Green Express Fall 2016
What a difference a few months can make. For those who have read our recent newsletters, the themes have been quite consistent. Christmas tree supplies have gone from a glut to an undersupply situation; Christmas tree prices are on the rise and there are far fewer current players able to reap the potential benefits. Moreover, and very importantly, a quick recovery is certainly not imminent as the Christmas tree business is one fraught with perils such as a long growing cycle, a seedling shortage, a labor shortage, and a whole host of risks associated with farming in general. No new participants are standing in line to join an industry that has no payday for 6-10 years and a checkered past.
Surviving Christmas tree farmers have learned a lot over the last several years. I would however contend that there is still much to learn in the years to come. 2016 is a year that I would label as a “transition year.” This is the first year in which demand exceeds supply; it is absolutely a strange experience for us as we recently learned how to survive and behave in an environment of surplus. We “learned” certain bad habits such as selling trees at a price lower than it cost to grow, harvest, and ship those trees. Buyers take advantage of market conditions (supply/demand) and seek out the best price possible given the prevailing realities.
As we have discussed in this space, the glut lead directly to a 50% elimination of large scale, 100 plus acre operations. You can only sell trees at a price less than their value for so long. The end result is certain failure. Flash forward to 2016 and many of us still standing feel like Alice in Wonderland. Customers are desperate for trees and are often, after the initial shock, disbelief, and anger willing to pay prices that could not have been imagined as recently as last year. As a result, a clear and very present danger has taken root- GREED.
As I start a new paragraph, take a second with me to pause, summarize, and evaluate what we have learned.
1. The glut lead directly to the shortages we now have (let that sink in). Selling trees at profitless prices doesn’t serve the longer term interest of the buyer or the seller though it might feel good for the buyer at the time. The word “partnership” suggests a sharing of the benefits. In the recent past, that did not always happen.
2. A shortage allows for higher pricing especially in light of the fact that pricing was artificially too low as a result of an excess of trees in the market place. Pricing needed to rise. The industry was clearly unhealthy.
3. If we fail to learn the lessons of the past we will be doomed to repeat them. Easy to say, yet difficult to do… Prices should rise in a measured, reasonable, fashion in which both partners share in the benefits fairly and intelligently. If we get this wrong and retail prices spike in a fashion that is unacceptable to the consumer both sides lose just as they ultimately did in the environment in which trees were plentiful and prices were unjustifiably low.
4. GREED is bad. True partnerships are good.
If you doubt what I say, consider the following data from the National Christmas Tree Association (2014 data).
*64.9% of US households display an artificial tree (most keep for approximately 10 years).
*21.8% of US households display no tree.
*18.2% of US households display a real tree (sometime more than one).
I have always believed in the old saying about three kinds of lies. “Lies”, “Damn Lies”, and Statistics… Nevertheless, if this data is reasonably accurate and I believe that it is, we had better get this “partnership” thing right. In my humble opinion, in would take very little to tip the scales more in favor of the two leading categories. Pricing is one of the factors that could do it, as is an aging population (empty nest households typically display no tree), and a society that is becoming more secular at an alarming rate. Yes, we do have a Marketing Order working assiduously to stimulate demand and promote consumer education as to why the FAKE tree is the Wrong choice comparatively (experiential), and a BAD choice from the perspective of environmental stewardship. All of this is good, yet stimulating demand in a shortage is a dubious strategy despite the best of intentions.
So despite all the euphoria and hoopla surrounding rising prices, there is much work to be done and a true partnership mentality needs to take root; the risks associated with getting this wrong are significant and in fact dire. Artificial trees are winning the war right now. We, as an industry need to temper our enthusiasm a bit and truly learn from some of the mistakes of the past. We are all in this together, if we forget that fact, an environment that should be our salvation will quickly and surely become our burden.
Finally, we all need to be flexible and creative in an environment in which THE TREE, may need to become A TREE, in order to not fall into the category of NO TREE. Some things are even more elemental than price!
Finally in spite of the many challenges we remain optimistic. Our mission, as articulated by our founder Ken Cook rings true-
“The purpose of our business is to create a satisfied customer through quality service and value. The consistent fulfillment of our commitment is the mark of a true professional.”
Thomas M. Cook