Green Express Summer Fall 2018
As I was thinking of a way to write this newsletter I have often found myself thinking of the Beatle’s 1970 song The Long and Winding Road. I really don’t know why as I have never been an especially big Beatles fan (though I certainly acknowledge their greatness). Hopefully the following paragraphs will help make the connection. For anyone who has read my updates before they know that I do like to, and in fact tend to jump around with my metaphors when discussing current events in the Christmas tree business in general and McKenzie Farms LLC specifically. We’ll see if this one works.
I have always tried to give our readers a feel for our history as a company, our successes and challenges as an industry, and a feel for what the future might look like. For the purposes of this update, I would like to focus on all three a bit of a prelude to announcing the future direction of McKenzie Farms LLC.
Our industry has seen many changes in the last twenty plus years; this newsletter has discussed them at length. By way of summary, ours is a seasonal industry prone to boom and bust cycles. When prices have been high new players have entered the industry, when prices have been low, attrition has been rampant. The Christmas tree industry has been guilty of very poor business acumen at times. Truth be told, farmers don’t usually make the best businessmen…
Our industry is greatly affected by the vagaries of the transportation, labor, and weather realities during a given harvest season. There is little we can do about the weather (the summer of 2018 is on the books as the second hottest on record). We do, however, get that constant moisture that makes the whole industry possible! There have been times when freight rates were reasonable, and labor was plentiful. The current trends seem to suggest major headwinds rather than tailwinds for the foreseeable future. Additionally, as an industry, we have been introduced to pricing / payment models that have moved to a consignment model (2006). Finally, we have seen a demographic shift that has proven less favorable for fresh cut Christmas trees and more favorable for artificial choices. And, never forget that it takes 6-10 years to bring our product to market! That and that alone makes this an industry that should not be attempted by the faint of heart. Deep pockets and an abundance of patience are strongly recommended…
From our humble beginnings back in 1990 as Signature Trees we have seen / experienced / survived it all. It has been a journey of discovery to say the least (you might say a “long and winding road”). The days stretch into weeks and the weeks stretch into months and years, and before you know it, 28 years have come and gone. Incidentally, I think this is what the Beatle’s were trying to say as well (discussion for another day!).
Because of these challenges, several very predictable things have happened. First, the number of large scale farming operations (100 acres or more) have declined dramatically in the last five years; I have seen numbers as high as 75% in terms of attrition! It is only possible to sell a tree for less than it costs to grow, harvest, and ship it for so long before the bottom finally falls out. Second, for the survivors, we have been the beneficiaries of supply / demand dynamics. Yes, it is very possible to make the argument that demand is declining. In fact, I would support that contention wholeheartedly. However, and this is a very big HOWEVER supplies are declining at a faster rate. Remember it takes 6-10 years to bring a Christmas tree to market (variance based on size, species, and weather conditions). Finally, as has been predicted by our founder and my dad McKenzie Cook, long before anyone thought such a radical concept was possible, consolidation would be used as a tool to gain inventory, attain economies of scale, and leverage one’s ability to serve the markets with the highest potential for total return.
There have been several large-scale acquisitions in the last several years and there have been late stage discussions relating to large-scale acquisitions (that didn’t work out) in the last several years as well. Well, I must say those have been a nice warm up to the transaction that we are pleased to announce. The largest in the history of the Christmas Tree industry by a wide margin.
Press Release- Sept 14th, 2018
McKenzie Farms LLC and Kirbycon LLC- Cubby Steinhart (Happy Holiday Trees) are pleased to announce a financial arrangement that has come about after many years of close relations between the two companies. This long-standing relationship has now culminated in a unique partnership designed to better serve the needs of the customer in an environment of extreme shortage, changing dynamics, and industry consolidation.
Kirbycon LLC DBA Happy Holiday Trees West will be purchasing a controlling interest in McKenzie Farms immediately, with a stated intent to purchase the remaining equity over the next several years. Key McKenzie Farms LLC management will remain in place indefinitely.
The new company and Happy Holiday Trees East plan to operate in an independent, yet mutually beneficial fashion and capitalize on synergies and efficiencies inherent in a multi-regional operation. The management teams of both companies are looking to retain an important sense of continuity and synergy now and in subsequent years.
McKenzie “Ken” Cook, viewed as a legendary figure in the world of multiple West Coast agricultural pursuits, and Conrad “Cubby” Steinhart a long time veteran of the East Coast Christmas tree business in numerous capacities (principle owners of the respective companies) see the purchase as a once in a lifetime opportunity to achieve managerial, inventorial, and financial economies of scale that will allow for increased opportunities for the new entity.
“The banking relationship with Northwest Farm Credit will remain in force as will the numerous relationships in the production, transportation, and harvesting community that have greatly helped McKenzie Farms LLC become the company that we are today. These are the foundational relationships on which the new company depends, and we look forward to a great working relationship during the transition.”
McKenzie “Ken” Cook (9/14/18)
Thomas M. Cook
McKenzie Farms LLC