainder of products were transported by air (.8%) and by UPS (.5%). Small
growers used air transport to a greater degree (2.5%), and medium firms used UPS more (1.1%).

A majority of truck shipments (54%) were performed by nursery vehicles (Table 9). Common
carrier trucking firms delivered 29 percent of products, and buyer vehicles transported 18 percent.
Small and large firms delivered a greater share (63% and 68%, respectively) of their sales by nursery-
owned vehicles and substantially less (11.4% and 15%) by common carrier. Very large firms relied
more on common carriers (50%), which tend to have larger, specialized equipment capable of making
longer hauls (Rahmani, Beilock, & Strain, 1987). This pattern is consistent with the results discussed
earlier for geographical market distribution: smaller firms sold products close to home, and very large
firms targeted markets at a greater distance.







Table 8--Sales by Different Modes of Transport, and by Firm Size
104 woody ornamental nurseries in Florida, 1988.

Transport Mode Small Medium Large Very Large Total
------------------------------------------------------------------
Truck 96.7% 98.8% 99.4% 98.2% 98.7%
Rail 0.0% 0.0% 0.0% 0.0% 0.0%
UPS 0.9% 1.1% 0.1% 0.7% 0.5%
Air 2.5% 0.1% 0.5% 1.1% 0.8%
--------------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0%

Table 9--Transport by Truck Type and by Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Vehicle Type Small Medium Large Very Large Total
.......------------------------------------------------------------------
Common Carrier 11.4% 20.1% 14.7% 49.6% 28.8%
Nursery Vehicle 62.5% 53.1% 67.9% 36.6% 53.5%
Buyer Vehicle 26.2% 26.8% 17.3% 13.8% 17.8%
----------------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0%


Marketing Practices

Sales Methods

Personal sales methods are a key point in marketing programs. Strategic considerations include
not only which contact medium used (trade shows, telephone, personal visit, mail order), but whether
sales are negotiated (prices adjusted for volume discounts, repeat customers, etc.) or non-negotiated.
The telephone was the most important sales medium reported in this survey, accounting for 52
percent of total sales (Table 10). Personal visits were the medium for 39 percent of sales, trade shows
7 percent, and mail order 1 percent. Among all sales media, non-negotiated sales represented
somewhat more (51%), than negotiated sales (47%). 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 perhaps some size economy in the employment of sales personnel.

Table 10--Sales by Type of Contact and Negotiation, and by Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.
Type of Contact
or Negotiation Small Medium Large Very Large Total
----------------------------------------------------------------------------
Trade show negotiated 2.8% 2.4% 3.2% 4.8% 3.7%
Trade show non-negotiated 2.5% 2.9% 4.9% 2.0% 3.3%
Telephone negotiated 24.9% 19.8% 11.1% 45.3% 26.9%
Telephone non-negotiated 28.5% 36.6% 35.8% 11.0% 25.5%
In-person negotiated 13.3% 11.9% 17.0% 18.6% 16.6%
In-person non-negotiated 27.8% 22.3% 27.8% 16.7% 22.6%
Mail order 0.2% 4.1% 0.2% 1.7% 1.3%
--------------------------------------------------..--...
100.0% 100.0% 100.0% 100.0% 100.0%

Negotiated Total 41.0% 34.1% 31.3% 68.6% 47.2%
Non-negotiated Total 59.0% 65.9% 68.7% 31.4% 52.8%
(includes mail order)







Repeat Business

Repeat customers are the foundation of continued strong sales. Repeat business is generally
more profitable because of lower overhead costs required for development of new sales contacts.
Table 11 shows that the overall share of woody ornamentals sales to repeat customers was 84 percent.
Very large firms had a somewhat higher share of repeat business (90%), which is consistent with the
above-mentioned finding of greater negotiated sales. This rather high percentage of business
conducted with repeat customers suggests that competition for customers in this industry may be
characterized as a zero-sum game (Haydu, 1990). In other words, often the acquisition of a new
customer by one firm means loss of a customer from another firm.

Table 11--Sales to Repeat Customers by Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.


Firm
Size


Sales
$1,000


Percent


Small 7,722 86.1%
Medium 14,344 81.2%
Large 39,691 79.4%
Very Large 43,377 89.8%


Total


105,134


84.2%


Pricing

Establishing prices for products has become a major issue in the ornamentals industry because
of widespread below-cost pricing (Haydu, 1989). As costs of production have continued to rise 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.


Data were collected in this survey for
rankings of factors used to determine prices on a
scale of one to six, with rankings of 1 being most
important. Figure 6 shows that the most important
factor reported for determining prices was cost of
production, which received a number one ranking
from 49 percent of growers. Comparison to other
firms and market demand were the next most
important factors, each top-ranked by 17 percent of
firms. These two factors also were rated as
important secondary factors by 30 percent and 29
percent of firms, respectively. Grade (quality) was
the first-ranked factor by 11 percent of growers.
Inventory levels (availability) of product were
consistently rated as a tertiary consideration in price
determination, with 22% and 23% of firms giving
this a third or fourth ranking, respectively.


Figure 6--First-ranked factors used for
V.4U15 ilbr UU At 1A hiA di 104 r


ts s ng Uro uc r uce, wu o WUuuy
Less than half of growers responding did not ornamental nurseries, 1988.
base product pricing on costs of production, and
probably do not consider total costs in making
business decisions. One important step towards altering this adverse situation in the pricing of
ornamental products would be to educate growers about production costs and use of cost information
in management.


Otner
6%


Market demand
17%


Cost of Productior
49%


Grade
11%

Comparison to other
17%







Advertising


Expenses on advertising by type of media are shown in Table 12. Overall, advertising
budgets represented 1.9 percent of sales. Trade shows were the most important form of advertising,
representing 35 percent of total dollars spent. Yellow pages accounted for 18 percent, and trade
journals for 13 percent of advertising budgets. Newspapers, catalogs, newsletters and flyers, and
other forms of advertising each held about 8 percent of advertising expenditures. Radio and
billboards were not used at all. Small firms used yellow pages and other advertising media to a
greater degree (51%, 26%). Very large firms relied less on trade shows (18%), and more heavily on
printed media for advertising, with newspapers and trade journals accounting for 28% and 19%,
respectively.

Table 12--Advertising Budget by Type of Media and Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Media Type Small Medium Large Very Large Total
----------------------------------------------------------------
-----------------1,000 dollars------------------
Yellow Pages 249 46 101 26 422
Trade Shows 27 231 508 51 817
Newspaper 17 20 78 79 193
Trade Journals 27 66 160 53 305
Catalogs 13 43 116 28 199
Newsletters/flyers 31 44 96 29 199
Other 127 6 50 14 197
------------------------------------------------
489 456 1,108 280 2,332

-----------------percentages--------------------
Yellow Pages 50.8% 10.1% 9.1% 9.4% 18.1%
Trade Shows 5.5% 50.7% 45.9% 18.3% 35.0%
Newspaper 3.4% 4.4% 7.0% 28.2% 8.3%
Trade Journals 5.4% 14.4% 14.5% 18.9% 13.1%
Catalogs 2.6% 9.5% 10.4% 9.8% 8.5%
Newsletters/flyers 6.3% 9.6% 8.7% 10.3% 8.5%
Other 25.9% 1.3% 4.5% 5.1% 8.4%
------------------------------------------------
100.0% 100.0% 100.0% 100.0% 100.0%



Business, Manager & Employee Characteristics

Business Organization

As indicated in Table 13, the predominant form of business organization in the woody
ornamentals industry was the corporation (73%). Twenty percent of responding firms were
proprieterships, and 6 percent partnerships. Most of the proprieterships were accounted for by small
firms, with 37 percent of firms within this group.







Table 13--Business Organization by Firm Size Class,
104 woody ornamental nurseries in Florida, 1988.

Business Type Small Medium Large Very Large Total
-----------------------------------------------------------
Proprietorship 36.8% 16.0% 9.7% 0.0% 20.2%
Partnership 5.3% 8.0% 6.5% 0.0% 5.8%
Corporation 57.9% 72.0% 83.9% 100.0% 73.1%
Other 0.0% 4.0% 0.0% 0.0% 1.0%

100.0% 100.0% 100.0% 100.0% 100.0%


Use of Computers

Use of computers in business has skyrocketed within the past ten years, however, adoption
of computer technology in agribusiness is though to have been slower than in other sectors. Table
14 details reported use and planned adoption of computers within the next 5 years for 6 major
business functions by woody ornamentals firms. Overall, nearly two-thirds of all firms are currently
using computers in some way, and within the next five years over three quarters of firms will add
or adopt use of computers. Medium, large, and very large firms showed generally high rates of
computer use, while less than half of small firms used computers now. The most important function
for computers now was accounting (payroll records, accounts payable, accounts receivable), with 58%
of all firms. Next in importance currently were word processing (37%) and inventory management
(34%), which was also had the highest planned rate of adoption (31%). This function may represent
a large potential for software development in the near future.

Table 14--Business Functions Computerized Now and Planned Within Next Five Years,
104 woody ornamental nurseries in Florida, 1988.

Computer Small Medium Large Very Large Total
Function NOW NEXT 5 NOW NEXT 5 NOW NEXT 5 NOW NEXT 5 NOW NEXT 5
--------------percentage of total firms in class---------------
Word Processing 13% 13% 52% 16% 45% 13% 67% 11% 37% 13%
Accounting 37% 29% 60% 32% 71% 10% 100% 0% 58% 21%
Inventory 11% 37% 44% 40% 42% 26% 78% 0% 34% 31%
Financial 5% 5% 8% 12% 6% 6% 11% 33% 7% 10%
Marketing 13% 11% 24% 20% 19% 10% 33% 33% 19% 14%
Communications 11% 5% 8% 16% 19% 6% 33% 33% 14% 11%
Other 5% 8% 4% 8% 3% 0% 11% 11% 5% 6%
................................................................
Total 45% 71% 76% 96% 71% 71% 100% 78% 64% 77%


Business Growth and Limits to Expansion

In view of the rapid growth in the ornamentals industry during recent years, there has arisen
concern about when growth will slow, and what factors will limit expansion of the industry. Figure
7 gives first ranked factors limiting business expansion reported in the survey. Market demand was
perceived as the most significant limiting factor, with 24 percent of firms rating this as the number
one problem. Availability of productive resources of land, labor, and capital were top-ranked
limiting factors by 17 percent, 14 percent, and 21 percent of firms, respectively. Rated of secondary
importance, in addition to the above factors, were competition (12%) and hired management (19%).
Availability of labor also received high ratings for third order (19%) and fourth order (29%) rankings
of importance. Curiously, water supply was not rated highly as a limiting factor, in spite of
mandatory water use restrictions in effect for several areas in Florida. It is also puzzling that
competition was not rate higher in view of the loss of markets in other states.







Conclusions


These survey data establish baseline
information that will be useful for guiding research
and policy planning to help the woody ornamentals
industry in the coming years.

Among the most serious challenges facing
the industry are the loss of markets in other states,
presumably due to competition from producers in
those areas. Markets in other areas are needed to
offset depressed sales in Florida during summer
months when landscaping activities slow down. The
increased share of export sales during the 1980's
demonstrated that market development is possible.

The apparent under-appreciation of
production costs in pricing and the role of market
demand in industry growth are other significant
problems. Below cost product sales and excessive
industry expansion are damaging to all producers
over the long run.


Competition
Own Management%
%wn Maemenrket demand
25%
Land
17%
SOther
6%
Hired Management
Labor 5%

Capita I
21%



Figure 7--First-ranked factors limiting
business expansion, 104 woody ornamental
nurseries in Florida, 1988.







Literature Cited


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Dunn, Charles W. 1981. European Market Potential for United States Tropical Ornamental Foliage
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Economic Research Service (ERS), 1989. Economic Indicators of the Farm Sector, State Financial
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Florida Agricultural Statistics Service (FASS), 1989. Farm Labor, Florida, May, Orlando, FL., 4 p.

Haydu, J. 1989. What's Happening to Florida's Ornamental Industry?. Florida Nurseryman 36(9),
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Hodges, A.W. and J. Haydu, 1989. Challenges Facing the Florida Ornamentals Industry.
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Marion, Bruce W. 1985. The Organization and Performance of the U.S. Food System. NC 117
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National Agricultural Statistics Service (NASS), 1989. Floricultural Crops. USDA, Washington, D.C.

Rahmani, Mohammed, Richard Beilock, and J. Robert Strain, 1987. Florida Ornamentals: Shipping
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Econ. Dept., Univ. Florida, Gainesville. 44 p.

Strain, J. Robert and Alan Hodges, 1989. Business Analysis of Container Nurseries in Florida. Econ.
Info. Report 266, Food & Resource Economics Dept, Univ. Florida, Gainesville, 35 p.

Strain, J. Robert and Alan Hodges, 1989. Business Analysis of Field Nurseries in Florida. Econ. Info.
Report 265, Food & Resource Economics Dept, Univ. Florida, Gainesville, 35 p.




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