Market update: retail seeds

Against a backdrop of market change, Matthew Appleby reports on latest business and product developments from retail seed suppliers

Jekka’s Herbs: a new range of packet seeds launched by Mr Fothergill’s last year - image: HW
Jekka’s Herbs: a new range of packet seeds launched by Mr Fothergill’s last year - image: HW

The retail seed market has seen an unusual amount of upheaval for such a mature category over the past few months. Suttons Seeds underwent a management buyout from parent company Vilmorin while Thompson & Morgan owner Primary Capital put the firm on the market then took it off again six months later.

Mr Fothergill's could see uplift, particularly with Bunnings buying Homebase, and Unwins is still a strong brand that is set for expansion. Kings Seeds has relaunched and Franchi Seeds of Italy remains a popular niche player.

Mature industry

The retail seed industry has matured since the end of the grow your own boom in about 2012. Industry-wide seed sales up to June 2015 were down 3.3 per cent in value, according to figures from industry analyst GfK. It reported sales were down 7.7 per cent in the peak month of March, mainly because of colder weather. Average packet prices fell from £2.03 in 2014 to £1.88 in 2015.

Latest figures from the Garden Centre Association show seeds and bulbs were down 0.42 per cent in 2015, against an overall market that grew seven per cent and included gains in outdoor categories.

At Suttons, turnover has dropped from £19m to £15m in five years, while at Thompson & Morgan turnover is now £31m after reaching £41m in 2012.

As well as Kings Seeds' broader range, in 2015 Thompson & Morgan launched its Van Meuwen brand in the retail market. Mr Fothergill's relaunched its Johnsons brand and a Jekka McVicar herb range. Suttons extended its James Wong range. In 2016, most of the industry is looking to promote the Fleuroselect year of the tomato and cosmos with stand-alone ranges.

Ipswich seed company Thompson & Morgan says sales and service are improving, with visits to its website up by 20 per cent, a 10 per cent reduction in stockholding and improvements in customer service helped by a new Enterprise Resource Planning system.

Primary Capital bought Thompson & Morgan in 2002 and also tried to sell it in 2011. The most recent sale process lasted six months but potential suitors failed to seal a deal. The company is set to go back on the market this summer.

Chief executive Bryan Magrath says: "Thompson & Morgan is outperforming its competitors and has recently introduced several new and exclusive products, including the fabulous Egg & Chips (aubergine/potato plant), and we have plenty more innovations in the pipeline. It has been flattering to be linked with various suitors but for the time being we remain focused on peak-season performance and delivering a great full-year result."

Meanwhile, sales of Thompson & Morgan "Garden Ready" plug plants have nearly tripled in the past season, with almost four million bedding plants sent to UK gardeners in 2015. A satisfaction survey by Typeform found 96 per cent said they would be back for more in spring 2016, giving the concept a five-star rating for quality on arrival and performance in the garden.

Thompson & Morgan supplied 1.5 million Garden Ready plants to customers in 2014. That figure nearly trebled in 2015, with 4.02 million plants sent out during the spring and autumn despatch windows. Begonia 'Apricot Shades Improved' remains the top seller in the Garden Ready range.

Published accounts

Suttons' first published accounts since its management buyout run for the eight months from 1 December 2014 to the company's new year end of 31 July 2015. The buyout was conducted in December 2014 and accounts published for the 17-month period from 1 July 2013 to 30 November 2014 showed an operating loss of £2.9m

Audited accounts for the eight months to 31 July show an operating profit of £500,000. The first year's management buyout business plan projected a £129,000 operating profit for the 12 months to 30 June 2015. The actual profit for this period was £203,000.

The 17-month published turnover to December 2014 was £18.8m. The eight-month published turnover to July 2015 was £11.2m. The first 12 months' projected turnover to July 2015 was £13.6m, whereas the actual over this period was £14m.

Gross margin

Managing director David Robinson says the underlying gross margin for the published eight months appears to show a drop from 51.4 per cent to 43.9 per cent when compared with the previous 17-month published accounts.

"This drop is due to variations in seasonal product mix," he explains. "The actual underlying product margin is showing a two per cent improvement to 53.4 per cent. This is due in large part to better stock forecasting, planning and proactive management of discounting in the direct side of the business."

Robinson has warned that early discounting of this season's stock could be dangerous for the industry. Suttons' latest accounts reveal actual underlying product margin showing a two per cent improvement to 53.4 per cent.

"This margin improvement has come against a backdrop of increasingly heavy discounting of packeted seeds by competitors," adds Robinson. "Suttons are conscious of the demands of operating a multi-channel business and rather than following competitors intend to continue to strictly manage any online discounting of branded seeds to avoid adversely impacting their partners in garden retail."

Online discounting

Robinson says online discounting of 2016 stock by competitors began in early October. "I can understand discounting at the end of the season, but before the new season launches just feels wrong for the industry."

He has a particular bugbear with "Black Friday" deals offering 50 per cent off seeds. "It doesn't sit easily with me before retailers have the chance to get them. This seems to be growing and could be dangerous for the industry."

Robinson says Suttons is looking to join up channels more and sees opportunity in the retail area. The 17-month published turnover to December 2014 was £18.8m.

Suttons retail sales and marketing director Chris Ramsden has joined Hozelock, with Hilary Mabbutt taking over. Mabbutt has a lot of experience, particularly in retail with Ikea, Dixons and department stores. Her focus will be on retail, where Suttons has "consolidated" over the past year since the management buyout by Robinson and Rufus Roberts from Limagrain in late 2014.

Robinson says the direct side of the business is growing but Suttons is looking to develop its retail offer and Mabbutt is now meeting garden centre buyers to discuss this.

Product update

- Westland has high hopes for Sow Smart, an easy tomato seed growing kit using glue plugs.

- Suttons is promoting sweetcorn shoots as well as a range of six Dobies grafted tomato/pepper/cucumber vegetable plants exclusive to Wyevale Garden Centres and fronted by Big Allotment Challenge winner Rob Smith. An "Unsurprisingly Suttons" campaign will promote the firm's heritage and wider range of products.

- Kings Seeds is to launch a 300-variety range of vegetable seeds this autumn with 50 new varieties to the company. It is also launching online vegetable plug plants and is in Blue Diamond this year. It has a newly designed range of 200 flower seed varieties and 50 sweet peas.

- Mr Fothergill's has taken on Tillington Group and Wyevale Garden Centres accounts this year. The company supplies Homebase in the UK and Bunnings in Australia, which it says "dominates" the market down under. Homebase is set to finalise its deal to be bought by Bunnings owner Wesfarmers at the end of February.

- The Fleuroselect year of cosmos and tomato has led to some promotions, particularly from Mr Fothergill's, while the Suffolk company also has a new Jekka McVicar herb range that should go well with the veteran grower's first RHS Chelsea Flower Show main avenue garden this May. Mr Fothergill's is continuing its poppy fundraiser for Chelsea pensioners.

- Suttons Seeds is supporting Cancer Research UK with a range of Flower seeds and Vegetable seeds. A 25p donation is made to Cancer Research UK from the sale of each promotional pack.

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