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April Newsletter

Green Express Spring 2017

As we set our sights on the beginning of spring and prepare to watch the months pass by with their usual alarming speed, we felt it would be a good time to take stock of some interesting themes both old and new.

The winter just completed in the Great Pacific Northwest has included record levels of rain, snow, and ice. Had this weather happened during our Harvest Season which begins in late October (believe it or not) and ends (in terms of shipping trees) around mid-December, our evaluation of 2016 would have been a far different tale; we dodged a bullet though for most of us lingering memories of “Winter 2017” will not be soon forgotten. And, for good measure, spring is starting out exceeding wet and unseasonably cool… There will be a year in which the onset of winter isn’t quite so accommodating and polite. Fingers crossed as always…

We have certainly had some time to evaluate the year that was and there were some surprises as well as some predictable elements / recurring themes. In this space we have discussed at length all of the various machinations associated with an environment of shortage and its corollary, rising prices. There has been an attempt by those trying to understand 2016 (unit sales flat to down / dollars up 8-10 percent), to blame the relatively disappointing unit sales performance on the fact that higher retails are hurting the sales of fresh cut trees while causing a chain reaction that is pushing the consumer to “artificial” in large numbers. While there is SOME truth to this conclusion, I would suggest that this explanation is a rather simplistic and that the best understanding is far more nuanced and complex; the devil, as always, is in the details.

2016 marked the first year in which Noble fir were truly short in the marketplace. Noble fir has definitively become the consumer favorite in much of the West. Retailers fell into three distinct categories relative to Noble Fir.

  • NONE

As a result, it is probable and in fact likely that some potential real tree consumers turned to artificial. Not sure that PRICE was THE ISSUE as a competing artificial tree would have, in most cases, cost more as an initial purchase. Significantly, we expect shortages in all species moving forward. And, again it is vital to remember that fresh cut trees are the lowest leg on the three legged stool that defines Christmas tree buyers; artificial trees are displayed in approximately 60% of US households, no tree is displayed in roughly 20% of homes, while a real tree choice comes in at slightly less than 20%. In other words we are LOSING THE WAR and have lots of heavy lifting to do to take on those factors that we can control while learning to live with those that we cannot.

As often stated by me, the Baby Boom Generation (1946-1964) is aging and older people tend to fall into the first two categories referenced above for reasons that are pretty self-explanatory. Some retailers take on these challenges with home delivery and end of season, in home disposal. Regardless, consumers willing to pay the additional cost constitute a small percentage overall. Also, it is important to acknowledge that we now live in a world in which ease and convenience are sacrosanct. A real fresh cut Christmas tree would certainly never be viewed as something easy and convenient; for consumers both young and old this is a potential barrier that falls into the category of “learning to live with it.” So, real Christmas trees have some dynamics that stand in the way of a meaningful market share grab. I believe we all realize this; however, and this is a big HOWEVER, we have an unlikely ally that is easy to miss at first glance.

Enter stage left the Millennial Generation, the largest living generation by size (roughly 75 million) (early 1980’s-early 2000’s)… I feel it would be fair to say that if the Baby Boomer is characterized by a “Live to Work” attitude, the Millennial Generation would be characterized by a “Work to Live” outlook. They tend to be far less traditional, far more secular, and increasingly less inclined to marriage and a traditional family concept. However, they are amazingly EXPERIENTAL in a self-aggrandizing sort of way (think Social Media), that often places the DESTINATION and the EXPERIENCE far above PRICE as a motivating factor when it comes to consumer decisions. You might in fact say that they are the very first “consumers” of Destination and Experience in such a “shared” manner. And importantly emotion plays a fairly large role. “How does this product / experience make me feel?”

By way of contrast, I think it would be fair to say that older consumers (BB- just shy of 75 million) are very price conscience and even though they often have the money to pay more, they tend to be more conservative in their (emotional) spending habits on a relative basis. So far so good, but what about the environment and a GREEN lifestyle…? Once again, we market and sell a product that should be a natural (pardon the pun) for Millennials. All one needs to do is look at the explosive growth of (Higher Cost By Far!) organic food sales versus the overall food market growth to understand that something profound is happening that we as an industry need to piggyback. Consider the following excerpt from the Organic Trade Association’s 2016 Organic Industry Survey…

(May 19, 2016)- “The booming US organic industry posted new records in 2015, with total organic product sales hitting a new benchmark of 43.3 billion, up a robust 11 percent from the previous year’s record level and far outstripping the overall food market’s growth rate of 3 percent.”

How difficult would it be for us as an industry to do two simple things? First, understand, that when it comes to a destination worthy experience Christmas trees have an enormous advantage over the non-emotional, stale experience of purchasing the latest artificial tree from the rack at the local Big Box or opening last year’s version from the bin labeled “Christmas stuff” in your garage. Christmas tree lots, just like my sun burned friends taking a group selfie on the beach can attest, can and should become the ultimate destination for crowd that covets destinations / experience that can be memorialized through Social Media. Do this, and “PRICE” will become a decidedly secondary concern. Borrowing a line from the 1989 movie Field of Dreams… “If you build it they will come…” For those that truly understand this, the advantage will be significant and lasting.

Second, take a cue from the organic food industry and associate the term “organic” with real fresh cut Christmas trees and the term “inorganic” with artificial trees in a meaningful, tangible way. It can be done and will pay huge dividends down the road. As it stands now, many Millennials believe that we cut down the forests and / or pollute the rivers with chemicals and that they are helping out by choosing not to buy (“feels good”). The National Christmas Tree Association has struggled to share the proper message despite a Marketing Order now in force (15 cents per harvested tree / 2017 3rd year). Regrettably, it is a remarkably easy story to tell and it is a story that we are now telling in the midst of a HUGE shortage. Moreover, consumer education can’t seem like education, it needs to appeal to emotion rather than intellect. Again, Christmas trees are an EMOTIONAL decision; we need the emotion on our side rather than as the headwind it has been. Hopefully we aren’t a day late and a dollar short. Time will tell.

As usual we do have far more challenging questions than answers, yet I feel we know a couple things with a fair degree of certainty. The Millennials exceed the Baby Boomers in size now and that will sharply increase in the years to come as evidenced by the fact that they will represent 75% of the workforce by 2025. THEY WILL BE ON THE FRONT-LINE OF CONSUMER TRENDS. Ignore them at your peril; to date, that is exactly what we have done as an industry. Finally, I would suggest that price is a small reason for the somewhat tepid unit retail sales figures experienced in 2016. Demographics, shortages, and a failure to better understand our rapidly changing world are far larger culprits.

In closing I would like to acknowledge / celebrate McKenzie Cook’s induction into the Green Industry Hall of Fame May 20th in Yorba Linda, California. His story is decades in the making and is a story of commitment, perseverance, and most importantly the friendships forged along the way. McKenzie Farms LLC which began in 1991 is the latest chapter in what has been a remarkable entrepreneurial journey within The Green Industry circles in many unique capacities. For more information please visit www. GreenIndustryHallofFame.org and be sure to read the biography for a full appreciation of the many contributions of an industry icon. Speaking of acknowledging / celebrating, Ken turns 80 on April 10th; time flies when you are having fun!

Ken’s Predictions For 2017- *Industry Consolidation / *Increasing shortages / *Rising prices / *Labor shortages / *General instability

TMC / April 4th 2017

Quality Signature Christmas Trees Since 1990

© McKenzie Farms/Website by Hazel Digital Media
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