Consumer spending is going to be the driver to get the U.S. economy out of the current recession, according to Ken Fisher, CEO of AmericanHort. During the Cultivate’20 Virtual State of the Industry presentation, Fisher explained that this recession isn’t a financial recession — it’s a consumer recession.
“This is a recession that’s going to be impacted by stubborn unemployment,” he said. “We’re hopeful that employment will come back quickly. We’re hopeful that the stimulus dollars will work but there are no guarantees and so we need to understand we’re in a recession.”
As the spreading coronavirus has kept consumers at home, Fisher noted that the recession is as much psychological as it is economical.
“People have been cocooning. We look at anything that’s been consumer-driven at home — bicycles, landscaping, appliances — they’ve done very well,” he said.
Fisher estimated that there has been an increase of about 25%, but the future remains uncertain. While the economy was strong going into the pandemic and stimulus money will hopefully soften the blow, it’s important to keep an eye on housing starts, consumer spending, business spending, the election and a vaccine.
“We’ve been fortunate that with consumers staying at home, they bought our industry and what we want to be able to see is we were able to hold strong pricing, shrink was low because everything sold through and discounting was minor,” Fisher said. “We need to be careful about our cash and our capital and our spending but we’re hoping in 2021 we’ll recover and have a good year there.”
Looking toward the recovery, Fisher noted that for the last 50 years recessions have been fairly short-lived. Optimistically, these last 10 to 16 months before returning to normal levels of spending, he said.
The essential battle
Before COVID-19 hit, the industry entered the spring with high hopes, especially from a sales perspective, said Craig Regelbrugge, senior vice president. Currently, the organization’s running estimate conveyed to USDA is in the window of $732 million to $1.2 billion in losses at the producer level.
Almost immediately after the pandemic started, AmericanHort went to work learning about the federal definitions as to what constitutes critical infrastructure and essential workers, but ultimately the decisions were made on the state, and sometimes local level.
“So we found ourselves fighting a lot of battles to make the case that all aspects of our industry should be considered essential and to the extent that they’re able to operate safely with an eye toward protecting employees and protecting customers that there should be ways to do so,” Regelbrugge said.
Thankfully, the industry won most of those battles and the supply chain continued to function.
“There were a few really difficult trouble spots – Pennsylvania and Michigan were examples where the battles raged longer and they were harder and the negative impacts on the industry were therefore greater,” he said.
And while Congress has passed stimulus measures and expanded the Families First Coronavirus Response Act to expand paid employee leave, Regelbrugge said the most substantial piece has been The Coronavirus Aid, Relief and Economic Security (CARES) Act, including the paycheck protection program, economic injury disaster loans and more.
“I know it’s been frustrating for many of you. How are decisions being made? What’s the plan? How will the economy be affected? Basically no one really knows,” Regelbrugge said.
As the pandemic spread, highly perishable items like color plants, tropical foliage plants and flowering plants got stuck in the supply chain.
“In the supply chain, people were saying ‘We can’t deal with plants right now,’” Regelbrugge said. “We had tremendous losses rack up very rapidly, very unpredictably.”
But, Regelbrugge said, not everyone was affected, and AmericanHort has been clear with the USDA on that point, explaining the nuances of the industry. “This is not beans and corn,” he said.
The organization is now waiting on an announcement about the industry’s eligibility for the Coronavirus Food Assistance Program (CFAP program). When the program rolled out in May, the green industry was not included but there was exclusive recognition and a request for further comments.
“Under the best of outcomes, no one is going to be made whole,” Regelbrugge said. “This is a partial loss recovery situation. For all the plants people had to throw out, hopefully we’ll see some relief that will help people recover.”
Despite the challenges growers and retailers faced this spring, for the most part, it ended strong, Regelbrugge said.
AmericanHort is launching a new offshore greenhouse certification program for unrooted cuttings, mostly annuals and perennials. The organization is working with the USDA to expedite the movement of roughly 2 billion cuttings coming in from certified growers who meet high standards.
AmericanHort is also working on protecting the H2-A and H2-B programs with the argument that halting immigration visas will hurt, not help, the economy. But people need to be doing everything they can do streamline their labor as well as distancing and sanitation.
“Employers need to be doing everything they can do protect their employees,” he said.
For a recap of Dr. Charlie Hall’s State of the Industry talk, click here.