State of the Irrigation Industry: Oct. 1999

The long-term value of landscape irrigation benefited from droughts and below-average snowfall in 1999. In many ways, the scarcity of water, caused by La Nina, which characteristically follows El Nino, bolsters the importance of irrigation. Seeing the bottom of reservoirs sends a message to landscape owners – if you don’t have control over the water making your landscape possible, who does?

A booming economy might have softened the temporary setback of dry weather, bringing growth rates of irrigation manufacturers into strong double digits. Pent-up demand for irrigation, which follows new construction by about six months, should bring another double-digit year as irrigation contractors enter the new millennium.

From the standpoint of landscape irrigation, Texas showed us that irrigation management can influence the reliability of underground aquifers and surface reservoirs. After experiencing months of below-average rainfall, high population growth and opportunity-based immigration, Texas is gaining control of its water use with the help of Mother Nature and irrigation. The city of San Antonio and the state of Texas, are funneling millions of dollars into irrigation research and education. The effects will be seen before the Irrigation Association holds its show there in 2001.

LOOK WHERE GROWTH MATTERS. Even the predominantly hose-end markets along the Atlantic Coast got a wake-up call this year. Drought threatened the Garden State of New Jersey, the bedroom communities in New York, Connecticut and Massachusetts, and the high-tech growth states of Virginia, North Carolina and Delaware. Even though these are states with comparatively low percentages of residential and commercial irrigation, the message hit home.

“I spend more on tolls commuting to and from work each year than I do on my landscape, even though it’s my time at home that counts the most,” said one New York commuter. “When the drought hit, we stayed inside or hung out at the mall while our lawn turned tan and our ornamentals dropped their leaves. My priorities suddenly became clearer. If I liked cement, I would have stayed in the city and gone to art galleries to get an impressionistic glimpse of nature. I want my kids to play on green grass, not plastic or asphalt. I found myself watching the Victory Garden or Martha Stewart with unusual envy. Finally, I realized that my lawn and garden meant more to me than I used to admit.”

On the lower end of Manhattan, on a couple of old-fashioned narrow, angular streets like Boston, sits the New York Stock Exchange. If the irrigation industry had more publicly traded companies, this article would be easier to write. The only way to gauge the public’s priority about irrigation has been with shares of Toro, one of the few irrigation companies listed on the New York Stock Exchange. Vulnerable, because it is so concerned about weather with its snowblower business, Toro expanded its investment in irrigation by buying Irritrol last year. Snow is big business in Minnesota where the company is headquartered. The opposite of snow is the desert, and Toro was the first “rust belt” company to hedge its bet on the Southwest when it bought Moist-O-Matic from Ed Hunter during the 1960s. Mowers, snowblowers and irrigation in the desert – how can you go wrong?

HELLO, WE’RE GROWING. Drought is not a threat to irrigation. It is gleaming proof that irrigation is necessary for the economy to grow. During the past decade, landscape irrigation has grown faster and larger than most of the other complementary markets to landscape contracting. That could be the reason why more state universities, community colleges and the Irrigation Association are experiencing impressive interest in landscape irrigation.

According to the Irrigation Association, landscape irrigation grew at the manufacturing level by roughly 15 percent from 1998 to 1999. If you include pipe, wire, contractor markup and labor, landscape irrigation jumped $380 million last year, from $2.25 billion to $2.59 billion. These numbers include irrigation sales by landscape contractors, not retail sales to do-it-yourselfers. They do include a factor for sales to landscape contractors by retail outlets.

COMPARED TO WHAT? For this State of the Industry report, the idea of comparing irrigation to other tangential landscape markets was intriguing. Markets such as sod, nursery, night lighting, water features and aeration, and precast wall blocks track landscape installation closely. If one of these markets does better than others, that’s news because it reveals changing priorities and opportunity in the landscape industry.

We overlook the importance of irrigation. As a contractor, you should have the facts. A landscape contractor, who is wise enough to tackle irrigation, will often be interested in night lighting, fountains and retaining walls. Just talking about landscape-contractor installed products, irrigation is No. 2. It’s hard to get good numbers about nursery and sod, since they, too, are predominantly held by private investors. Irrigation might be No. 1if we could cut through the red tape.

Before we get to national trends, let’s be specific about the landscape industry. A number of major industry groups sponsor a Gallup Poll every few years. It makes us all feel good because the numbers begin with a “B” (billions). Allow me to say, if there are 16,000 golf courses in the country, there are at least four times that number of full-time contractors paying taxes to the IRS. Maybe some day we will get our own SIC recognition.

With no disrespect to the hard-working marketing managers in related fields, here are a few ballpark numbers to consider. We already said that irrigation at the contractor level (installed) is $2.59 billion. Nursery is virtually controlled by privately-owned companies. But, I’ll stick my neck out to say it is close to irrigation. Out of the $14-plus billion in annual landscape investments identified by the Gallup Poll, landscape contractor installed nursery material might be in the range of $3 billion. Considering the size of the maintenance market, it can’t be much higher.

Understanding sod is like trying to know the value of players at poker tables in Las Vegas. From the many I know, and their predecessors who propelled their industry beyond a commodity, today’s market, including installation, is about $1.5 billion.

Low prices in farm commodities could apply some competitive pressure on sod growers. This could cause sod prices to drift downward in some regions. The trick with sod is to concentrate on the leading turf varieties and to specialize in the highest establishment success. Seed producers separate their most successful varieties for sod companies and golf courses in purity and performance. Contractors would be wise to delegate this specialty to turfgrass producers (the new name for sod growers).

The precast concrete retaining wall industry is about $800 million installed. This market is hard to pin down because it operates through dealers, who are licensed by the big names. It is, however, a favorite of landscape architects and will take some landscape investment dollars from other areas.

The next, most obvious product in the industry is night lighting. What could be better proof of great landscaping than extending its display into the night? What’s that worth? People tell me $80 to $100 million at the manufacturer level for contractor-installed lighting.

Once you identify closely with a landscape, you understand that it can include a full palette of nature. Applying water for irrigation lends itself to the question, where does that water come from? Take the next step to, “Can a water source be an attraction as well as a utilitarian component of the landscape?” The answer is yes to the tune of $20 million, just for landscape contractor installed fountains, aeration, and artistic water features.

To recap, without being too specific, landscaper-installed irrigation is a $2.59 billion industry in the United States. The nursery industry should be in the range of $2.5 to $3 billion installed. This does not include maintenance. So, we are talking about $1.25 to $1.5 billion in shipping from nurseries. A little-known fact, however, is that you can turn capital in landscaping faster with installation than with maintenance. Maintenance has simply been more consistent and newsworthy in the past two decades. And, if you look closely at the dollars spent, maintenance is nearly twice installation.

The fact is, we love our landscapes and are not that terribly sensitive about the cost of installing or maintaining them. What we want is a few hours of enjoyment after a week of making either ourselves or someone else wealthy. Call it quality time. Hard work is supposed to create enjoyment.

Without water, there is no landscape. Starting from this point, we should have strong confidence in our occupation for at least the next two decades.

NITTY GRITTY. Let’s start off with an inflation rate of 3 percent. We can expect landscape irrigation to be somewhere between this and the 150 percent growth in stock price of companies such as Intel and Amazon.com. But, if you come down to earth and compare profitability with share price, you will learn that older stalwarts, such as aluminum and oil, are doing pretty well. That is where you will find irrigation in the future.

What does this tell us? Productivity is up. Foreign markets do not lead us, they follow. We don’t need to look for junk bonds to make money. The U.S. economy has found peace with its banks. Consolidation has made some things easier and investors less edgy.

You might have seen that plumbing unions are waking up to the fact that their members can make money outside as well as inside. They have taken steps, in at least two states, to wave their public health flags, despite a clear lack of experience with plant water requirements, distribution uniformity and the science of evapotranspiration. However, a plumber’s ability to fit a pipe does not ensure that he or she has a grasp of the workings of a backflow prevention device.

The backflow device is the iron curtain in the public health debate regarding irrigation and the potential for contamination during chemigation or simple suction of lawn chemicals through irrigation systems. Propaganda about licensing of plumbers is threatening public health officials’ trust of uncertified irrigation contractors.

Certification is gaining importance when it comes to landscape irrigation. It’s the only true way to counteract the plumbers’ union assault on our industry. If plumbers really want our cooperation, they can express more interest in working with us.

Overall, the greatest growth in irrigation in pure dollars remains in the Sunbelt. It flows along with population growth and the future is bright for continued expansion. Let us not forget, however, that landscape maintenance boomed first back in Ohio and New Jersey. Droughts in these regions only reinforce the importance of irrigation, even when it supplements natural rainfall.

Keep in mind that mass hardware merchandisers are pushing hard and they are taking irrigation along with them. Simply stocking the aisles of new stores will swell irrigation manufacturer sales. These retailers might spell the ultimate success of the irrigation industry. Growth of irrigation distribution chains is changing the way manufacturers do business, but contractors who want to compete with larger contractors have a vested interest in supporting their local irrigation distributor.

It’s probably a good idea to pay as much attention to the irrigation industry as you do to the nursery and precast retaining wall industries. Irrigation fits well with the fountain and aeration business too. Finally, it would be wise to start stocking low-voltage lighting. All of these technologies are compatible.

While the term interior decorator might not ring a positive chord with the landscape industry, the concept of outdoor decorator is one to take seriously as the landscape industry matures in the next millenium. Without irrigation, you don’t have a leg to stand on. To be great at landscaping, you have to be great at irrigation.

The author is owner of IrriCOM, a communications company based in Palmdale, CA that specializes in the irrigation industry. He has 28 years experience covering the landscape industry and can be reached at irricom1@earthlink.net or (661) 274-0321.