Evaluate your operation to make improvements that will benefit you now and in the long term.
During the last few years, the greenhouse industry enjoyed a boom in consumer interest that helped to offset some of the challenges of the pandemic. With inflation raising costs for both consumers and growers, this demand is unfortunately slowing down.
Upgrading your greenhouse lighting system from high-pressure sodium (HPS) to an LED system can reduce lighting costs by up to 40%.
This spring especially, growers had to raise prices for plants because they themselves were paying more for everything, from plastic and fertilizer, to growing media and fuel, just to name a few. These costs are not predicted to decrease in 2023; in fact, they will likely increase. More expensive plants at a time when consumers are facing increased costs of essentials such as food and gas will likely slow growth in gardening purchases.
It is not all doom and gloom. The Garden Center Group and Retail KPI Consulting track weekly sales trends from more than 100 independent garden center retailers throughout the U.S. Their report shows total sales declining 3.9% compared to the same date in 2021. However, since sales during the past two years were up an average of 20%1, it is still not a bad place to be. The advice coming from AmericanHort in their November 2022 State of the Industry Whitepaper is to “keep a close eye on managing cash flows, preserve liquidity, tighten inventory levels as appropriate, work to expand gross margins and be careful with growing SG & A [selling, general and administrative] expenses.” Caution is the word: reduce costs, increase efficiencies and plan carefully.
1. Labor, as always, is one of the highest costs of production, even when you can find it. Automate where you can. This doesn’t have to mean robotics and cutting-edge technology. Most environmental control systems allow automated watering, lighting and temperature control. Having an automated system in place for opening and closing roof vents and energy curtains is an easy way to start. And this doesn’t just save labor, it also saves energy costs.
Automating the greenhouse will help you save money over time, from reducing labor costs to boosting energy savings.
Automating tasks that are tedious or uncomfortable for workers is a way to save money, as well as retaining employees. Automated transplanters, seeders and soil mixers can be faster and more accurate, while eliminating some of the most tedious tasks for workers. Automated watering booms also fall into this category.
2. Fuel costs are already a big concern this winter. Natural gas and heating oil are predicted to increase by 28% and 27% respectively2. A number of cost-cutting strategies will help save significant dollars in this area. Under-bench hydronic heating (hot water pumped through the bench and under plants) puts the heat where it is needed — at the roots and immediately around the plants — and is proven to save 20-30% in heating costs. Energy curtains can also save 30% to 50% in heating costs because they reduce the volume of air that needs to be kept warm at night and the amount of heat that escapes from the greenhouse roof. Evaluate your HVAC system; does it need to be cleaned, calibrated or even replaced? Is your environmental control system as accurate as newer models that maintain temperatures more consistently at the set level? Use an online heat calculator to determine your needs and explore various scenarios to see where you can save money.
Save electricity costs by replacing high-pressure sodium lights (HPS) with LED lights. In a recent article in Greenhouse Grower, Dr. Erik Runkle, Michigan State Professor and Floriculture Extension Specialist, urges if you haven’t replaced your HPS lights yet, don’t wait any longer. “The combination of efficiency gains, longer lifetimes, and in many cases rebates and incentives from utility companies can make for a relatively short return on investment,” Runkle says. Energy savings when LED lighting systems replace other technologies can be significant, ranging from 30% to 40%3.
3. Consider crops with a shorter turn. Breeders have been working on grower-friendly crops for years. If you’ve always grown the same varieties because that’s what you know, it may be time to look into varieties that can produce more in the same space. Saving just a week on a petunia crop that you turn several times during the season can add up to some big savings. For that matter, crops have also been developed to reduce other inputs, such as PGRs and pest and disease control.
4. Pass most, if not all, cost increases to your customers. In his State of the Industry Address in July at Cultivate’22, AmericanHort Chief Economist Dr. Charlie Hall said his research showed only 40% of green industry companies are passing all of their cost increases on to customers. “That’s magnanimous of you,” he said of those who didn’t pass along costs, “but you won’t be in business for long.” It’s painful to raise prices, but be sure to communicate the reasons, and most of all, the value of your products. What solutions do they provide? Shade? Privacy? Attracting pollinators? Fresh produce? Or perhaps offer a “loss-leader” product like many grocery stores do, while pricing other items appropriately.
New structures and retrofitting gives growers the opportunity to update old systems and equipment, allowing for long-term savings in an inflationary market.
5. Consider building a new greenhouse or retrofitting. This seems counter-intuitive in an inflationary economy, but if your finances allow, it can be a good strategy. If your operation includes older, inefficient greenhouses with outdated coverings, HVAC systems and other key equipment, ultimately this will save significant dollars on inputs in the next few years. Michael Kovalycsik, Marketing and Regional Sales Manager at Stuppy Greenhouse, says while some clients have pulled back on projects, others are lining up to build new structures. “The return on investment can vary based on your location and heating and cooling needs,” Kovalycsik says. “But often, when you do the numbers, you’ll find that investing in new equipment or structures can be financially beneficial.” Stuppy works with equipment vendors as well as its own engineers to develop customized, turnkey structures designed to optimize workflow and efficiency.
Kovalycsik says in his experience, inflation is often good for our industry. “You may not be able to afford a new roof, but you can spend $100 at a garden center and make your house look pretty, and I think that has an effect,” he says. Many growers seem to agree. In the recent Greenhouse Grower Expenditure Survey, nearly 30% of respondents plan to increase live goods purchases by 11% or more, while 57.3% will increase plant orders from 1% to 10%. Another 8.47% plan to purchase the same amount as last year. Just 1.69% plan to decrease purchases. For information on how to make your greenhouse more efficient, reach out to Stuppy’s expert sales team.
Charlie Hall, Ph.D., in AmericanHort State of the Industry Address, July 2022. Columbus, Ohio.
Best Practices Guide: Lighting for Controlled Environment Agriculture (CEA) Operations. March 2022. Resource Innovation Institute.