Blue Diamond MD Does Not Share Suppliers’ Optimism For 2022

Walking the aisles of Glee revealed a sharp difference of opinion between retailers and suppliers. 

While many of the latter were expecting to see growth for 2022 and were planning accordingly, retailers generally seemed to be more cautious.  They said they were increasing early orders, not because they expected demand to increase but to ensure against running out of stock.

Are there 3m extra gardeners?

Research from the HTA and other surveys suggest Covid created 2.7m – 3m new gardeners.  Some suppliers expect as many as 2.2m will still be there in 2022.

Alan Roper believes they were never there. 

Increase in average spend not footfall

He is managing director of the 37 strong, Blue Diamond garden centre group that now has a £250m turnover. 

He says it shows that the 60+% sales growth in many gardening categories since 2019 has been due to a rise in the average basket size and not an increase in customer numbers.  These increased by only 5% since 2019 according to his analysis a below average LFL growth over 2 years.

He explained, “Next year as people return to the normal rhythms of their lives, the inflated average spend is likely to deflate as people redirect their disposable income back to travel and other interests that were curtailed during covid.  At the same time footfall is unlikely to increase beyond previous pre-pandemic levels.”

How quickly sales will fall back to pre-Covid levels depends largely on how long travel restrictions last into next year, but after a buoyant start Roper expects activity to be lower by the middle of next year.

Inflation

The prospects for 2022 are also being dampened by inflation.

Blue Diamond imports 1200 containers a year with an average content value of £25,000.  Container costs have increased from £1,800 in 2019 to an average container price for this gardening season of £10.000.

This is an additional cost of £10m to Blue Diamond. However, in 2021 they have been successful in loading this cost onto the retail price and have protected their margins.

With container prices now at £16k and rising it is viewed as unlikely that margins can be fully protected during 2022.  Container costs sustained at this level next year would cost BD an extra £17m compared to 2019.

On top of that, raw material and labour cost pressures are mounting. 

Alan Roper says UK inflation rates projections of 4% are “off point” and expects inflation to be higher.  Several manufacturers at Glee were suggesting they would rise by 8% to 10%.

Blue Diamond’s ordering?

Alan Roper says budgeting for 2022 has been the toughest of his life.  Will 2022 beat sales in 2021?  “That will not happen,” he says.

Blue Diamond is being optimistic and ordering at around 2021 levels.  It now has a central warehouse and so it is not the end of the world if the group holds a few extra £m’s in stock.

However, Alan Roper hopes early spring sales will remain strong as people may be slow to venture abroad.  But by the later part of the season he expects the stay-at-home boost to garden centre sales to have waned.

If other garden centres adopt a similar approach, it could be a start–stop year for suppliers as retailers delay replenishment till spring orders sell through.

Christmas – it’s going to be a nail biter

Blue Diamond anticipates a good Christmas because there will still be many people opting for a staycation this year.

However, stock availability is an issue.  Many lines are still on the water and some stock may not arrive until November.  “We’ll have to throw a lot of people at it, to get the stock out…  It’s going to be a nail biter!”

Source : Reproduced with kind permission from George Bullivant, GardenForum

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