February 1, 2021

Knowledge Exchange Partner

2021 Green Industry Outlook

Volume 15, Issue 2
February 2021

Click here for a PDF version of this month's issue.

2021 Green Industry Outlook

Written by Dr. Charlie Hall, Texas A&M University

It didn’t take long after releasing last year’s green industry outlook for the predictions to be sidetracked by COVID-19. The COVID-19 pandemic left a wake throughout the business community that is still being wrestled with today, with some industries being COVID winners and others COVID losers. It just happened that the circumstances played out favorably for the green industry for several reasons, but not without a few hiccups along the way.

Early in the spring season when COVID-19 first hit, decisions were being made across the country as to which businesses were going to remain open in the face of the pandemic; in other words, which businesses were essential. In most states, green industry firms ended up being considered essential, causing many firms to breath a collective sigh of relief. But this was not the case in all areas of the country and those firms that were not deemed essential early on (but eventually were), found themselves playing catch-up to capture as much of the missed time as possible.

There was also an early advantage for green industry growers that grew for the box store market. Since box stores like Home Depot, Lowes, Walmart, Menards, etc. were all open during the pandemic, consumers were able to access plants and other lawn and garden products without interruption. Independent lawn and garden retailers (garden centers) thought the worst was going to happen in that they would not be deemed essential and their box store competitors would steal the entire spring 2020 season. But they recuperated nicely after the slow start and ended the year with double-digit comps (YOY sales).

This above-average performance of the lawn and garden retail sector was brought about by the “staycation effect” promulgated by folks working from home during shelter-in-place restrictions. More time at home led to increased home improvement spending and this included landscaping their yards and decorating the interior of their homes with plants. It is estimated that several million new lawn and garden consumers were created during this increased time at home. Retailers thus experienced increases in their gross sales that resulted from the increased store traffic count and the increased dollars per average ticket.

But retailers had to work hard for those dollars because COVID-19 created many challenges for handling face-to-face sales. Retailers had to be creative with social distancing measures and remote (curbside) pickup procedures. The same could be said of all firms, up and down the supply chain, in the green industry.

Interestingly, landscape firms were one of the few service-related industries that were not only able to stay open (being outside aided in social distancing requirements), but experienced the same shot-in-the-arm from more people being at home and wanting to improve the aesthetics of their surroundings. Landscape sales were up YOY, with many landscapers experiencing a backlog of several months’ worth of projects because they simply couldn’t keep up with demand.

Growers in the industry also experienced a very good year in 2020, for the most part. My own benchmarking efforts across the grower sector revealed that about 75% of growers experienced sales increases ranging from 5% to 25%, while the remaining 25% of growers were down YOY from the sales they had in 2019. These growers also experienced much lower shrink than normal since many retailers were scrambling to find enough product to sell during the extended spring season in June and July. Thus, growers were able to sell most, if not all, of their available inventory.

On the flip side, many of the growers that were down YOY were either located in states where all firms were shut down (e.g., Michigan), or their retail or landscape customers were shut down, or they were selling into markets where there was substantial slowdown because of the economic downturn (e.g., green infrastructure projects, conservation projects, etc.).

All of this trickled down to a good year for the allied trade sector as well. There were fewer delinquent accounts payable than they had experienced historically at the close of the season and many have expressed that pre-bookings for the 2021 season are higher than they have been since the great recession (particularly for young plants like tissue culture, plugs and cuttings). However, going into 2021, it is anticipated that input costs will be 2-3% higher due to trade war effects and other inflationary pressures resulting from higher commodity prices.

Going into 2021, the economy is still suffering under the weight of COVID-19. While some vaccines are already released, states have experienced many challenges in distributing and administering them. In the meantime, the number of cases, hospitalizations and deaths continue to set new daily records. This continues to be disconcerting because I have said more than once over the last year that the “shape of the economic recovery is correlated with the shape of the COVID-19 curve.”

That being said, if folks continue to stay at home more in the 2021 spring season, there is at least the opportunity for them to spend more again this year on plants and other lawn and garden products. The litmus test for the retail sector is whether or not the new lawn and garden consumers will come back for more this year. If they serviced them appropriately and made them successful last year, then that will likely happen. Time will tell.

If the weather cooperates, the stage is set for another good year across the green industry. The housing sector is still performing well (though I am keeping my eye on it since prices are above where they were before the bubble burst during the great recession). Most of the lawn and garden consumers are in the mid-to-upper income level category and that category has mostly recovered from any COVID-19 job losses. Further stimulus payments will also bolster consumer spending. Will we see the same YOY percentage increases of 2020? Not likely, but I am advising firms to plan on a 5-10% increase and any more than that is icing on the proverbial cake. From the banking perspective, firms are entering 2021 in a much better working capital position than I have seen in decades.

Editor: Chris Laughton 
Contributors: Paul Jannke, Charlie Hall and Chris Laughton

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