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Gardener George pops round to his local garden centre…

SUMMER is here says George Kerevan.

You can tell by the rain and the gale-force winds. I await global warming with some impatience. Meanwhile, the Scot-Buzz team are about to take a spot of summer gardening leave. This prompted a thought: can we divine any clues to the economic future in the garden or the allotment?

Britain has around 2,000 dedicated garden centres.  These range from tiny nurseries to vast emporia with restaurants and a coach park. In fact, garden centres are fast become major gastronomic ventures. 

All this makes for big business.

The gardening retail market in the UK is worth £5 billion at the last count.  Weather permitting, this is expected to grow at five per cent a year, well ahead of even the most ambitious forecasts for other retail sectors. In other words, here lies a potential recovery mechanism for the economy! Or as they used to say in Victorian times, where there’s manure, there’s brass.

What makes gardening retail such a strong market?

Partly it is the demographic: the well-off over-45s who have paid off the mortgage and have time on their hands. Pensioners in particular remain relatively insulated from the impact of the economic downturn. Even if the pension does not quite as far as it did, people will merely replace the Saga cruise for more time spent with the roses, plus weekend visits to a new garden centre in search of delights.

Intriguingly, market research shows that the biggest spenders in garden centres are women rather than men. So the image of the typical gardener as an old bloke in a torn cardigan chewing on his pipe is long gone.  The men may discuss the garden with each other over the fence but it is the woman who trundles the trolley in the garden centre.

Garden retailers have discovered they have a captive audience once it smells the flowers and plants on sale – an audience with an appetite for non-garden ranges such as food, gifts, clothing (gardeners yield nothing to golfers or cyclists when it comes to specialist attire) and Christmas ranges.

This has not gone unnoticed by the big retail and supermarket chains. Tesco bought Dobbies Garden Centre in 2008. Dobbies has 32 outlets and a turnover in excess of £100m, but Tesco says it has ‘ambitious growth plans to be a £1bn business with 100 stores within the next ten years’. Clothing retailer Next opened its first garden centre in 2011.

In fact, M&A activity is strong in the garden centre market, as latecomers pile in or try to grow through acquisition. Last year, private equity firm Terra Firma forked out £276m for The Garden Centre Group, adding 128 garden centres to its portfolio of wind farms, Odeon cinemas and commercial property assets.

That’s what I call a conglomerate!

Terra Firma’s chairman, Guy Hands (the former owner of EMI) says he values the stability of garden centres’ sales and profits. But there is more to it than that. Garden centres come with large land holdings that make for good investment potential. The land and the steady revenues provide the collateral that allows big institutional investors to raise capital to make the deal.

There are a number of downsides, though, before we suggest Chancellor Osborne starts promoting garden centres as the driver for economic recovery. First, competition is very tight between stand-alone garden centres and the big DIY stores. That can affect margins and may explain why smaller, independent garden centres (unless protected by a rural fastness) have fallen prey to the competition since 2009.

The other problem is not something the Chancellor or the business consultant can do anything about – the British weather. Garden retailing is a very seasonal business and heavily reliant on the British summer (or lack of it). Last year started well for the sector with reports that like-for- like garden centre sales were up seven per cent.

Then we had the wettest April on record. 

Result: sales plunged immediately by 40 per cent. It is also the case that repeat business is very high at garden centres. If people excited about their garden at the start of the growing season, they will come back time and time again throughout the summer. Unfortunately, if the season is rained off, so is the repeat business.

Fingers crossed, 2013 seems to be a good year for garden centres (at least judging by the time I’ve spent in them). Of course 2013 still has a long way to run. For the UK's garden centres, the Easter weekend is as important as Christmas is to the high street. But the coldest March in 50 years definitely caused a retailing wobble. However, by June catering sales at garden centres were up 15 per cent on last year, garden clothing up 14 per cent, and garden gifts up 12 per cent.  The betting is that 2013 will be a big improvement (sales wise) on last year.

There is a final factor that could impact negatively on garden centres: as a result of the downturn, there are fewer people with gardens. Compared with 2006, there are now 2 million fewer consumers aged below 45 who possess a garden. This is due to falling numbers of consumers in this age group being able to afford to buy their own homes, and the trend to living in rented flats.

Mind you, that still leaves one in three of us with a lawn to mow once the rain stops.  Speaking of which…