Nurseries

Industry Overview

In the US, about 25,000 farming operations produce nursery and greenhouse crops with a total annual wholesale value of $14 billion. Large companies include Hines Horticulture, Monrovia Nursery, and Color Spot Nurseries. In this highly fragmented industry, only 2,000 operations have annual revenue over $1 million. The largest 2,000 farms produce 65 percent of industry revenue. Most producers are small, with nurseries attached to a retail store.

Competitive Landscape

Demand is driven by consumer income and commercial real estate construction. The profitability of individual companies depends on anticipating demand for various types of plants, and an efficient distribution system. Large operators have economies of scale in distribution. Small operators can compete successfully by raising specialty plants or serving a local market.

Products, Operations & Technology

Products include flowers and flowering plants, shrubs, food plants like tomatoes, Christmas trees, sod and seeds. Large commercial growers concentrate on producing container-grown ornamental plants for indoor and outdoor use, including bedding plants (usually grown in flats and transplanted into beds by the end-user); shrubs; and flowering potted plants. Products include annuals like marigolds and petunias; perennials like daylilies and clematis; evergreens like azalea, box wood, pines, spruce, and juniper; tropical flowering plants like Bougainvillea and hibiscus; "holiday" or "seasonal" plants like Easter lily and poinsettia; and specialty plants like bonsais, ferns, and trellises. Cut flowers are a smaller segment. Because of weather limitations, most single-location growers can produce only several hundred varieties of plants, but national growers can produce several thousand.

Commercial operations revolve around the growing cycle. Growers buy plant "plugs" from suppliers who germinate them from seed in large, controlled-environment facilities for four to 10 weeks before shipping them around the country. Growers transplant these "prefinished" plants into containers and grow them until they're ready to be shipped to customers. Large growers may have their own plug operations for some plants, but also buy from suppliers. A large nursery can cover from 10 to 1,000 acres, but 50 to 100 is typical for a big commercial operation, with 500,000 square feet of greenhouse space. Relatively more greenhouse space is used in colder climates.

Growing time is six to nine weeks for bedding plants, eight to 14 weeks for flowering potted plants, 10 to 14 months for shrubs, and seven to nine years for Christmas trees. The prime commercial planting season generally extends from February to May when seasonal labor is hired, though planting continues year-round, with producers getting more "turns" (inventory turnover) depending on their crop. Many growers increase their workforce by as much as 80 percent at the peak in April. Transplanting and caring for containerized plants is highly labor-intensive. Although growers take pains to produce a uniformly high-quality product, many plants don't grow properly and must be discarded.

Automation has proven to be difficult, aside from the widespread use of irrigation and fertilization systems. Greenhouse operations can be technically sophisticated, with automatic irrigation, fertilization, air and lighting systems driven by a variety of sensors. Innovations demanded by big-box retailers, like custom labeling, bar codes, scanners, and electronic data interchange between suppliers and buyers, are now used by many producers. Computerized information systems are becoming more important, especially for big growers who have to track a large volume of containers and a large variety of plants.

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