Value Added: Pushing Petunias
Here's Tom Heath's latest column on Washington's entrepreneurial set:
A couple of weekends a month, my wife and I drive up Route 270 in Montgomery County to one of the big box stores like Sam's Club or Home Depot in Gaithersburg. We walk the aisles, buying everything from "man-size" bags of Bounty to mulch, screen doors or $10 cotton T-shirts. We like to save a buck like everyone else.
What I didn't realize until a couple of days ago was how well local business-owners can do by working with the big boxes. Take Gary Mangum, co-owner of Bell Nursery USA in Burtonsville, Md. If you bought a plant recently at any of the 180 Home Depot stores between North Carolina and Ohio, you put some money in the pocket of Mangum, his brother-in-law Mike McCarthy and their private equity partners, Lindsay Goldberg of New York.
Gary and Mike are the Petunia Kings of the Mid-Atlantic, selling about 100 million petunias, pansies, shrubs and any other live plant Home Depot sells. Their base of operations is on 50 acres at the end of a narrow road in a corner of Montgomery County. They employ 400 full-time employees and will gross around $150 million this year.
Mangum, 51, and McCarthy, both Maryland guys, bought the Bell Nursery business from Mangum's parents in 1994. At the time, Bell Nursery was a small company providing the plants and flowers for a landscape design business that the Mangums ran locally.
Mangum and McCarthy were thinking big.
They contacted Home Depot within weeks. Their first in-store test came the following June, and it was a big success. The plants sold out in a couple of days.
"We wanted to move to a consumer business and we wanted to grow," Mangum said. Grow indeed. Bell Nursery went from less than $1 million in sales in 1994 to this year's projection of $150 million. The company earns about a 20 percent profit margin on its revenues, which puts profits at around $30 million this year. The company recently bought nurseries in Richmond and Springfield, Ohio, which doubled the number of Home Depot stores served by Bell Nursery USA to 180.
Mangum lists several keys to the success of the business, including zero long-term debt and a network of 45 farms on Maryland's Eastern Shore.
He also is spending millions to build high-tech greenhouses, and he employs a nimble delivery system of more than 150 rented trucks that keep fresh goods in the stores. His deal with Home Depot, Bell's sole client, doesn't put a penny into Bell Nursery coffers until the plant is purchased at the checkout counter.
Bell Nursery salespeople are in every Home Depot, caring for the flowers, making sure dying or injured plants are sent back, and letting the main office in Burtonsville know what is hot and what is not. The reward: Bell keeps more than 75 percent of each sale.
"We work closely with Home Depot," said Mangum, who runs the marketing end of the business and visits Home Depot stores five or six days a week. "I love seeing the plants go out the door in the shopping carts. I take 20 pictures a day of people buying the plants. People are happy buying flowers."
The Burtonsville headquarters is a marvel to see. It has 10 acres of flowers under greenhouse glass, housing a sea of petunias, impatiens, geraniums and daisies. Water is captured from rainfall, wells and recycled back onto the plants.
The biggest selling months are April, May and June, in descending order. Annuals, bright flowers which last a season before dying, are the biggest sellers. Next are shrubs and house plants. Then comes perennials, which you plant once and then they bloom year after year. Finished products, like flower baskets and pre-planted flower boxes that you can put on your deck, are surging in popularity.
Business dies off during the summer, but picks up again in September and October with chrysanthemums and pansies. A rainy day is bad for business. Mangum prays for sunny, warm springs. And the best-selling store of the 180 they serve? The Aspen Hill Home Depot.
The business has done so well that it drew the attention of the private equity industry. Lindsay Goldberg, a New York partnership, approached Bell Nursery about two years ago and ended up buying around half the firm, which became Bell Nursery USA.
With private equity help, the firm bought the new nurseries and doubled the number of Home Depots they serve. They plan on growing more, but Mangum won't say where or how much. I am betting they have their eyes on everything east of the Mississippi River.
By hanging on to half the company, Mangum said "we have a major incentive to grow the business. We have kids and we have an interest. We think it can be half a billion dollar business, easily."
Mangum earns a nice salary and bonus, but he says it is modest by corporate standards. He and McCarthy have rolled most of their profits back into the company, building the high-tech greenhouses, working with the grower network and ensuring the service and employees are top notch.
By my lights, Mangum personally reaped more than $10 million, maybe a few times that, when he sold to Lindsay Goldberg. He won't confirm that. He owns a nice home on the Chesapeake Bay, and keeps most of his money "in conservative mutual funds."
Mangum and McCarthy have invested some of their earnings in related businesses. One business is Air House, an eco-friendly version of temporary housing. The other is called Freedom Garden Products, which makes a lightweight, foam-like product that helps plants live with minimal water.
Look for the foam products sometime soon in a big box near you.
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