McKenzie Green Express March 2015
I wanted to take a little time to get back to everyone with a quick update after the commotion of Christmas and The New Year.
Christmas is our Super Bowl; we have now moved on to a new, yet familiar phase which, though less hectic, is crucial to our collective success (the “off season” to continue with the sports analogy). I always thought it would be fun to write about and in fact answer a question I get quite often.
“What do you do the rest of the year?”
I thought this Newsletter would provide a good opportunity to at least partially answer that persistent question.
A smart businessman once told me that “a sale isn’t a sale until you get paid.” And, I must say that a truer axiom has probably never been uttered. The “getting paid” part of the Christmas tree business is always “interesting” and we don’t usually sign off on a Season until March of the following year. Chris Reznicsek heads up this very important project for us and it literally requires hundreds of hours of calls, emails, texts, and yes even faxes (believe it or not). We quickly learn that while a million and one things can go wrong during the Christmas Season, much can also go right. We are always gratified and made proud by the many success stories we hear in the AR process; likewise, we listen attentively to any issues that may have occurred and then we strive to fix those hiccups so we won’t repeat them the following year. Improvement is the name of the game, and a little candid policing goes a long way toward future success; our customers help us do this.
Getting paid is a relatively simple concept; what isn’t so simple, are the countless hours that go into auditing the financial aftermath of our whirlwind adventure known as Harvest (cutting, slinging, baling, loading, servicing and delivering etc. etc.). Who owes whom what and how that all ultimately ties into our year-end financial statement for the purposes of taxes is made doubly difficult by virtue of the fact that essentially all of our business is done in a forty day period (which happens to be the last month of the year!). Carey Anderson and her Team do a miraculous job of unraveling the mystery and then allowing us to have a final and thorough evaluation of our Financial Performance; there are always surprises both positive and negative. The Season truly isn’t over until the entire outflow has been reconciled with all of the inflow… Quite frankly, a huge, complex undertaking… Every business does it, yet seasonal businesses seem to draw the short straw.
Another huge part of our post-Christmas activity centers on clean up, ground preparation, seedling procurement and ultimate replanting to replace the many trees that we harvested the previous year. Since it takes 6-10 years for a tree to come to market, this complex part of the puzzle goes into overdrive shortly after the calendar turns to a new year. Weather plays a huge role as it does in most tasks Christmas tree related; John Anderson and his Team perform the impossible from my point of view based on the sheer volume of land and trees that they oversee and manage in the Production side of the equation. All of the different species have unique needs in terms of fertilizers, pesticides, and the type of ground that is best for a given species of tree. Couple all of this with general maintenance such as pruning and sheering and you can see that this is a massive undertaking that doesn’t take a rest.
Finally, McKenzie Farms could have all of the quality trees it needs and then some and it would mean very little if we didn’t have the equipment to get those trees from Oregon to destinations far and wide. Another smart person once told me, “When it comes to Christmas trees, so goes trucking, so goes your business.” Once again, this is an extremely sage and accurate statement; we don’t figure this out in October. This is something that we start working on very early in the following year. In 2014, we shipped in excess of 1500 trucks. Once again (see a recurring theme yet?), it takes a full offseason essentially to put in all of this in place for the following season. Dave Mann and Chris Reznicsek do a great job of coordinating all of the many aspects of ultimately matching up trucking companies with loads. If it sounds simple, I can tell you it isn’t. There is a large shortage of drivers / equipment these days; our success is tied to our ability to take care of our current truckers, procure new ones, and manage to pay rates that allow us to make good on our promise to deliver the trees in a timely manner in a professional way. We must really understand the industry in general and truly grasp the dynamics that have led to a nationwide trucking shortage. I have always felt that trucking is the single most important element of being a quality Christmas tree company. We make it a priority. I included a few highlights from an Industry Report dated January 2015-
- Economy will continue to grow at a rate slightly above 3% in 2015 while consumer spending is forecasted to be favorable and inflation mild…
- Diesel fuel forecasted to trend -13.7% below 2014 levels through May 2015, then gradually increase to $3.60/gal by Nov 2015.
- Driver shortage will continue to worsen, forecast a shortfall of up to 250k drivers by Q3 2016.
- 2015 Trucking bankruptcies are forecasted to remove just under 10k trucks from the available trucking pool.
- Driver compensation increases ranging from 3% to 13%
- Dry Van & Reefer Loads: More loads than trucks available
Finally, we start to plan on the Sales side in concert with our feel for the realities of the Supply side right away. As many of you now know, Oregon WILL NOT have enough trees to meet the annual Demand for the foreseeable future. As a result, the planning part of Sales has changed dramatically. This is a time that Kristina Roberts and I use to evaluate the previous year and start to plan out the shape and scope of the year to come. Over the next several months we will create Big Box presentations, project 2015 pricing, arrange reviews / dialogues, and then start planning out the respective orders for 2015. We have already met with some and we look forward to future rendezvous with others. As mentioned, “Early” is good given the current environment and we look forward to nailing the specifics down earlier than normal.
As you can see, we don’t simply vacation until say October and then cut down the forest with our personal fleet of “on call” truckers. Sometimes I really feel as though people unfamiliar with our industry feel as though we work three months a year! The next time someone asks that oh so familiar question, I might need to send them this letter. Thank you again to everyone who plays a role in this elaborate yet rewarding puzzle.
Thomas M. Cook
McKenzie Farms LLC
March 18th 2015