Pricing in the Green Industry: We’re Worth It
It wasn’t long ago that our industry was reeling from the massive pandemic-fueled growth, liner shortages, and supply chain disruptions of 2020 and 2021. We were propelled into 2022 by the momentum of the previous season, and we were poised for another year of increased sales and higher profits. Nursery Management’s 2021 State of the Industry reported that 50% of respondents planned to increase production by over 20 acres, and over 40% of growers said they would increase prices by 10% or more.
But our industry’s landscape (pardon the pun) has changed a lot in two short years. Although this spring exploded onto the scene and customer demand has been stronger than ever so far this year, many of us have taken a more conservative approach when it comes to growth these days. The 2023 State of the Industry report found that 80% of nurseries plan to expand less than 5 acres this year, and 12% of those surveyed said they wouldn’t raise prices in 2024. This last bit of data is perplexing considering that our input costs continue to rise, especially when it comes to labor. According to Dr. Charlie Hall in his most recent “Index of Prices Paid by Growers”, input costs have risen 20% over the past four years, and while most growers raised their prices during the pandemic, less than half raised them enough to cover cost increases.
As inflation has risen over the past few years, there’s been a lot of talk about finding ways to reduce shrink, cut costs, and slow the erosion of already slim margins. And so I’ve been thinking a lot about cost analysis lately; for one thing, how many of us can confidently say that we understand our margins? In most economics classes, we learn about production and profits in terms of widgets. But the problem is that we don’t produce widgets – we produce living, growing, dying plants. And the costs involved are complex. We not only have the direct costs, like pots, soil, fertilizer, labels, and other inputs that are simple and straightforward, but we also have to account for shrink, labor, discounts, and varying production times. If we truly want to understand the value of our products, the first step is understanding the costs that go into producing them. And once we do that, we must be willing to price them accordingly.
But pricing strategy should be so much more than simply accounting for costs. Our products provide value to the world and to the consumers who buy them. We learned much about the psychological and physical health benefits of plants and gardening during the Covid years, and that hasn’t changed simply because we’re no longer in a pandemic. Rather than undercutting one another in a race to the bottom, our industry would benefit far more from striving to set prices that truly reflect the value of our products.
To do this will require some degree of unity and willingness to change on a broad level throughout our industry, as well as marketing that raises perceived value and educates our customers. Of course, we’ll always need to be competitive, but we can’t be afraid to demand a fair price for our products. This will not only allow us to attract and retain top talent from the next generations, but it’s also necessary if we want to stay in business and be here for the future.
