8 Dec 2010

Banks Rule the Roost at Monrovia.


Last Thursday, Monrovia customers found an e-mail in their inboxes containing two letters. The first letter, signed by Monrovia leadership, read (in part): 

“Our banks have expressed their concern by giving us until January 31 to show significant improvement [$20 million] to our 2011 bookings or face a distressed sale of our inventories";

“Accordingly, we are offering you the opportunity to add to your spring bookings now and until January 31 [reductions of 35%-50% on products]”; and

“Candidly, we are being advised by our lenders and their advisors to sell to the big box channel if we are unable to significantly increase our booked orders. We will not sell our brand into the big box channel but the quality of our plants, even in a black pot speaks for itself. We are aware that this affects your competitive advantage.”

Monrovia has long been an independent-only grower of premium nursery products. Which is why a possible move into the big boxes prompted a group of 75 garden retailers to pen a letter of support (also included in the Monrovia e-mail): 

“We, as Independent Nurseries, cannot afford this to happen,” the letter of support reads. “We agree that we shall increase our spring bookings by a significant amount to help Monrovia Growers reach their goal.”

Monrovia’s response
I was traveling when all this went down, but Green Profit Editor-at-Large Ellen Wells was hard at work in her Boston office, so she called Monrovia for the story. Here’s her report:

I spoke with Monrovia CEO Miles Roseland Friday to learn more. Sales, Miles says, had been “fine” for a six- to eight-year period—then for the last two years they’ve “slowed”—recession-related, he says. 

As for two of their three banks (one wants out of the industry), “They are encouraging us to sell our plants into all channels and to find ways to increase our profitability as a company.” The one channel Monrovia currently isn’t in is the mass market. 

Asked if there would be a reluctance to go in that direction, Miles assured customers that Monrovia “wouldn’t go into that channel with our brand, and we haven’t been in business there so we don’t know exactly how to do it, but we’re going to look into it.”

“Humbling and quite remarkable” are how Miles describes the IGC letter of support. “When our garden centers became aware of our need to go into all channels, they said ‘Let us help you sell more plants. If you can pass savings on to us, we can try to pass savings on to our customers. Maybe we can order a little more.’” 

Premium nursery material in the mass-market channel—even in an anonymous black nursery pot—can and will be a threat to sales at IGCs. Does Monrovia feel they’d lose a lot of support from customers if they were to go into the big boxes, even if it wasn’t in a branded form? “We’re hopeful that our customers will understand the need for us to survive, and appreciate that we’re offering a differentiated product with a brand to them,” says Miles. 

What Monrovia wants IGCs to know is this:

* They’re in full production and have lots of plants to sell;
* They’re prepared to offer good pricing so they can pass savings along to consumers;
* They’re not asking you to take away from other growers; and
* They’ll continue to offer high-value, high-quality plants.

“Response has been very favorable,” says Miles. “If they [IGCs] are willing to increase their business, that should give us the basis to find bank support.”

The conference call
On Tuesday, Monrovia held four conference calls with customers and other interested parties (like me), sharing details of the issue and opening the phone lines to questions.

They explained that one of their three banks doesn’t want to be in business with an industry that has inventory on the books for more than 12 months. That bank has apparently been burned by other nurseries, and so wanted out of this field. “We’re faced with the need to replace one of our three banks, and that is what has precipitated this outreach,” said Miles. 

He was quick to add, “We’re not asking you to cancel from other growers. We recognize that other growers are in the same situation as we are, the same marketplace. We hope you’ll see the opportunity to add to your bookings with us, but we’re not asking you to cancel with someone else just to give us an advantage.”

Monrovia has more than 3,000 independent garden center customers. Quick math says each customer would have to increase its business by $6,700. Is that impossible? 

“We certainly don’t think so," said Bob Smiland, chief sales & marketing officer. "You can do the math yourself, but 3,000-plus locations, you don’t have to buy too much more per location to get to that number. So this is not something just for the larger multi-store operations or super-destination garden centers."

Will they enter the mass market?
That’s what one caller asked. Replied Miles, “The simple answer is, we really don’t know at this point. We haven’t done business in the box channel for 15 years, and really are not familiar with it, but it wouldn’t be prudent for us, facing our demise, so to speak, to not consider all the channels, and that’s what we are doing. So at this point we really can’t give you a definite answer one way or the other.”

But he added, “Our approach into the box channel is not with the brand. The brand is something that’s been built by the independent garden centers, and we want to keep that exclusive to your channel.”

That was the only probing question. Otherwise, the few comments were pledges of support. Said one caller, “Do what you can for Monrovia in this tough time. They’ve been here for us for many, many years.”

Added a representative from a multi-store independent, “I just can’t envision this industry without Monrovia. When things do turn around, we’re going to depend a lot on the guaranteed availability from Monrovia and being able to introduce their new varieties to our customers.” With that, he pledged to increase purchases this year by 25%.

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