Water Garden News' Splashdown - 2006

Our Annual Recap of the Past Year’s Biggest Developments

Splashdown looks at the events and stories of 2006 that are most likely to make a difference in 2007 and beyond for better or for worse.

NEWS ANALYSIS
In many years, 2006 was a year in which pricing pressures erupted, shaping many of the year’s biggest developments. Inflationary pressures and heightened competition no doubt fueled those pressures.

10 NEW GAME
The Truly Named certification program for waterlilies has grown to 15 participating members (who pledge the waterlily hybrids they sell by name are propagated only by vegetative means) and eight certifying members (who pledge that the specific waterlily cultivars they offer are true to their names) since its launch last year. The program is designed to protect hybridizers and wholesale nurseries by defending their intellectual property as well as consumers and retailers by ensuring that they get what they pay for. For all involved, the program protects pricing levels.
 
Arguably, only a minority of water gardeners are truly concerned with named waterlilies. If the industry doesn’t protect the elite of the hobby, however, what gets mislabeled next? Colors? Plant varieties? Care instructions? Clearly, aside from any moral obligations to be honest and accurate in labeling, rampant mislabeling will lead to growing disenchantment of enthusiasts and declining sales of plants, supplies and ponds.

9 ENABLERS
More than 20 pond builders from various states met in Myrtle Beach, S.C., to replace a disabled man’s disabled pond. The International Professional Pond Contractors Association event was significant for two reasons.

First, it highlighted the need for the industry to police itself against substandard work. Poorly constructed water features taint the entire industry and make future growth that much more difficult. The person who goes to a party and brags about his wonderful pond most likely is a bore. The person who goes to the same party and enthralls the crowd with his tragi-comic mishaps with the flakes that put in a leaky money pit in his back yard will be the life of the party and the death of the industry.

More importantly, however, it was an example of contractors and suppliers working together toward a positive end. The industry seemed to see more name-calling and back-stabbing in 2006 than it had in many years, if not ever. This meanness might be the result of a more competitive environment or a “maturing” market, but it probably isn’t making anyone happier.

8 GROUP THINK
The water garden industry continued its search for a trade association in 2006. With the addition of at least two organizations, the still tentatively named Water Garden Manufacturers and Distributors Association and the International Landscape Alliance (a buying group with lofty goals), it is likely that the search will continue, though probably not conclude, in 2007.

WGMDA holds a great deal of promise, as it is comprised of larger companies, which means that supplying financial and logistical help to the organization is not nearly the burden for its members as it is for the other organizations, including the National Association of Pond Professionals and the International Professional Pond Contractors Association, comprised principally of small business owners.

On the other hand, the manufacturers are much more likely to be direct competitors of one another, and the industry might not be mature enough for them to put aside their differences.

7 SHOW BUSINESS
The water garden industry continued its search for a single, national event in 2006.

2006’s Pondemonium drew more than 1,100 attendees, somewhat less than the attendance of Pondapalooza multiplied by the attendance of the IPPCA’s Infotanza. At its core, Pondemonium is a sales meeting and cannot be considered the industry’s premier event. It does testify, however, to Aquascape’s heft, continued growth and emphasis on education.

Some shows, like the Irrigation Association show, gained prominence for the water garden industry; others, such as the SNA Show, faltered somewhat.

Controlled Marketing Conference’s International Water Garden and Pond Show, a sister event to its more established National Lawn and Garden Show, was not as successful as the organizer had hoped, but CMC saw enough promise--and need--to try it again this June in Reno.

Pondapalooza drew its smallest crowd in years, which may have been a blessing. The event seems positioned for a rebound, particularly as the ILA plans to promote it to its members and vendors. This assumes, of course, that ILA grows enough to have a significant impact.

6 FISHY BUSINESS
The U.S. Department of Agriculture’s Animal and Plant Health Inspection Service adopted restrictions on koi and goldfish imports to prevent the spread of spring viremia of carp and is likely to focus on koi herpes virus in future restrictions. The government expects the new restrictions to cost importers nearly $400,000 in fees and permits, which likely will be passed along in price increases. In addition, the restrictions limit the number of ports of entry for imported fish, which could increase distribution costs more.

5 SUPPLIER SHUFFLE
A trio of Aquascape moves is realigning vendor relationships and prompting other changes to the water garden industry’s landscape, including the creation of at least one additional pond equipment manufacturer.

Its acquisition of Pondsweep Manufacturing altered supply agreements for pond equipment, and forced many who viewed the industry through the Wittstock schism to reevaluate their loyalties. The Tsurumi master distributor deal was a coup for both Aquascape customers and for other pump manufacturers as distributors sought new pumps. Perhaps most significantly, Aquascape’s unification policy for its contractor lines under the AquascapePro line, and the related distribution expansion, further shuffles the distributor deck as Aquascape demands exclusivity from its distributors.

4 PRO FOCUS            
Manufacturers and distributors focused on the professional installer market, from pond building specialists to irrigation contractors, as an increasingly important channel. The number of new and revamped professional lines alone is somewhat staggering, with new and future lines from Danner, Little Giant, Beckett and Blue Thumb, to name just some.

The big irrigation distributors like Ewing understand that water features provide their clients a higher margin offering, so they’re pursuing those higher profits aggressively. Franklin Electric, which does a lot of business with irrigation contractors, is likely to invest in its newly acquired Little Giant business with that market in mind.

The emergence of the Irrigation Association show as a major water feature venue also dramatizes this trend. Among exhibitors was Henri Studio, which had been acquired earlier in the year by Sunterra parent and irrigation equipment manufacturer L.R. Nelson Inc. The buyers were very attracted to the statuary, and it’s likely that Henri won’t be the only statuary company exhibiting at next year’s IA Show in San Diego.

3 HOUSING SLUMP
The latest economic indicators show that housing starts are down, supply is up, and home prices are not escalating as they have been in the past years. As new home construction is a major driver of the overall economy, these indicators don’t bode particularly well for most businesses and over-mortgaged home owners.

What the housing market means for the pond business is less certain. Pentair, for example, lowered its earnings projections, because the slumping housing market has hurt its pool and spa business, which closely follows the housing market. Water features and other outdoor living enhancements, however, arguably could make a home both more livable and more salable.

2 TREASURED MAPs
Minimum Advertised Pricing policies created a great deal of buzz in 2006, and the issue is far from settled. For starters, their legality remains murky.

These wholesale policies restrict retailers from advertising products below minimum costs in an effort to protect pricing levels from discounters, particularly online discounters. The courts and legislatures have yet to declare definitively whether these policies are necessary efforts to protect investment in product, distribution and goodwill development or merely the latest wrinkle to price-fixing.

Then there is the question of their effectiveness. More manufacturers seem to be touting their MAP policies than seem to enforcing them. Enforcement, moreover, can be a costly endeavor that could, ironically, increase wholesale pricing.

1 OIL PRICES
With crude oil hitting record prices, (gasoline) pump prices took their toll on the economy, including the water garden industry. Fuel prices changed how people shopped (fewer trips), eroded their discretionary income and heightened their concerns about energy efficiency.

In 2007, new oil-price highs are almost a certainty. Oil reserves are shrinking, and it is becoming more expensive (both financially and environmentally) to retrieve and process the remaining oil. Those costs are leading to interesting developments. Arizona-based PetroSun Inc., for example, plans to begin testing the cultivation of algae for biodiesel production in 2007. 

Water gardening is not necessarily environmentally friendly. Companies that act to ensure that it is ecologically sound might reap more benefits.

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Water Garden News' Splashdown - 2006

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