Growers and retailers planning to raise plant prices

Brexit, currency exchange rate and higher raw material costs cited in survey by HW.

Plants: retailers cited new pension costs and the National Living Wage among reasons for future price increases - image: HW
Plants: retailers cited new pension costs and the National Living Wage among reasons for future price increases - image: HW

Asked "are you planning to raise, reduce or keep plant prices the same for the 2017 season?" in Horticulture Week's price intentions survey, some 71 per cent of growers and 59 per cent of retailers said they would increase prices.

Almost all the rest said they would keep prices the same. Some 55 per cent of retailers and 29 per cent of growers said Brexit is the reason for putting up prices, with 46 per cent of growers adding that exchange rates are a factor. Growers also blamed increased costs for raw materials (52 per cent) and the new National Living Wage (47 per cent).

Among retailers, half cited new pension costs while three-quarters said the National Living Wage is the reason why they might hike prices. Some growers said they have already put up prices, though others have done so only selectively where cost increases dictate.

One said: "I have no interest in peer pressure from other competitors' nurseries. I know what my costs are and price accordingly. Thus with my input costs going up thanks to Brexit, my prices rise." Another added: "I've been trying to do this over the last few years."

Hayloft Plants' Derek Jarman said: "As a direct consequence of the vote to leave the EU we are already experiencing input cost increases, in particular oil-based items traded in US dollars such as heating oil and plastic-based packaging, which have all increased by three-to-five per cent in the last month, although oil has started to slip in value in the last couple of weeks.

"Sterling has weakened against the euro and while we have sufficient euros at Hayloft Plants to last us for all 2016 purchases, a proportion of our plant costs and European haulage will rise by at least 10 per cent in 2017. The National Living Wage increased by 11 per cent in April 2016 and is rumoured to go up another five per cent in April 2017. Our staging date for pensions is August 2016, which we will delay for three months to November 2016. This will cost us a minimum of one per cent of our labour bill in year one, rising to three per cent in year three and probably more in the future.

"As a multichannel retailer, our second biggest cost is parcel delivery to the gardening consumers. Prices change in March/April every year and with the cost pressures in the marketplace we are budgeting for a five per cent increase in 2017.

"Our biggest unknown and fear is what the consumer will do with regards to spending money in 2017 onwards and in particular spending on gardening. So far we feel that the drop in spending in July and August 2016 can be put down to the weather, but what next spring brings is anyone's guess. So in summary for those who want to stay in business, both plant costs and delivery costs have to rise in 2017."

Boningale chairman Tim Edwards said: "Boningale supplies the amenity market, where a plant supplier needs to reflect the market price for plants - we need to have a feel for what that price is and make sure we're at about that level when we quote. We don't take a purchase price and add a profit margin.

"However, a good deal of what we sell is inevitably bought in and a good deal of that comes from Europe. The trade does not have good figures to go on, but most estimate that around 50 per cent of what we use in this country comes from Europe and so, inevitably, if the exchange rate moves then we need to see that market price rise.

"The exchange rate was around EUR1.40 to the pound 12 months ago. Today it sits at around EUR1.17. Something that cost just 71p a year ago now costs 85p - that's a movement of 20 per cent. I know of one bank that predicts the rate will drop a great deal further yet. We must all expect that the 50 per cent of plants that currently comes from Europe will cost a great deal more in the coming year. So yes, I hope we will see prices rise a fair bit.

"As producers, we will also find that any imported raw materials will increase in price. One solution to this is to produce more in the UK and I fully expect that Government - if we in the trade lobby them effectively - will be putting down incentives to increase production in the future. So this could lead to opportunities for the UK producers. However, production cannot be turned on overnight. In the meantime there will be a real need to see prices increase and I hope everyone is getting their heads around this."

ADAS consultant Andrew Hewson added: "I think most growers try to raise prices each year in order to keep pace with rising costs - notably labour and transport - and I encourage them to do so because if they didn't they'd be out of business. I also believe plants have been undersold for years. Why should retailers make the best money? Better pricing means better wages for all and we should embrace the National Living Wage - try living on less than £6.70 per hour. Personally, I think the EU is a failed construct and Brexit will be quite liberating. I know a lot of growers who voted for it."

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