Industry Trends and Forecasts: What's Coming and How to Prepare

Understanding industry trends and market forecasts is essential for flower farmers and floral businesses looking to plan strategically and stay competitive. Drs. John Dole (NCSU) and Charlie Hall (TAMU) will explore current trends shaping the floral industry, from consumer preferences to supply chain shifts, and provide insights into what’s expected in the months ahead. We’ll also highlight opportunities for growth, emerging niches, and strategies to stay agile in a changingmarketplace.

Ideal for growers and floral business owners seeking to make informed, forward-looking decisions, this session provides actionable insights to help your business thrive today and plan confidently for the future. This one-hour Zoom-based webinar will offer a Q and A session with John and Charlie and is complimentary for ASCFG Members.

About the Instructors: Dr. John M. Dole is a leading researcher, educator, and author in the specialty cut flower industry. He is a professor of horticultural science at North Carolina State University and has spent decades advancing research on cut flower production, postharvest handling, and floriculture economics. Dr. Dole is co-author of the widely used reference Floriculture: Principles and Species and has played a key role in supporting flower growers through research, extension, and leadership with organizations such as the Association of Specialty Cut Flower Growers (ASCFG).

Dr. Charlie Hall is a nationally recognized economist and professor in the Department of Horticultural Sciences at Texas A&M University. He specializes in the economics of the green industry, with research focused on consumer behavior, market trends, profitability, and business management for horticultural enterprises. Dr. Hall is a frequent speaker and author, providing data-driven insights that help growers, retailers, and industry organizations make informed strategic decisions.

Transcript

SPEAKER_01 0:03

Hello everybody. I hope you're doing well today. My name is Rebecca and I'm the education director for the association. I'm thrilled that you joined us today because we have a wonderful uh presentation ahead of us for you. Um, you know, this is part of our Navigating Uncertain Times webinar series, which was inspired by an idea that our president of the board of directors had. Um, and the goal of this webinar series is to offer you new ideas about um how to pivot or refine your business operations uh in light of our current economic times. Um and so before I turn it over to Charlie, I do want to uh confirm that yes, you are in the right webinar. If you're here for industry trends and forecast, um we're gonna start in a second. I'm gonna ask the folks to remain muted throughout the presentation and to hold your questions for the QA session at the end of this webinar. Um and if you are not a member yet, uh I do want to point out the we have a QR code here and we're offering a special discount for people who want to join today. So um I'll put this QR code back up at the end of the presentation. Um, but just be aware that uh we'd love to have you join us. We have webinars, um, all kinds of resources available for you. Um and with that, uh, I think I'll turn it over to Charlie. Are you ready, Charlie?

SPEAKER_00 1:33

I am always ready. Thanks, Rebecca. Yeah, yeah. I have a microphone. That automatically means I'm ready. So good morning, folks, and thanks for the invitation to come and visit with you a little bit. Um I have just an incredible uh partner today on today's webinar, Dr. John Dole. And we just found out that he is the Liberty Hyde Award winner from the American Horticulture Society. So that is awesome. Congratulations, John. And yeah, yeah. And John and I are going to have a conversation today. Now, I'm I'm kind of known for having just a plethora of charts, but I'm I'm I'm mixing things up today. I'm I'm going to start by not having many charts, although I do have them in the background in case I need to refer back to them. So I I just want to admit right at the very get-go that I understand the trepidation that you're going through. Now I'm assuming that some of you are coming online and you've got the little bit of worry about some current economic conditions, a lot of uncertainty. And in fact, 2025 was the year of uncertainty, and it all started with a series of treats, or uh treats, tw not treats, tweets. I need to articulate that better, a series of tweets at the beginning of the year that talked about tariffs, and of course, that set uh in motion just a flurry of activity and people trying to get input imports in as quickly as possible before the April 1 deadline when the cost of everything was going to be increasing because of the tariffs. So I I'll come back to that here in a second, but I just wanted to acknowledge that it's it's been a big um uncertain time period. So the the format today, as Rebecca mentioned, I'm going to start talking about kind of the the 30,000-foot view economically, drill down to ground level. Um and and John will and and I will talk about, all right, what do you do about it? That's the key thing. I always approach it from a Venn diagram standpoint. There's this great big circle of all the things that matter. And there's another great big circle of all the things that you can control. And it's the intersection of those two circles. That intersection is what you need to work on. And that's what we're going to focus on today is that that intersection between the things that matter. I'm not saying that tariffs don't matter, but you don't control the tariffs. So what are the things that you do control? And then we'll focus on that. So let's let's talk about the macroeconomic perspective. Obviously, there's been some inflation that we've had to deal with, that you see in the media and everything. And it's it wasn't unexpected. John, is every economist worth his or her salt knew that inflation was coming down the pike whenever we passed $5 trillion worth of fiscal policy measures during the pandemic, and then five trillion dollars of monetary uh policy measures, and you throw that much money into the M2 money supply, the economy's going to heat up. But we had never been through a global pandemic before. And so we learned a lot of lessons during the COVID pandemic time period. It disrupted cut flower supply chains worldwide. And we we've metamorphosized those supply chains both domestically and internationally. And those lessons have come into play during this past year of uncertainty. So while things are uncertain, we may have some degree of trepidation, they're not as uncertain as what they could have been because we we have put so much into motion during the pandemic. And everybody that's online, you know, all 124 people at the moment, there's still people coming in. Everybody that's online, I guarantee you, you do serve certain things differently in your business today than you did prior to 2020 when the pandemic. And it's been six years. Can you believe it's been six years since all that disruption? But it made us better. And the fact that you're online today uh proves to me that you learned some things during that global pandemic and you're doing things differently. Otherwise, you wouldn't be here because it created such a cash flow dilemma for many businesses. So, consumers today are facing that inflationary time pressure or inflationary pressure when we go to the supermarket, when we go buy a car, when we go buy clothes. We we see it everywhere we go, in spite of being told by the current administration. And again, when I say current administration, I'm not I'm not saying I'm not I'm not throwing stones. I don't talk partisanship, I talk policies. All right, and there's a big difference. But still, some people get upset with me from time to time because I'll knock a particular policy, but I'm approaching it from an economic lens. I'm not approaching it from a political lens, and there's a big difference. So I'm just put that out there up front as well. So the the the um the the increased cost of things have caused a lot of trade-offs. And of course, economics is all about trade-offs. And every single customer that's out there, it's just like you and me. Everybody is making trade-offs every day. Is this product worth the the money that I'm going to put toward it versus something else? What's my opportunity cost of buying something else? And John, the good thing is that people aren't stopping buying flowers. I just got the Valentine's Day survey data from SAF. Um, they hire Ipsos to go and do that that survey. And there were 35% of Americans bought cut flowers during Valentine's Day. It just happened to be the very same percentage as what was in 2025, which was even higher than 24. And so part of that though, you know, remember that that's sales. That's we're not measuring units. So since the pandemic, obviously the price of cut flowers has gone up, both domestically and imported flowers. That price has gone up. So you get a little bit of a sales lift just from the price increase. So, but units, we don't even have a database measuring how many units we sell. Well, if cotton soybeans, corn, etc., we can measure exactly the the bushels and for meat, the hundredweight of meat that's sold, and that's kept uh the unit data is right there. But in our industry, not so much. So when I when I go and I survey folks, without the absence of data, I got to go ask people, and I ask them about their top line sales, I ask them about uh their bottom line net profits, and I ask them about units. And these are growers, not just cut flower growers, but perennial growers, shrub growers, etc. Now this is this is collective data here, because I don't want well, the the people I'm collecting data, they know that they're I'm aggregating all that data. So I want to hold to the promises I've made them. So it's a bell-shaped curve. If you look at all the people year over year that have experienced increases, it's a bell-shaped curve from positive 25% to negative 25%. So what that means, John, is that you've got folks that that really 2025, I'm looking at last year's data, they were knocking the ball out of the ballpark. Top line sales were up, bottom line net profits were up, and units were up. So it's the trifecta. But the bell-shaped curve means that you got the majority of folks right there in the middle, plus or minus zero to five percent, plus or minus. And that's where the the majority of folks were. But you had some in the same industry, same year, same time period, that that had negative top line sales year over year, and and or bottom line net profits were negative year over year on units. Some of them had to trifle in the wrong direction. Now, John, I'm always quick to tell people year-over-year results are not the end-all be-all. Because there were some uh last year or 2024, they had their best year ever. And if they didn't have their best, they didn't beat their best year ever the next year, then automatically it's going to be down year over year. So year-over-year comparisons, and and I know that some of you, when you're looking at your income statements and your balance sheets, and you're comparing uh the the time periods, you're saying, oh, we're up here in this category, we're down here in it. All right, that that's a that's a needed analysis. Congratulations. Uh absolutely you should do that. But you'd also look at the three-year average and see where the overall trending is going, and then you'll have a little better feel. And if you really want to go uh and have a complete picture, you'll go all the way back to 2019, pre-pandemic, and see how your performance now compares to pre-pandemic conditions. So that to me, that's that's when you're doing an adequate job of measuring your performance. So that's I'm kind of sneaking over to the second half of our conversation. So we got inflation, and we're dealing with it. And it's still in the 3% range, and it's not coming down anytime soon because we've implemented tariffs. And in any economics textbook 101, well, you'll see that the the country that's importing product into the U.S. doesn't pay the tariff. It's the import, uh it's the customs broker or the importer of record who pays the tariffs and sends it to Washington. So, unlike what we were told by some in their tweets and so forth, that's not the way it happens. And so what's happened is there's been a cash flow crunch at that point in the supply chain. Customs, brokers, and importers have had to come up with the cash to pay the tariffs. And that's that's caused a cash flow issue within the entire industry. So we've got uh those inflationary pressures and and we've got that cash flow crunch at the same time at different points in the supply chain. Now, fortunately, interest rates are starting to trickle down slightly, but we're still in a high interest rate period. But I chuckle. Now, John and I we're we're both old enough to know or to remember the 70s. We still have some tie-dye t-shirts to prove it. We we can remember the 70s. And and uh during the 70s, we're talking about 18, yeah, Tina gave me a thumbs up there, so Tina remembers that too. So uh but but during the 70s, we had a time period where inflation was 18%. So when we look at inflation now of 5, 7, 9%, and people are saying, oh my gosh, it's because people have never managed their business during inflationary time periods. But really, that's not really high inflation. It's resilient and and and um and what's the other R word? It's it's resilient and it well, it just stays there and it's not coming down. We're having to deal with it. And what it's going to take is interest rates to keep coming down. But here's the conundrum. When interest rates come down, operating lines of credit that gets cheaper. CapEx expenditures get cheaper. Um the the the paying down long-term debt, we can we can pay it with with cheaper dollars. But the thing is, is that that stimulates the economy, gets more people buying, which creates an inflationary effect. So it's it's you know, it's a yin and a yang. And so that's that's what the Federal Reserve, all these uh uh decades now, has been wrestling with is how do we manage that that fiscal policy, monetary policy measure in such a way that we can limit inflation but create high employment, right? That's their twofold mission. All right, so labor. Um I I'm not going to cover labor that much because I know John has all the answers on labor.

SPEAKER_02 14:58

Oh, Charlie.

SPEAKER_00 15:02

But it's it's there's a labor labor quantity issue, and there's a labor wage issue. And they're they're correlated, but but John was one of the founders of the Seed Your Future program, and Seed Your Future is trying to to educate folks at the seventh, eighth, ninth, tenth grade level that horticulture, and in this case cut flowers, is a great career opportunity. And so we we're they're now in what year are we in seed your future now, John?

SPEAKER_02 15:33

Uh 12th year.

SPEAKER_00 15:34

Twelfth year. And and so it's a it's a long game, right? Trying to change the course of of young people going into horticulture or not, it's a long game. And the reason we're catching them early is that we can get them before they're brainwashed into being a doctor or a lawyer, so forth. But here's the catch. You can be a doctor, lawyer, you can get a PhD and so forth, because we need PhDs in horticulture. We need growers, we need mechanics, we need engineers, we need scientists within horticulture. So anyway, I digress a little bit. The key thing about labor is that right now we're we're in um a situation where during the pandemic we had two jobs for every person looking for a job. Oh, wow. Um I just created some balloons there in my picture. I I forgot that I could do that. Two jobs for every one person looking for a job. John, right now we have 0.98 jobs for every person looking. So it's a tighter job market. All right, there's fewer jobs, so people aren't bouncing around from firm to firm like we saw during the pandemic when people said, you know what, if I'm gonna go back to work, I'm gonna go to a job that's fulfilling to me. Not just the same job that I had just to earn money to live, but I want to seek out a career. So we had a number of people jumping ship and going to different things. Had some people going in to cut flowers, growing cut flowers themselves, right? Because they they were they'd already they had always had that inkling and they they acted on it. So we saw the number of cut flower growers actually increase domestically because of that. Now, um there's some other supply chain issues besides interest rates that are creating a a lot of interesting dynamics. We it was just announced the Colombian wage rate, the the minimum wage was increasing by 25%. And of course, Colombia imports a lot of flowers, uh, as though I'm I'm preaching the choir here. You guys know that. But that those cut flowers are much more expensive to grow in Colombia than they were prior to this policy measure by the Colombian government. So that that's cut increased their landed cost, which the the where it comes into play with you guys is that then the differential between domestically grown cut flowers and imported cut flowers, which are grown at scale, and the economies of scale means that the the overall landed cost of those flowers relative to domestic flowers is typically lower. That's how they the share has changed over time. That's why we have 80% of the flowers that were consumed, that are consumed, are imported. It's cheaper to grow, cheaper wage rates. So if that landed cost increases, the differential differential decreases. But you know what? All right, that's that's a that's a benefit. It may be a temporary benefit, it may be a long-term benefit. Remember the things you can that matter and the things you can control. You can't control what the wage rate in Colombia is, but you can control your value proposition. You can control what your difference is and why people should be paying for your flowers versus imported flowers, and and that messaging is critical. That's that's what affects what we economists call inelasticity of demand. And the more you you talk and refine your messaging, whether it be about the the health and well-being benefits of the cut flowers you sell, whether it be about the lower environmental footprint, carbon footprint associated with the flowers that you sell, that's that's a that's a you gotta be careful there that you've done a life cycle analysis to prove that. Otherwise, we call it greenwashing. But you need to be very clear in your messaging on the benefits that you bring to the table so that people are willing to pay the price that you need to make a profit. And so that that that that profit as you measure over time is increasing and covers your input cost. All right, so that's some of the the dynamics that are happening uh from an importing standpoint. Uh when you look at uh your competitive position, again, it's the proximity to markets. That's your that's that's one of the key things that that is uh on your competitive advantage checklist and the seasonal and the local differentiation that you got. All of those things are you're you're more nimble than anybody else in the whole floral supply chain. Or if you're not nimble, you should be nimble. I mean you you control what what product you're putting out every year, how much you're going to to harvest and so forth. So those uh those um those parameters help differentiate you in the marketplace. Plus the other thing is those uh the relationships that you got with your customer base. Right? Whether you're selling uh B2C or whether you're selling B2B, you know, here in Texas we've got some of both. We got some folks that like selling to H E B and H E B. Uh H E B is like the premier supermarket in the world, by the way. And all this rhetoric about H E B customers being a cult, it's true. We love HEB. We will do anything for H E B. It's like Publix on the East Coast and so forth. And Wegmans up north, right? There's a there's a lot of different regionals anyway. I digress. But some growers sell to HEB, some growers sell directly to customers through various mechanisms, and we got some people that do that quite successfully. And some of you can guess who I'm talking about as uh as I'm talking about that. Um I want to go back to consumers for a second because they're the they're the key here. The we have seen some softening in terms of the mass market and the That's that in some cases that's your competition. We've seen some softening in terms of the mass market channels and the cut flowers moving through those channels. And the uh the specialty florist uh I'm gonna mute myself one second so I can clear my throat. It's the specialty florist, it's the um the B2C, the farmer florist, uh the subscription services, studio florist, and and the when you're supplying those kinds of customers, that's where you get the premium pricing and you get the premium experience. And to me, as an ASCFG member, you're all about that, right? And so the customers, though they are bifurcated, that's another fancy economic term, meaning that there's there's there's the there's a continuum of customers. And all customers are not created equal. That's a misnomer in the marketplace. Not all customers are created equal. So some of those customers have a higher income than others. Some of them higher have greater uh needs for to buy different flowers than the standard commoditized flowers. And so those higher-end customers, whether it be by income or by taste and preferences, those that's your that's your bread and butter. And then on the other end of the spectrum, you've got lower income families, and I'm not saying that you don't have any customers that are in that lower socioeconomic status, but that's not typically who buys most of the cut flowers in the country. We weeded out the middle, and we got the high end, and we got the the the bottom 80%, and there's there's a lot of sales in that bottom 80%. I'm not I'm not saying that. I guess what I'm saying is that there's a lot of cut flowers that are purchased by the top 20%. And the top 20% are willing to pay for quality, for service uh dimensions, for diverse products, and that's got your name written all over it. Right? So that's your that the the bifurcated customer is exact that whole trending works in your favor, right? So you gotta you gotta ask yourself if if your own sales are trending in the wrong direction, and the market would dictate that I should be going in the upward direction, you really gotta do some soul searching and figure out what it is, and we're gonna come to that in the second half of our talk. So, John, that may be a good transition point. Uh, the only other thing I was going to mention is that when I talk about national economic economic trends, it's one thing. And then I filter it down to regional economic trends, and then ultimately it comes down to local. I like the phrase all politics is local. Well, really, it's the local economy. So every single one of you online that are that are on the webinar, you have you have your your market, right? And it tends to be narrower in scope than the mass supermarkets, right? Alversons, Kroger, so forth. They have a bigger reach, obviously, than you do. But that doesn't mean that you can't play on the fact that you're local. And I wanted to refer to a study that I did several years back with along with some colleagues, Bridget B. Hip, Michigan State, and and others, and we looked at tagging something, labeling something as local, organic, and sustainable. Those three labels. And what we found that if you look at likelihood to purchase and willingness to pay, both the likelihood and the willingness to pay increased with one of the three in both cases, but not the other two. Local was the only one that generated a greater likelihood of purchase and a greater willingness to pay. Well, that's got ASCFG members all over it, right? That's it's all about local and being being all that for my customer base and my and within my market, my trade area. So I think that might be a good leaping off point, John, to make a transition here.

SPEAKER_02 26:48

All right. Well, thank you. Yes. You know, um, well, that is a great transition. Um, local is certainly making a big difference. And, you know, I'll go back to what Charlie said at the very beginning, talking about what you can control and what you can't control. Uh Charlie talked about a lot of factors there, some of which we can control, some of which we can't. So, what I'm gonna do now is talk a little bit about the things that we can do. And I'm gonna go ahead and share the screen for just a little bit. So I'm gonna start here with with uh the the military term. I'm sure Charlie is familiar with it. Uh VUCA, which stands for volatility, uncertainty, complexity, and ambiguity. Um, you know, man boy. Charlie, you covered all the factors that fit under those things, didn't you? And in terms of what's happening. You know, I'm thinking back to COVID and what a ride it has been since COVID, because it just seems like we got a couple months, things settle down, and then something new pops up in the news that is adding to our volatility, uncertainty, complexity, or ambiguity. And then you add that into what we were dealing with before even COVID, you know, changing consumer preferences. That is still going on and will continue to go on. Uh, Charlie mentioned labor availability. Yes, that still is an issue, and I know for many of you it's becoming even more of a concern. Changing weather patterns. Um the you know, this isn't necessarily a problem, but where does AI figure into our businesses? How can we use it? Um, and so forth. So we have a lot uh going on. Um, I think of floriculture and cut flowers in particular of being a combination of ag and fashion. Uh we have all the challenges of ag having to do with pests, diseases, and when to irrigate and when to cut, and then we've got the fashion that changes, you know, which color pink is in a particular year. Um so with all that in mind, remember to go back to the basics of business management. This is the part that you have control over. Okay, what is your vision for your business? Why did you start your business, or why are you still in your vision or still doing your your business? Focus on think that through, focus on it. Uh focus on your communications. Oh my gosh. You know, we talk a lot about in administration about crisis communications, but the basics are there. Keeping the message short and to the point. Uh, there's a uh uh uh a general rule, shall we say? It's the uh 3927 rule, which is three messages, nine words for each, and no more than 27 words altogether. I like it. There's the science that proves that when things get hairy, um, we tend to only hear three things. So we can go and discuss 29 different things, but people are only gonna hear three. So keep your message, and that message is for your for your staff. You know, let's say um you suddenly find out from the city that your farmer's market is gonna be moved all the way across town. You know, that's a bit of a crisis, and the staff are worried, are we still gonna do farmers markets? So that's time to communicate very clearly, succinctly, and directly. And the same with our customers. Uh Charlie brought up the study about local, and that I think is is real important for us to tell our story, communicate that story, you know, so that uh 3927, that's what you can start with to get your message across. And then you can always elaborate later. But keep in mind that when you're dealing, uh when you're trying to communicate, uh keep the message short, succinct, and no more than three main points to it. So um do contingency planning and risk management planning. Boy, we had a couple of great talks at the ASCFG conference that dealt with this topic. Um they did just a wonderful job on thinking through this is what you can do in terms of keeping control of things. You can think through problems that could occur. You know, what if we got a flood in the lower field? What would we do then? Uh, what if we lost power for for four, you know, three or four days? What are what are we doing? I know that's scary to think through all those things, but generally most of us feel better after we thought through them and then realize, oh yeah, we could handle this, we could take care of this. All right, so do some of your contingency risk management. And then the next two here, focus on marketing and cost accounting. I've got a little bit more on that. But before I get too much further, you gotta remember the basics of focusing on yourself, taking care of yourself. Um, we tend to think of this as a luxury. We tend to think of you know going off and and taking, you know, taking a bit of a vacation as a luxury. You need to reframe that. We don't do well when we're stressed out when making important decisions. This is not a luxury. This is a critical factor in your business of taking care of yourself and being ready to make those decisions when things happen. Alright? So, let me go ahead. Let's talk a little bit about marketing. Of course, Charlie can do this part better than me, but I'll just uh go ahead and get us started. Um, who are your target customers? You know, um it's easy when a crisis happens to start thinking about what I need to do to make some extra money. Um we gotta be careful with that. Because if we lose the focus on our main customers, our business in general may suffer. Um what customer needs are you satisfying? Okay. Um why are they buying from you and not from somebody else? And Charlie's absolutely right. There are so many reasons that people are buying from especially cufflar growers in the US, than they are from a supermarket or a big mass market retailer. Uh they want to connect with you, uh, they want to connect with your story. Um you're giving a high value, you're giving a diverse product mix, uh, you're providing a lot of support and service. There are a lot of reasons why folks want to buy from us. So think that through for your business. Okay, what image does your business project? How are you reaching your customers? Are you investing money in marketing? If not, you probably need to be. You know, I know that um um I I get a little cringy when I hear the cliche. It takes money to make money, but in this particular case, I agree with it. Sometimes you got to spend a little bit of money uh to get some return in marketing. And then, of course, how you determine if your marketing is effective. There's lots of little tricks. And again, go to the ASCFG. Uh, there's webinars and things that can help you uh with putting all of this information together. Before I move on to basics of business, do you want to add anything on marketing, Charlie?

SPEAKER_00 34:21

Well, the I think marketing starts again with your value proposition that that you develop your sales messaging off of. But there's a correlation. You you mentioned vision uh as one of the very first things. And in my Eagle program, which is an executive education program for growers that that I that I've been teaching now for 14 years, the very first thing we do is we look at the core values of the firm and the core purpose, or that that vision, it's another word for vision, that core purpose. And until you got the core values of set and your purpose, you glass vision set, I agree with you. You could do all the other things that you're doing are meaningless. Uh you've heard the phrase, um, you'll if you don't stand for something, you'll fall for anything. Well, it's the same way with your employees. If they don't know what the core values are, and it's not embedded within the culture of your firm, whether you've got four employees or you've got 40 or 400, it's the same principle. You want everybody on the same page in terms of where we headed and and most importantly, what are the behaviors that are expected while we're heading there? And you may say, well, there's the uh accountability is one of our core values. We're accountable to each other and so forth. But then when you look on a typical day, not everybody's coming back from lunch at the same time or showing up at the same time. And particularly for small businesses, there's a lot of leeway that's given because we don't want to run people off. It's harder, the hard as heck to get a hold of in the first place. Those core values are, as we say in Texas, muy importante. They're they're critical to the the rest of the operation. Because the efficiencies that you also alluded to all boil down to SOPs and standard operating procedures, another great military term, right? And I talk SOPs, SOPs, SOEPs, but I talk about COEs too. Because COEs is not necessarily known as much as correction of errors, and that in spite of having SOPs in place, there's always errors that happen in the thick of things. When we're at our busiest, you can pretty well guarantee that something is going to happen. And those errors either occurred because we didn't have an SOP, or we didn't train people on the SOP, or somebody ignored SOP, and that's a that's a core value violation right there. You invite them to get on somebody else's bus if they continually do have those core value violations. So I I I wanted to hit on those couple of points that, yeah, it's it's values is important, and from a marketing standpoint, uh an operational efficiency standpoint, we we got SOPs in place for a reason. Because we can't everybody on here, uh, if you own the business, you want to be able to operate the business without you necessarily having to be there all the time. You want it to continue operating. But then if if you're working in the business and you love it, you just want to make sure that you're doing things right. Because having a um a business requires sustainability in a lot of different ways. People plan at profits. You gotta have the right people working for you, the right customers, you gotta have the you be it um good for the planet, but you gotta have a profit. And without profit, you're not gonna be sustainable for very long. Uh anyway, I'm pontificating now, John. So I'll I'll I'll quit right there and you can move to the next topic.

SPEAKER_02 38:18

All right, very good. Okay, so basics of cost accounting for the next year. Um, have you done a cost analysis of your marketing channels and products? Um, if you have, is it ongoing? Does it need to be updated? And if you've not, then do so. All right. And again, uh contact, you know, go through the ASCFG website. There's a couple of great presentations uh that can walk you through that. Again, this is something you can control, you can know where your expenses are going. And I'm gonna say this right off the beginning. We so often focus on the clear, simple numbers, the cost of a seed, the cost of a tuber, the cost of a flat. And then we tend to not pay attention to the unit cost of labor, whether that be our own or our employees. And if there's anything I can add onto that, to the basic cost accounting part, is really be thinking about the labor costs and going through and figuring out, and there's different ways of handling that. It's kind of a it's kind of a big topic, but uh um Charlie's done quite a bit of work on that as well.

SPEAKER_00 39:29

Yeah, John, I started in 1984 doing cost accounting as part of my master's thesis. I'm still doing cost accounting.

SPEAKER_02 39:38

It's that important.

SPEAKER_00 39:39

Yeah.

SPEAKER_02 39:40

Uh Charlie talked about B2B, and so I'm just gonna show you real quick what those are. That's business to business. So, like selling to retail florist designers, grocery store, local retail buyers, floral wholesalers, cooperatives and collectives, any one of these can be a talk in and of itself. And we're not gonna go through that. Um, but just to give you an idea, and then uh direct to consumers, whether that be farmers markets, CSAs, farmer florists. We've got cooperative and collectives again, because some of them actually sell directly to the public. Flower pop-ups, those a new one, that's so much fun. And then, of course, all the on-farm stuff. These are all exciting and fun, and I'm sure everybody's looking at this thinking about them, but we're gonna give you a caution. Do the basics first before you start looking at all of these other marketing methods, because you got to make sure you're optimizing what you're doing. Because it takes a lot to get customers, and once you've got customers, you want to be sure to keep them and keep them happy. Um, so again, remember the basics of business management, um, the things that we've mentioned here, and then be sure to take care of yourself. Move that from the luxury column to the must-do column uh to make sure that your business is successful. All right, with that, I'm gonna stop sharing of the slides. And I know we've got some questions already in the uh in the chat. But before we do that, anything else you wanted to add, Charlie, before we go to questions?

SPEAKER_00 41:12

Just one quick note that was from the cost accounting standpoint, you already alluded to this. I just want to reiterate it. Labor is typically 30 to 35 percent of sales, 35 to 40 percent of of our cost of goods. For cut flour growers, it can be as high as 60% of our overall cost of goods. So again, I'll use our Texas terminology, it's muy importante that you start looking at labor as part of the you figure out labor in your cost accounting, and you've got the biggest part of it cracked right there.

SPEAKER_02 41:46

Very good. And you know, there's some good books out there, and then there's some great webinars and articles on the ASCFG website. You know, one of the one of the questions that we got was in this current situation, do local growers have an advantage in terms of costs against flowers imported from South America that are being charged by tariffs, higher minimum wage, etc. Yes, because our growers are typically closer to the customer. When you're closer to the customer, you have more control over that message. When you have more control over that message, you have more control over the value proposition. And I'll pass that on to Charlie.

SPEAKER_00 42:30

Amen. That's okay. That's you you answered, you nailed it. That that advantage there is from an operational standpoint, operational efficiencies, it's from a marketing standpoint. And remember my local sustainable organic example, the study that we conducted. There's great power in that the local labeling. And uh even those that sell to HEB, sometimes HEB will put these full-size figures in the store that of the uh like well, I don't know that Jimmy will mind. Jimmy Claypack, right? Claypack greenhouses, right? He sells some some uh things to HEB, and they've got a life-size cutout of Jimmy in the display because they want to emphasize that their flowers were grown 30 miles down the road. So there's again, there's great power in in that local messaging.

SPEAKER_02 43:24

All right, the next one I think is squarely in your court. I'm curious about the amount other growers are spending on marketing. Um, how much dollars should we dedicate to it? I think I'm paraphrasing a little bit there.

SPEAKER_00 43:38

Yeah, yeah. You know, that's always been a question, regardless of which sector across the green industry, how much should I spend on marketing? The answer is it depends. You know, but in general, general, most people are spending two to three percent of their sales on marketing dollars. That's kind of a rule of thumb. I'd like to see it in a four, five, six percent if you're if you're a business to consumer and you're it's more expensive, so you have to spend more dollars than if you're going business to business. For the business to business, you have usually one person you're dealing with and you have to convey that value proposition to that one person because they're the buyer for that particular channel. But in the in the case of B to C, I mean, you've got a little more reach that you've got to make, and it's more expensive. So it could be four or five percent of sales that you've got to spend on marketing. Now I say those as rules of thumbs, and I can't the the vast minority of businesses out there actually spend that. In fact, m marketing dollars are the first thing that's cut whenever we get uh a downturn. And that's really when you could spit should spend more on marketing dollars because when everybody else is cutting and there and there's not any people shouting in the room, your voice can be heard much better. So you almost want to think, like Warren Buffett, think counter to the trend and not necessarily be susceptible to cutting marketing dollars in the midst of these contractions.

SPEAKER_02 45:11

You know, I think that leads us right to the next question, which is really good. If 2026 budgets have already been set for the year in a business, um should any adjustments or buffers be made for a volatile year? You know, can you talk about how a business might be doing that and how much?

SPEAKER_00 45:32

Yeah. In in the midst of volatility, I again I don't know that you need to make any major adjustments, particularly in terms of cutting what what you've already got in place. But if you think about adding to a marketing budget midstream, that that's certainly doable. But you want to do one you want to do a couple of things. First of all, working capital is very important to businesses in the midst of volatility. And a lot of times I'll see folks, which is basically the the short definition of working capital is your current assets or current uh liabilities on the balance sheet, right? It tells you how much money that you've got basically to operate your business day to day. That's working capital. Well, I've seen too many businesses that grow excellent quality cut flowers. That's not the problem. They've got great marketing. That's not the problem. They burn through their cash. And so managing cash and managing working capital, that's not a very sexy topic, but it's again, it's a very important topic. So you can make adjustments, you could increase marketing dollars, you just want to make sure that you don't burn through too much working capital just in case something unexpected happens geopolitically, like starting a war or something of that nature. So you you wanna you want to be aggressive, but you don't want to burn through working capital and leave yourself susceptible with not having cash when you might need cash. So that you in fact, in in one of my four-part sermons that I would use today, one of those would be you gotta manage your balance sheet every bit as much as hard as you do your income statement. Right? It's not just and I know the tendency is for a lot of cut flower growers, they they'll they they live in the income statement. But you gotta you gotta back up a little bit and you gotta pay attention to the balance sheet as well and work it every bit as hard during these times of volatility.

SPEAKER_02 47:44

Next question we got here for direct to consumer markets. You know, we had that list there. Um, what buyer trends have you been seeing recently? Is buyer interest going up or down in those particular categories? I will start real quick and then I'll have Charlie actually provide the numbers. My impression is that for the most part, the bump that we got from COVID has definitely leveled off. Um I would say last year there's a lot of folks that did well, some folks did not. And what I know what I heard a lot was um people in general did well, but things were just off just a little bit in this category and just a little bit in that category. And then when they got to the end of the year, they were pretty close to the year before. Now that's just my general impression. Charlie, you probably have some more specific numbers on how people do that.

SPEAKER_00 48:34

Yeah, I've got national data straight out of the GDP data on flowers, seeds, and potted plants. And I I can draw you an air graph. Is let me see if I can draw it backwards. All right, so so in in this air graph, you the before the pandemic, we're growing glacially. That's the term I like to use. And you know how fast a glacier moves, right? We're we're growing, but we're growing glacially. The pandemic hits, and we start growing at about a 30% increase in that curve, and it's man, it's that's it's pretty it's good demand, solid demand, and we get a little bit of cover to raise our prices, and and so sales go up, but then they they plateau. And you had in 2022, it's plateau and it starts going down a little bit. And that's what I'm saying to myself, self, I've seen this before. We get that big jump, it was shot in the arm, and then we go back to trend, and then we can't take off again. This time we plateaued and did a little bit of a dip, we went back up. And we increased a little bit, but then we plateaued again. And then we went down in 2023, towards the middle of the year, and then we went back up again. It two times it tricked me, and it wasn't done because in 2024 we did the same thing. We had a three-month dip, and I thought, okay, here we're going back to trend again, but then it curved back, and in 2025, the same thing, the same plateau, although at the end of 25 we've had four straight months of decreases. But even with those four months of decreases, we and in the in the early 2026, the January and the preliminary February data, because it's not finalized yet, but but they we've we've kind of plateaued again, come back up a little bit. So the good news is that even with that little bit of decrease at the end of 2025, we're still well above where we were in 2019. We're well above where we were. So we're now right now, it's still an expanded market, and we hadn't gone back to trend, and it's been three solid years since you know, well, 20, no, it's been I guess the height of where we were during the pandemic is 2022. So we've had you know three years and some months since then, and we've we've threatened to go back down to trend, but we haven't.

SPEAKER_02 51:03

So I'm we're holding on to the COVID bump.

SPEAKER_00 51:06

Yeah, holding on. Yeah, that's a great way to put it. Holding on to the COVID bump. Yeah.

SPEAKER_02 51:11

Very good. Very good. All right, so one of the questions here says uh a little more specific. We started selling 80% to one floorist, but last year in our fourth year, that floor has dropped off sales. We picked up a wholesale company and sold more bouquets. I'm trying to decide my focus for 2026. What worked for 2024 isn't what made us money in 2025. So that's kind of getting to when should a person really decide to make a big pivot in what they're doing. Charlie, can you talk a little bit about that?

SPEAKER_00 51:46

Well, I mean, there's the advantage of having 80% of your sales tied to one florist is that as long as that florist is getting your value proposition, no problem. But then when that that florist drops out, then you get you're left trying to move that product in other channels. So I would continue my exploration efforts and try to diversify my customer mix. And whatever worked in 25, I couldn't pick it up in the questionnaire. What whatever you did to make money in 25, explore more of it. But then uh you know, going the wholesale route is going to move volume, but it's not going to move in terms of margins. There's going to be tighter margins. So there's trade-offs. And so it depends on what your cash situation is, whether you need to build cash, and so that may dictate in the short run, you have to make decisions and you may sacrifice some margin in the short run to move some volume to generate the cash, to pay the bank, and to keep in business. But in the longer run, you gotta seek out customers that are aligned with that vision that John started with. That may be a wholesaler, may not be, but you gotta you gotta have a customer base that fits what your vision for your company is. And John said it so well earlier.

SPEAKER_02 53:15

All right, and I would um you know, I I would add maybe time for a conversation with that, Florence. You know, is it a matter of competition from other local growers? Is it a matter that you know, have you drifted off of your mark a little bit and that's starting to show up in in lost sales? Um it could be something that you have control over, and it could be something you don't have control over to be able to figure out what's what's going on there. Um what would be the key differences in terms of direct sales to consumers between the Canadian and American markets? As a Canadian, I feel some of our trends may be different. Oh golly, that's a fun one. I'm not sure I know what to say on that one.

SPEAKER_00 54:02

At 4 30 this afternoon, I'm headed to a on a on a plane to Calgary, and I'll be talking to the Canadians tomorrow. And the the trending uh, you know, the the overall scope of the trends are roughly the same, but it's the magnitude that differs. So I can't say that anything that uh what we've said so far is markedly different, the bifurcation the bifurcation of the of the customers and the inelasticity demand, the value proper. All that holds true. It's just in terms of magnitude. And and not all provinces in Canada are created equal in terms of economic performance. I just happen to be going to Alberta, and I and I study the Canadian economy every bit as much as, well, not every bit as much, but a lot, um, because I know that our two economies are so closely linked, and the green industries in those two countries are so closely linked that that I pay attention uh a lot to what's happening in Canada. So not but not all provinces are operating at the same economic efficiency right now. And it just happens to be I'm going into one where housing is strong stronger than other provinces, and the prognosis is good. So I don't know where in Canada that you are. Uh bring a warm coat. I'm in the Calgary Airport now. It's a small world. Yeah, I got I got my coat, but trust me, a Texas coat in Canada doesn't cut it, so I may be looking for one while I'm there, but anyway.

SPEAKER_02 55:38

We have we have probably time for one more question, and it's a good one, I think, as well. Um basically talking about the increase in labor costs, and are prices keeping pace with the increase in labor costs is really, I think, the question.

SPEAKER_00 55:54

Yeah. I calculate an index of prices paid by growers, and I look at all the inputs that growers utilize, and I comp I calculate what the year-over-year change in those input costs. And since 2019, the cost of labor, the cost of fertilizer, plant protection products, we don't say pesticides anymore, plant protection products, um uh freight trucking, uh the supplies and repairs, all that. I measure all that. Since 2019, it's increased by 23%. I'm rounding up 22.5 to 23%. So that means if I've not raised my prices since 2019, 23%, I'm sharing profit margin with my customers. And I may like my customers, I may, I may interact with them a lot, and they may be friends with them, but I don't necessarily have to share my profit margin with them. I want it, they're going to get their profit margin. So so the prognosis, my forecast for 2026, as it stands right now, with the tariff structure and so forth, I'm still looking at another 3.7% in 2026 increase, which is a little higher than last year. We got a little bit of reprieve in spite of the tariffs because energy prices were so low. And so that we we've gotten a little bit of reprieve while food prices are high, energy prices are are low, and which has inf has an influence on the Canadian market, right? Because the Canadian economy is very dependent on energy prices. And so that that's why some provinces are have it struggling in terms of of making their budget meet and at the local level because of that. So yeah, I guess that that's my main comment. If you're not seen it, you can Google Index of Prices Paid by Growers, Dr. Charlie Hall. It'll come up. And it's I I disseminate it through a Cultivate or American Hort and talk a little bit about that on the stage at Cultivate and other settings. But just look for that, and it'll um I'll be releasing the this year's release in the next week. So it'll be hot off the press. But basically what I told you just now is is is the big part. 23% increase since 2019. So look at your pricing structure and have you increase prices accordingly, and then uh you know, expect a little more for this year. And how do we how do we create that runway in front of us on pricing when we're already starting to get some pushback from customers? That's that's a tricky one. You know what the the answer is? It's two words Value proposition. That's the only way. It's the only way, it's the only way you can get it. There's no other way. You can't cut your way out of it. You uh and you gotta r go the price route. Right? You get you you can't shave 23% off your cost all at once. You gotta you gotta go the price route. To go to price route, you gotta emphasize value proposition. Whew, we John, we did it, man. This has been fun. It's been a great one-two punch back and forth. Maybe we set a new trend, a new, a new tradition.

SPEAKER_02 59:19

There we go. I hope so. Thank you so much, Charlie. You know, I'm gonna finish with with one one more comment here. Charlie's an expert in all things financial, but um, some of you may not know that he has also done a lot of work on the on the benefits of plants to humans. And you know, he finished with talking about the value proposition. You know, that's a big part of the value proposition, the importance of cut flowers in our lives, and he's just done a lot of great work on that aspect of our industry as well. So thank you for all that you've done for the cut flower industry, Charlie.

SPEAKER_00 59:55

Absolutely. It's it's it's it's my passion, right?

SPEAKER_01 1:00:05

So um again, just let me echo that. Uh John and Charlie, this has been amazing. Um, I love the conversation between you two. I can clearly see the passion and the joy uh on these topics. So um thank you so much. And you know, when we talked about building a new tradition, I hope so. I would be delighted to work with you to make that happen. So um, yeah, I'll be knocking on your your email inbox door. Um so again, thank you so much. This has been incredible. Um, and thank you everyone who has joined us today. Um, you know, I know this is kind of a new time for folks. You know, typically we have a lot of our webinars in the evening, but we're kind of borrowing from a lunch and learn model for this series. Uh, and I'd love to hear your feedback if um this time works out for you. Um so please email me if you have any thoughts, you know, uh shout out to us on Instagram, whatever, whatever, however you find us, let us know what you think. Um, and then in addition, I just want to remind folks if you're not a member yet, please scan the QR code that's on the screen. Uh, and you can join uh the ASCFG at a discounted rate today. Um we just the more the merrier. We are growers who connect with one another and learn from each other and get to learn from wonderful people like Charlie and John. Um and we'd love for you to experience those benefit too. So with that, I'm gonna stop talking. I'm gonna end the webinar. I hope you guys have a wonderful week. Um, and just take care. John and Charlie, thank you again.

SPEAKER_02 1:01:44

You better. Thank you. Thanks for having me. Have a great day, everyone.

SPEAKER_01 1:01:48

Have a good day.