Market Trends: Feb. 2001

DENVER, Colo. - With the recent bankruptcy and subsequent sell-off of AgriBioTech’s (ABT) assets, many turf seed customers were left wondering what became of the grass seed varieties the company had managed to consolidate.

That mystery has been partially solved by United Horticultural Supply’s (UHS) strategic agreement with the newly formed United Seed Production (USP) that provides UHS with marketing rights to most of those varieties. The agreement positions UHS as a top grass seed supplier in the turf and ornamental industry.

“There are more than 100,000 acres of turfgrass production currently in place to ensure that the supply of well-known products turfgrass managers have enjoyed in the past will continue uninterrupted from UHS,” said Terry Boehm, business manager for UHS.

UHS devoted most of its recent energies to creating a national focus and developing a line of fertilizer products under its “Signature” brand name. Now, the company hopes to build market share in the large grass seed segment, armed with an arsenal of many of the industry’s best-known varieties.Premium seed offerings will carry the Signature brand name, which UHS acquired the market rights to while building the program. Many products will also be marketed under the general UHS label, the total available list including more than 100 industry names.

One of the major components of USP is ProSeeds Marketing, a seed marketing company in Oregon’s Willamette Valley. ProSeeds acquired the bulk of the turfgrass assets from the bankruptcy of ABT in August 2000, and was awarded the exclusive rights to more than 80 percent of ABT’s approximate 300 turfgrass varieties. With the combination of ProSeeds’ existing base of varieties and the newly acquired varieties, USP became the largest source for both improved turfgrass genetics before this acquisition.

UHS plans to continue to bring new and improved varieties to the market through affiliations with the nation’s top breeding programs. In fact, Rutgers University has reportedly already designated several of its newest improved varieties for exclusive UHS distribution.

UHS projects turfgrass supplies for the upcoming spring season will vary substantially depending on the turfgrass species. Turf-type tall fescue and elite Kentucky bluegrass will be in tight supply while the mid-range bluegrasses should be available in adequate quantities. Improved fine fescues and turf-type perennial ryegrasses are in ample supply and most varieties of creeping bentgrass should be available for the upcoming spring season.

REGIONAL NEWS
Construction Forecast Brings Good News, Bad News

WASHINGTON - With so many contractors waiting for the first sign of an economic slowdown, the CMD Group’s North American Construction Forecast announced a reassuring message: residential and commercial construction should remain strong through 2002.Total construction is already at a record high, but Bill Toal, chief economist for the Portland Cement Association, predicted the blistering pace to climb another 1.3 percent for 2000, dip 1.9 percent in 2001 and then increase another 1.3 percent in 2002. The overall economy is a key factor in construction spending, and Toal predicts the entire economy will swell another 3 to 3.5 percent next year. “With the technology bursts we are getting, unless something really broadsides us, I see continued economic growth at a moderate pace as far as the eye can see,” he noted, adding that October 2000 marked the 115th consecutive month of unprecedented economic expansion.

Population demographics also can be credited for some of the construction growth, as the rise in the grade school population created more school buildings and the population increase in the 18 to 24 age group prompted more apartment construction.

However, Toal tempered his enthusiasm by noting a decrease in the number of people ages 25 to 44, which could lead to a decrease in new single-family home construction in the next two years.

In fact, Toal noted that this key source of new installation work for landscape contractors already has begun to slow, and he predicted a 9 percent drop in residential construction for 2001. However, the growth should return in 2003, and construction of multi-family units should remain steady.

“What is dragging down single-family housing starts is multi-family housing starts,” agreed David Seiders, chief economist, the National Association of Home Builders.

Toal’s forecast for non-residential construction called for a 4.6 percent increase by the end of 2000, which will then level off throughout 2001 due to fewer new hotel and retail projects. However, the aforementioned boost for educational construction equates to a 16.4 percent jump for this year and a promising future.

Fortunately, any negative impact stemming from the slowdown in commercial construction may be offset by a continued climb in the office occupancy rate, which currently stands at 91 percent and provides commercial property managers and owners with the funds necessary for maintenance and enhancement projects.

Ray Torto of Torto Wheaton Research, explained that the cities with the lowest office space vacancies for the third quarter of 2000 were: San Jose, Calif., at 1.2 percent; San Francisco, Calif., at 3.3 percent; New York, N.Y., at 2.5 percent; Seattle, Wash., at 3.4 percent; Boston, Mass., at 3.7 percent; Washington, D.C., at 4.2 percent; and Portland, Ore., at 7.1 percent. Cities with above-average vacancy rates include Los Angeles, Calif., (12.4 percent), Phoenix, Ariz., (12.5 percent), and Dallas, Texas (15.3 percent). As a result of the climbing occupancy rates, office rents rose at a 16 percent annualized rate for the first half of 2000.

Some landscape companies may find government projects more attractive since Toal thinks they represent strong opportunity next year as more communities and local governments enjoy healthy budgets and fund more public works projects.

In particular, Toal said the construction hotspots for the next few years will be California, the Pacific Northwest, the Southeast and Texas.

On the downside, forecasts for future labor are not bright. William Rodgers, chief economist for the U.S. Department of Labor, explained that what many people consider as a labor shortage can more accurately be described as a skills shortage. “The Department of Labor believes that construction employment will grow by 9 percent over the next 10 years, [which is] more slowly than the overall economy, which is expected to grow 14 percent over the same period,” he said.

However, wages for construction and related industries have slipped relative to other industries since 1979. Rodgers said the government is exploring ways to raise the skill level of the 13 million unemployed Americans. Since half this group are female and more than half are minorities, the industry might become more diverse in the future.

MARKETING IDEAS
Let Your Fingers Do the Walkin’

WITCHITA, Texas - To attract its market niche - the infamous do-it-yourself homeowners - a-Perm-o-Green’s Marketing Director Nancy Brown visualized a typical do-it-yourself homeowner with a hoe, shovel and bag of fertilizer in his hands and a spray tank on his back, sweating in the hot sun and looking miserable. She described this image to the company’s advertising agency, who drew up a cartoon based on this depiction.

The result won a-Perm-o-Green the 2000 Professional Lawn Care Association Best Yellow Pages Ad award.

This spring will be the fourth season the ad will appear in the Texas area Yellow Pages. Each season, the company changes the ad slightly to jazz it up. One season, the homeowner was lying in a hammock drinking lemonade and the next season he was on a golf course. The slogan under both ads read, “Don’t spend the weekend in your yard. Call a-Perm-o-Green.”

To run the Yellow Pages ads, Brown said she spends about ¼ of the company’s $35,000 marketing budget.

“We wanted to do something that makes a potential customer look at the ad and say, ‘That’s me, and that’s what I don’t want to be doing this summer,’” Brown said. “The ad also shows off our company’s lighter side.”

IN THE NEWS
Ariens Digs Into Construction Equipment

BRILLION, Wis. - Ariens Co. launched a new division with the hope of expanding the number of markets the company deals in. Ariens Construction Equipment will focus on construction equipment products, such as full-size skid-steer attachments and machines. Ariens’ hope is that the new division will push the company further into the construction market by providing increased focus on this segment of the industry, reported Ariens President Dan Ariens. Equipment in the new division will include Ariens Grader and Gravely-branded Skidsters and Pro-Chip series machines.

“We believe these products will serve the construction market well by boosting productivity, reducing capital costs and cutting labor,” Ariens said, pointing out that newly developed sales partners will handle the bulk of sales activity for Ariens Construction Equipment. “We believe it is important to keep a broad enough product offering while avoiding channel conflict with our loyal, long-term dealers.”