Fire and rain. Record heat. A slow recovery from the most dramatic downturn in decades.

Evolving demographics. New consumers. Tree shortages.

We’ve got a lot to consider, and here to help guide us toward a better understanding of our industry’s status quo – with a peek into the near future – is the go-to horticultural economist in the U.S.

American Nurseryman:

Let’s start with the present: Can you give us an overall picture of the industry?

Charlie Hall:

charlie hall horticulture

Photo courtesy of AmericanHort.

If you consider where we were back in 2009, I think we’re in a lot better shape. However, we obviously have some hurdles to overcome. And obviously there’s fewer of us around. If you consider the full gamut of growers and landscapers and retailers, there’s at least 5 percent of the firms that are no longer in business, and I don’t exactly have a feel for how many have changed hands. I know that several businesses have been bought and sold in the last six years, or just went out of business, and then there are others that, when they went out of business, their assets were transferred to another company. So overall capacity has left the industry, but certainly we’re in a growth phase that is glacial in nature.

If you consider the number of firms that are in the marketplace, we had such a tremendous dip in employment and the number of establishments since 2007, it really was 2013 before we saw any real growth in terms of the number of firms in the industry. For four years running, we were downsizing – no, let me say “rightsizing.”

American Nurseryman:

Is it fair to say that a slower growth, perhaps a more considered growth, would be a more reliable growth?

Charlie Hall:

Without a doubt. In fact, I would equate that to the economy at large. A lot of the media attention plays on the fact that we haven’t grown at the same rate as what we did in previous recoveries from previous recessions. And much of that is because there was so much economic turmoil going on at the same time in terms of the housing industry being overvalued, and those assets being revalued at their proper value.

And of course, the financial sector woes occurred at the same time, and those were correlated. They were still distinct issues, however. And so because of that, we weren’t really recovering from the recession as at fast a rate as what we needed – or not needed, but wanted – to be. And obviously the housing sector is still in its recovery mode, albeit housing starts this year are projected to be 1.1 million starts; we’re on track with that right now. But 1.5 million starts is to be considered “normal” levels of housing starts.

American Nurseryman:

Would that be normal according to prerecession numbers, or what we can reasonably expect after such a dramatic recession?

Charlie Hall:

It’s not like saying what we can expect after the recession, it’s what we can expect given the current demographics in the country. Before the recession, we were at about 2 million starts. And we were bolstering that particular market because we offered credit where credit was not due. If you drew a breath, you were basically able to get credit to buy a house.

So those things have changed dramatically. There’s not as much leniency in terms of offering credit by the banks, and of course, the banks themselves are still sitting on cash as much as possible in order to be in better shape whenever the next recession hits, which the economic modelers say will be 2018. But we average a recession every six and a half years, so you do the math since 2005: We’re at 2015, and the fundamentals are still fairly strong.

It’s really when you get into a bubble type of situation that you have these corrections in the market and thankfully, the housing market hasn’t really created another bubble. We thought it was three years ago, but that boom slowed down. And while much of the growth was in multifamily housing, now the single-family units are starting to be built as well, so it’s more of a balanced growth in the housing sector.

American Nurseryman:

Do you think it’s an overcorrection, like we’ve experienced in the past? Is it one where it’s bounced back too quickly or too dramatically?

Charlie Hall:

Now remember that housing starts are only half the equation. You have existing homes that are bought and sold, and so the inventory of those existing homes has dwindled from about 14 months of supply to between four and a half and five months worth of supply. A lot of that inventory in the pipeline has been filtered through.

You can’t go by just existing homes or housing starts; you need to look at the total supply of homes that are out there, both new and existing.

Population trends, specifically the demographic trends, would point to the fact that a million and a half housing starts would be where we need to get to, and then sustain that long term as population grows.

It hasn’t created another bubble, and since we [the green industry] are correlated with that, we’ve not really seen a bubble in our industry, as well. We’ve seen the roughly stale or glacial-like growth in sales, I think, since 2012.

American Nurseryman:

Do you think we’re seeing the beginning of a permanent shift in housing – going along with the change in demographics, that younger generations are putting off home ownership longer?

Charlie Hall:

The demographic influences on the housing sector are particularly interesting as well over the next 20 years. The McMansions that the older growers bought or built are being largely sold to younger Boomers at this point. And those older Boomers are moving to more organized areas, closer to medical facilities and being close to the grandkids. And a lot of those McMansions that we saw built will, interestingly, be occupied by Hispanic American families or Asian American families, which typically have a strong family unit, so you have mom and dad in the house, and the kids and the grandparents, and maybe even great grandparents that’ll be occupying that 5,000 to 7,000 square feet instead of those two older Boomers.

It’s an interesting trend, and that’s one of the reasons why we’ve got to get immigration figured out, because of the population growth over the next 30 years, 80 percent of it’s going be from immigration coming into the country. So if we develop an exclusionary policy – no more people, no mas – then we’re cutting our own throats. The Congressional Budget Office has run several scenarios in terms of immigration policy that basically said that the only scenario in which the economy continues to grow is if we have immigration reform. If we build fences and say no more people can come in, or we send people back home, or whatever, then basically that causes a decrease in the economy.

At the point we get it figured out, we have not only a good guestworker program for agriculture but we have a pathway to citizenship as we’ve always done, through the 200+ year history of our country.

There are two very good case studies that we rely on; one is Russia. When the Cold War ended, it was largely a matter of demographics, not necessarily because we carried the bigger stick. It’s that Russia ran out of young people, and they couldn’t maintain their infrastructure. China’s one-child policy will also be an obstacle for their short-term growth. They’re going to run out of young people, unless they start importing people, through an immigration policy. To date, they’ve been reluctant to do that. As we saw with Russia, the whole system may implode because of the lack of young workers.

American Nurseryman:

So their status is pretty tenuous based on the demographics?

Charlie Hall:

The one child policy is really a hit over the head. On the surface it sounds good, for the people and the resources, and the people that are left; but economically, it is very limiting.

American Nurseryman:

That’s a fascinating perspective, and it’s something that most of us don’t hear.

Charlie Hall:

True. And the media doesn’t focus a lot of attention on that angle. We’re a sound-bite nation, and we respond to sound bites. Just look at the consumer confidence, you can see that. Whatever the news is saying, that’s how good we feel. And of all things, just because gasoline goes below $3 a gallon people are feeling really good about the future. But gasoline is such a small part of household budgets that it just doesn’t make any sense.

The good thing is that consumers are still spending. There’s an average of about $700 per household that’s projected because of the gasoline savings, and so far they’ve been paying down debt, mostly, or saving that $700. Whether they spend that or not is still up in the air. If they spend it, what are they going to spend it on? Are they going to spend it on flowers, shrubs and trees, or are they going to spend it on other types of things?

The truth of the matter is that they’re going to spend it on the things that they want. People will always find a way to afford the things that they want. You’ve heard me say that before. Here we all walk around with these smartphones and tablets and so forth, and we bought them in the wake of the single greatest economic downturn our country has experienced in 80 years. We just find a way to buy the things that we deem to be necessary to our lives. Unfortunately, flowers, shrubs and trees have taken a back seat to many other things.

American Nurseryman:

What is it that we can do, then, to try to alter the perception on the part of the public that ornamental horticulture is basically essential horticulture?

Charlie Hall:

Yeah, I’m glad you asked that. I teach a course now called “Sociohorticulture.” That course is all about people-plant interactions. And in the class I’m talking about not just the fact that plants are pretty, but they provide tremendous economic benefits in terms of home values. Again, I’ve been part of multistate regional research that conducted a study on the value of landscaping to homes, and on average it’s $1.09 – for every 1 dollar that’s invested in the landscape, you realize $1.09 of improved home value. So for every 1 dollar you invest, you put that same dollar into a bathroom or a kitchen remodel and you get certainly less than a dollar in return.

Businesses that are properly landscaped? People will travel greater distances to shop at those businesses; when they’re shopping, they’re less stressed, they shop longer, they buy more stuff and they’re also willing to pay higher prices. And occupancy rates in apartment buildings and office complexes are higher whenever there’s a landscaped area surrounding the building versus when there’s an inadequate landscape around the building.

Again, I talk about economic benefits. And then I talk about the environmental, ecosystem services. And it’s not just the oxygen it’s generating but the carbon that’s sequestered. And the stormwater that’s mitigated. Cities and communities all across America put in a lot of gray infrastructure in terms of piping and sewage systems, stormwater management systems – millions and millions of dollars – whereas green infrastructure is known to be very effective in mitigating stormwater runoff and save cities millions of dollars compared to the investment in that green infrastructure (see “Growing the Urban Landscape Market” by Shannon Currey and Debbie Hamrick, in the November 1, 2014, issue).

American Nurseryman:

It’s sad that that isn’t the front-page news.

Charlie Hall:

I know it. I haven’t even talked about the health and well-being benefits: When people are surrounded by flowers, shrubs and trees they’re more compassionate, they remember stuff better. In fact, memory retention is enhanced by as much as 20 percent. There have been studies of kids in school that show they perform better if they perform in a natural, nature-filled environment versus a sterile, concrete building like the schools we typically build. And then kids with ADHD: A 20-minute stroll in a landscaped area has the same neurological effect as two of their medications.

People get better faster in the hospital whenever there are flowers and potted plants in the hospital. And even when they have a window overlooking a landscaped area, they get better faster. I teach a whole semester of this stuff. It’s not just a smattering of things, but it’s talking about the economic benefits, the environmental ecosystem services benefits and the health and well-being benefits, that not only offer values, but those values are very relevant to the welfare of our lives, the quality of our lives.

So we’ve been talking as an industry about being “pretty,” and we can make this area more attractive, this interior or exterior, but we’re missing a totally different dialog, particularly for the younger generations that are more environmentally conscious than any other cohorts that we’ve seen before now. To address the consumers of tomorrow, we got to talk that language.

And then within the architectural field, one of the hottest trends is biophilic design, where the architects are mimicking the natural environment in their designs for office buildings, apartments, skyscrapers, and so forth. They incorporate a lot of natural lighting, skylighting and so forth; they integrate the use of water, they integrate the use of green walls, and green roofs and other types of green amenities within the building. And then they take natural surfaces like wood and bamboo and so forth and incorporate that into the architectural design.

There are movements afoot that bode well for our industry in the long term. Ironically, many of those movements are not things that we’re doing as an industry. Other industries are doing it. The roofing industry that’s capturing the value from greenroofs. It’s the architectural industry that’s capturing the economic rent from biophilic design. Horticulture is just so far behind in this it’s not even funny. That’s what we need to do: We need to bolster our dialog and figure out how best to capture certain opportunities that are going to be coming our way.

American Nurseryman:

Can you share your perspective on what can be done, to make sure we do a better job of that?

Charlie Hall:

Sure, it’s a matter of constantly talking the message. I’ve been asked several times: Can’t we just have a “Got Milk?” type of campaign, just tell everybody about the benefits?

First of all, it costs about a zillion dollars to do it effectively. Like when you see a gecko, what do you think of? You think of GEICO: “Fifteen minutes can save you 15 percent or more on car insurance.” That’s because they spent a zillion dollars to get us to think that.

Ironically, the Got Milk? campaign and the Beef, What’s for Dinner campaign and Pork, the Other White Meat campaign … all those generic advertising campaigns only had short run impacts on those particular commodities. Their consumption isn’t significantly higher today because of the Got Milk? program; we’re just more aware that this particular celebrity looked good in a milk mustache at this particular time. It didn’t really have a long-term impact on consumption; only short-term impacts.

Every firm in the industry – if we engaged in this type of marketing, at the firm level, if everybody did that – it’d have an even greater effect than any sort of national promotional program.

American Nurseryman:

What about harnessing the power of those industries that are already getting the word out for us, anyway?

Charlie Hall:

Yes; we should be developing partnerships with as many types of associations as we can. Here’s what’s interesting: the new national pollinator campaign. Twenty-two different organizations coming together because they saw a need to offset the negative press about neonicotinoids. We’re doing our thing in terms of creating healthful bees and assuring that bees are going to be around. Those 22 organizations haven’t partnered together on anything. What prompted that? Well, there’s motivation that everyone stands to benefit from that kind of promotion and those types of efforts. So the trends that I’ve been talking about, as you well stated, haven’t been talked about by the media. Not many folks know about both the dilemmas that we face and the benefits and the advantages that plants provide as part of the solution.

So education is one step. The associations coming together to make an impact … still, nothing beats individual firms incorporating these messages into their individual programs.

American Nurseryman:

One by one. Do you think that part of the initial success of bringing together this massive group for pollinators is the emotional aspect? Is there a way that we could develop an emotion-based campaign for plants?

Charlie Hall:

Yes, I think we could. Take the Bee Movie, for example … it was basically propaganda cleverly disguised as a kid’s movie. The big, bad honey industry is exploiting bees, and if we keep doing this there aren’t going to be any more bees, and there’s not going to be any more planet. It was just propaganda. And yet, we didn’t see those same 22 organizations come together after the Bee Movie. It was only when Home Depot and so forth said, no more neonicotinoids, and it affected growers. So it’s the threat, the economic threat that we wouldn’t be able to control, that was the driver.

So it’s no surprise that it’s the bug and disease programs that always get attended the most at our industry meetings. Definitely I’ve had some great audiences in the past few years, because of the economic downturn. But I guarantee you my audience size before the recession wasn’t anywhere near what it is now. I was every bit as funny then as I am now. What’s changed? It’s people’s appreciation for what an economic downturn can do.

But it’s always the insect talks and the disease talks that there’s standing room only for at all of these conferences. Why? Because it’s a threat to growers, and we like growing. And you’re talking about threats not just to the crop, but threats to the entire business. And no one has an appreciation of the magnitude of the trends that we’re talking about.

We should be responding to some of these long-term trends; and I think we’re making movements, like AmericanHort sponsoring the new retail program – SHIFT – when they hired the design center in Ohio and utilized a group of talented Millennials to work on what garden centers should do in terms of merchandising to appeal to [their generation].

What messaging should we include at the retail level? Not just what type of display, and how to state price in a way that’s going to be more palatable. All these messages that I talked about in terms of the benefits of plants: How are we going to incorporate that into those displays?

American Nurseryman:

You can make it compelling and you can make it fun, but they also need to walk away armed with information.

Charlie Hall:

I agree. There is a lot of positivity associated with the benefits of plants, so there’s good reason to be optimistic.

American Nurseryman:

These trends that are coming out of the recession, then, coupled with more reliable growth… is that going to continue for the next five to 10 years? Are we building toward something, or do you see more obstacles for us?

Charlie Hall:

The biggest obstacle will be the next economic downturn and how the industry and the consumers react to that particular downturn. This past recession was so bad that it will probably make folks a little hypersensitive to the next one. But considering the demographic trends and the spending trends that we have now, if you consider the increase in population, we should continue to see increases in what people spend on flowers, shrubs and trees, at least for the next five years. In short term, we should see a fairly stable situation and increases in what people are spending in the lawn and garden category. It’s hard to project after that. You have to take the long-term trends into account, and how well do we address those in our marketing strategies?

American Nurseryman:

Do you think the current tree shortage is going to be a source of frustration for consumers?

Charlie Hall:

I don’t think that’s going to continue for very long because we may not have the trees at the sizes that they want, but we’ll have other sizes of trees. They’ll be younger trees, and they may not be inch-and-a-half and 2-inch caliper trees, but we have bigger trees and we have smaller trees. Plus, we are doing a fairly good job of substituting varieties at the moment.

American Nurseryman:

In a nutshell, we’re on the right road?

Charlie Hall:

Well, there are certainly other things we could be doing. Are we on the right road in terms of innovation and product development and so forth? Yes. We create an incredible number of new and exciting products for consumers every year. If you go to spring plant trials; it’s quite obvious that we produce a whole lot of new bedding plants every year, and the J. Frank Schmidts of the world are doing a fantastic job of producing some great trees every year. Not every year, but they’re coming out with new varieties.

I don’t think there’s a lack of exciting new plant products for consumers. It’s just a matter of whether or not they have appreciation for the things that plants can do for them?

American Nurseryman:

And so it’s up to this industry not only to become more aware and to start to implement more public outreach, but perhaps to connect with some other industries that are already singing our praises anyway?

Charlie Hall:

Yes. I mean, we’ve got to continue taking care of business. Logistics is a big deal; a lot of the cost of doing business in the nursery and greenhouse business today deals with logistics and getting product into stores, whether it be box stores or IGCs. Getting it there on time and safe and in the form that everybody wants it, so logistics is going to be important; we can’t forget about that. We can’t forget about shrink, because that’s the profit-killer right there.

And we have to continue on the operational side of our businesses, doing what we know to do, continuing to be leaner and leaner and implementing more lean flow into our operations.

But we’ve got to look at the bigger picture and see exactly what’s going to be driving people, and help make consumers successful in terms of when they do put plants in the landscape, make sure they’ve got the right plant in the right place. And making sure that they don’t plant the trees too deep, and they don’t put these mulch volcanoes up the side against the tree, encouraging insect problems.

There’s a lot of the nitty-gritty that we need to continue to do, but we’ve got to look at some of these bigger type trends, like the demographics, and how are we going to appeal to a changing consumer base?

We haven’t even talked about ethnicity, but 20 years from now, the entire country will look basically similar to Houston, Texas, in terms of the African American, Hispanic America, Asian American populations – Houston’s a perfect microcosm of how the rest of the country is going to be looking.

And so what needs to change about our landscapes as we have more ethnic diversity within the country? I think our breeders and all of the participants in the industry are going to have to address those types of big picture things.

It’s not just home gardens, but urban types of gardens; community gardens and rooftop gardens, hydroponic and aquaponic farms that are going in. Millennials really eat that stuff up, and so – things like slow food, local food – they’re not fads, they’re driving change, and we need to respond to those driving forces.

And too, more online sales are occurring, so we have to figure out how do we get products to folks who are really only willing to buy online?

American Nurseryman:

Will online commerce continue to grow, despite the risk of not knowing the quality or the source?

Charlie Hall:

Yeah, definitely. You take aging Boomers – that’s a good example – who may go out and buy plants themselves less frequently, but they can certainly order online. And that’s another good example, that the business-to-business applications there are phenomenal. Information technology is another one of those driving forces, and now we use that info technology to streamline our businesses, but also to appeal to our consumers at the same time.

I don’t claim to have all the answers, but I know many of the issues that we are facing and it’s going to take all of our collective energies to address them successfully in the future.