Gardening Boom Feeds Nurseries

A sprawling turn-of-the-century farmhouse in Azusa still serves as Monrovia Nursery’s home base, nearly four decades after founder Harry Rosedale moved in. It’s a quaint reminder of the nursery’s roots as a dirt-under-the-fingernails backyard family business.

But it’s also a little deceptive. Monrovia Nursery’s actual backyard spans thousands of acres in three states, and its sales are close to $120 million, enough to support a few thousand families.

A walk around the red wooden building reveals the realities of today’s nursery business: gray-carpeted cubicles inside for the company’s marketing department, high-speed Internet access and a parking lot full of late-model luxury sedans and sport-utility vehicles rather than rattling old pickups.

The proliferation of chain-store garden centers coupled with a buoyant economy have helped turned gardening into a $33-billion business and prompted a wave of consolidation that is creating national plant Goliaths.

In early January, Monrovia Nursery will wrap up a $40-million acquisition of one of its East Coast rivals, Wights Nurseries of Cairo, Ga. It also has launched an expensive ad campaign to become the must-have brand name in the plant business, sort of a Ralph Lauren of rhododendrons, with 100 patented plant varieties and designer labels on every pot.

It’s a bold and expensive move, which analysts say could prove thorny if the economy cools.

Some of the industry’s largest players are already struggling, after racing into a number of acquisitions.

Shares of Hines Horticulture Inc. of Irvine, the nation’s No. 1 plant wholesaler and the only publicly traded one, have plummeted this year as it has struggled under a mountain of debt accumulated during its $150-million acquisition spree of the last year and a half.

And No. 2 Color Spot Nurseries Inc. is just now getting back on its feet after a string of big purchases forced a recapitalization and closure of two nursery operations last year.

“The business is going wonderful, but a lot of the companies are finding growth tricky,” said William Gibson, who follows the industry for Banc of America Securities.

Although many mom-and-pop retail nurseries have folded, sales of gardening supplies have surged as gardens and lawns become more elaborate, reaching an average of $532 per household last year, up from $342 in 1994, according to the National Gardening Assn.

Indeed, a Gallup survey indicates that gardening has become the nation’s third-most-popular leisure pursuit behind walking and swimming for exercise, said Bruce Butterfield, research director of the National Gardening Assn.

And the swelling ranks of retirees are helping to fuel the boom.

Hunching over a basket at an Armstrong Garden Center in Glendale on a recent weekday, retiree Alex Kerr of Burbank was trying to choose from a selection of colorful plants to brighten up his condominium for the holidays.

“I had a $20 coupon,” he said. “But I’ll probably wind up spending another $30 by the time I get out of here.”

With even admitted brown thumbs such as Kerr looking to add a little green decoration to their homes, sales are surging at Armstrong.

The Glendora-based chain has nearly doubled in size over the last three years to 38 Southern California stores, even as Home Depot has increased its share of the market to almost a third, Armstrong President Michael Kunce said.

It also has moved beyond plants and fertilizer to begin selling “garden art” and statuary, plus gift items such as pottery.

The key to competing against the hardware giants with their $3.97-a-gallon plants? Kunce said it’s constantly adding new varieties of roses, shrubs and flowers, and staffing centers with enough well-trained people to assist customers in planning and caring for their gardens.

“If our customers are successful [with their gardens] they’re going to come back” he said.

However, industry observers said most consumers are shopping at both independents and mass merchants.

“They’re going to a retail nursery for a special plant and shopping for bedding plants or fertilizer at Home Depot,” Butterfield said. Some large growers such as Hines have managed to sell in both places, cranking out boxwood and other popular plants for the big chains and more unusual shrubs for independents.

It’s a tough business with rock-bottom prices and not everyone has survived. However, Hines said it has managed to use its massive size as leverage to negotiate fatter margins--15% on average--so it can pay the high costs of setting up 13 separate regional nursery “hubs” around the country.

The growth, however, has come with a price.

Although Hines has become increasingly profitable and expects sales to reach $400 million this year, its prolonged growth spurt has left it heavily leveraged and ripe for a takeover bid.

Monrovia Nursery--now No. 3 behind Hines and Color Spot--has grown quickly as well, even though it has exited the chain-store business and sells only to independent retailers.

Chief Executive Miles Rosedale said he’s unwilling to trade the company’s fat margins for volume: “We’ve adopted a strategy of having a premium line of plant materials priced at a higher price point than mass merchants want to pay.”

To garner higher prices, it has shifted its focus from more mundane landscaping plants to interesting specimen shrubs, ornamental grasses and trademark plants with different characteristics such as longer blooming times or greater hardiness, rather than selling standard potted vegetation.

It hasn’t meant sacrificing volume. Even without the big chains, Monrovia Nursery ships more than 12 million plants a year.

But Rosedale acknowledged the part that the big hardware chains have played in spurring greater interest in gardening: “I think their influence has been positive rather than negative.”

Not everyone would agree--certainly not the owners of smaller nurseries that have been forced out of the business. But for companies such as Monrovia Nursery that can provide something different, there’s still room to thrive.

“They have good quality plants,” said Sally Melcher a manager of Sunset Nursery in Los Angeles’ Silver Lake district. “Their stuff is expensive, but it always looks good when it comes in.”

To bolster its high-end image, Monrovia Nursery ships its plants in signature sage green pots with proprietary soil mixes, and has developed “collections” of its patented plants that attract wildlife, create a tropical garden or allow homeowners to grow their own spring bouquets.

Although Melcher said a few customers ask for Monrovia Nursery plants, Sunset can’t afford to stock many of the nursery’s varieties. Prices have been rising steadily over the last few years, and Monrovia Nursery’s prices are some of the highest, she said.

Indeed, Melcher said, rising wholesale costs have increased the price of the average 5-gallon plant Sunset sells by about $10. That could be troublesome to consumers at some point, she said.

However many industry observers say the gardening boom has plenty of steam left in it, especially given the aging of the population. Shoppers older than 50 spend more than younger groups on gardening supplies.

For years, Europeans have worked out ways of making garden centers destinations for these customers, Butterfield said, building aviaries and adding tea rooms. Although that may not happen here, he predicts retailers will at the very least begin taking cues from interior furnishing retailers and begin selling gardening items as lifestyle products.

“They’re really selling a way to furnish the outdoors of their homes,” he said.

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Sprouting Sales

Garden centers have cashed in during the last five years as the aging population spends more on plants and gardening equipment. The average household spent $532 last year.

1999: $532

Source: National Gardening Assn.