As a grower, you may be dividing up your product selection in such a way by distinguishing “value” versus “premium” crops. If you don’t yet provide such upsells in your product offerings, you could be missing out.
Premium crops are a must when you need to differentiate your product selection, which is becoming more important in order for smaller operations to compete. As independent garden centers seek to differentiate their product selection from that of the mass merchants down the street, they’ll look to you for items they can’t find anywhere else.
Yet, what defines a premium crop varies widely from grower to grower, as do the ways in which such crops are leveraged. While larger pot sizes, unique containers and new varieties are all conventional paths to premium price tags (see my 2014 article “Premium crops grow profits” at bit.ly/2bF3INR for more), the “premium” category is getting more nuanced.
Input vs. output
For some, premium crops are determined by how they impact the grower’s operational costs. For others, it’s the added end-user benefits that draw a bigger price tag. How a company decides what qualifies as premium can be influenced by core company values and marketing strategy, or it may depend more on efficiency and operational logistics. Perhaps it’s a combination of all of the above within your operation.
I checked in with two growers who approach premium crops from two different angles, even though their ultimate end goals are similar. When it comes to identifying premium crops at Village Nurseries Wholesale in Orange County, Calif., President and CEO David House doesn’t just focus on pot size or variety, but rather identifies “premium” crops across every size and product category within their entire selection.
“A plant typically fits in our premium category if they are harder to grow, more expensive to grow and require modified growing conditions (i.e. plastic house or shade requirements).” Plants that cost them more to produce get the “premium” stamp.
The effect of this approach is the ability to differentiate product selection by offering varieties that other producers may not be willing to grow, thus creating an opportunity for exclusivity. Niche availability or exclusivity gives your retailers an opportunity to be the “go-to” for hard-to-find or highly sought out plants. When a customer can’t find an item anywhere else, it sure makes it easier to back up the higher price tag.
At Certified Plant Growers in Norwalk, Calif., it’s not just about input costs, but more so the end-user experience that distinguishes their premium items. “Crops that have exceptional bloom power and habit or are low-maintenance, pest/disease-resistant, and easy to grow are all check marks the next generation is looking for when it comes to purchasing plants for their garden,” says Production Manager Jacki Armstrong. She insists that premium items must perform better and longer for the end consumer.
A garden performance-based approach to premium classification allows you as the grower, as well as your retailers, to utilize a benefits-based marketing strategy. By promoting premium crops as plants that will give the customer the most bang for their buck, customers will feel they’re getting a better ROI on their purchase.
What many growers will agree on right now are the current and emerging plant trends. Customers of both Village Nurseries and Certified Plant Growers want succulents, low-water use and water-wise plants, more blooms and better disease resistance. House notes that demand for specialty forms of plants is rising in his marketplace, while Armstrong cites first-year flowering perennials as a growing opportunity.
I’d be remiss if didn’t remind growers that high seed or plug costs for such premium plants shouldn’t be a deal breaker for you. Ultimately, it’s your retailers that will have to determine a viable price to the end customer; they know their customer’s needs better than you do. If their customers are beating down their doors for the newest dwarf vegetable variety, give your retailers the opportunity to tell you what they’re willing to pay for the latest and greatest.
Frankly, it’s unfair to the entire marketplace for growers to limit availability to great plants for fear of not getting enough margin. You’ll often be surprised at what your retailers and end consumers are willing to pay for premium plants, especially if everyone gets the marketing right. If you’re really worried about selling an item, talk to your retailers upfront and get feedback as to your desired price point. Or, offer to pre-book special grows or trials at your desired price point for customers who absolutely want the item.
More or less?
I was happy to hear that neither Village Nurseries nor Certified Plant Growers shy away from providing premium crops. “In fact, we are looking to do more and more of these types of products,” House says. Their goal in doing so? Enhancing their value proposition. Smart move. Village Nurseries currently classifies about 25 percent of their product selection as premium, and continually trials new varieties in order to boost that percentage.
Certified Plant Growers knows the value of end-user success and also intends to step up premium crop production. “Plants that work and are rewarding to the consumer are always going to be in demand,” Armstrong says. Once her customers have trialed a premium crop, and see how much better they perform, they’re typically hooked.
By promoting premium crops as plants that will give the customer the most bang for their buck, customers will feel they’re getting a better ROI on their purchase.
Armstrong says her company tries to make the percentage of premium crops as large as possible, as they ultimately want customers to feel as if all their products are a cut above. “Even when it comes to our vegetable crops, we like to use varieties that are heavy yielders with great pest and disease resistance,” Armstrong says. The result is multiple harvests and premium taste.
While a premium crop is typically going to have a higher price tag due to its higher production cost, that doesn’t mean the calculation needs to stop there. When it comes to your mark-in margin (mark-up over cost), you should consider a premium margin to go along with premium inputs and performance. While you might set say a 40 to 50-percent mark-in margin for standard crops, premium crops may justifiably garner a 60-percent margin target.
Village Nurseries takes this approach with their premium items, garnering an average of 50 percent more gross margin over value products. Certified Plant Growers, on the other hand, chooses to keep target margins equivalent between their standard and premium items. Why? “We are a family business that likes to keep a fair price,” Armstrong says. For CPG, premium products mean better performance all around, even for the grower.
While a company’s pricing strategy will ultimately depend on the surrounding marketplace opportunity to a degree, be careful not to leave potential margin on the table for specialty crops.
Given that there are differences in how growers are choosing to classify and price premium crops, special attention should be given to how we communicate about them. Are you making it easy for both retail buyer and garden center customer to quickly understand the benefits of such a crop and relate to the higher price tag?
Also, keep in mind that perception of what qualifies as a premium crop in the minds of the end user may be different from yours as the grower. And that perception isn’t static; it shifts with overall market trends. Staying ahead of consumer trends can help you evolve and expand your premium offerings to keep things fresh.