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.


Petunia Kings: Gary Mangum, on right, with Mike McCarthy

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.

Who knew?

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.


"People are happy buying flowers," Mangum says

"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.

By Dan Beyers  |  June 3, 2008; 3:30 PM ET  | Category:  Value Added
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Comments

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as someone who has the furthest things from a green thumb, i now know where all of my money is going to... nice piece and interesting... keep it up mr. heath

Posted by: Not a green thumb | June 3, 2008 4:16 PM

Who knew so much "green" was being reaped by the fertile soil of Montgomery County;)

Posted by: Barry | June 3, 2008 5:27 PM

What an interesting story. I've been buying plants from Home Depot for years and have really appreciated the quality of late. Who knew that they came from this nursery network? Glad to hear too that they're locally grown and helping our local economy.

Posted by: Brenda | June 3, 2008 9:13 PM

In a day and age when we hear so much about the "big box" stores putting the small, Mom&Pop's out of business, it is nice to know that at least one small business (at least by comparison) found a way to work WITH the Big Boxes. Another smart piece, Tom.

Posted by: Chris | June 3, 2008 10:16 PM

as you said Tom, who knew! this is great news to stay local! good for them.

Posted by: ALD | June 4, 2008 8:23 AM

Petunias - now you're talking my language! I've probably helped to make Gary and Mike rich with my efforts at gardening. Great story! My gardening cap is off to you for digging up this information. It's good to know the little guy can prevail.

Posted by: Polly Elmore | June 4, 2008 8:36 AM

It's nice to know the plants are local and helping local growers and aren't flown in from Chile or California.

Posted by: Anne | June 4, 2008 10:03 AM

OK, so I'm new to the blogging world as I'm usually working to try and make sure the petunias are selling.

One thing I wanted to clarify - I wish the profits were 20% of sales. I obviously wasn't clear enough about that when speaking with Tom. Production costs and the investment in people eat up the lions share of what we collect. Business is good, but definately not that good.

We've always enjoyed the faith that Depot placed in us by promoting the locally grown concept. It's made a real difference for us - and by extension the gardening consumers in the area we serve.

Posted by: Gary M | June 4, 2008 11:33 AM

thanks for clarification gary. enjoyed touring the greenhouses at bell nursery with you.

Posted by: tom heath | June 4, 2008 12:05 PM

I've been buying flowers at Home Depot for years. The people who work in the nursery area are always very helpful and knowledgeable about the plants. I always shop at the Leesburg store and thought they were the busiest! Nice to know about where the plants come from.

Posted by: Rebecca B. | June 4, 2008 12:09 PM

Tom,
A positive article about great people and a great business model. I have known Gary and Mike since they started their business. Our company supplies them with a lot of their products, including the (Wave)
petunias mentioned. These guys work as hard and as smart as anyone I know. They have developed and nurtured a good relationship with Home Depot that has benefited both equally. However,after being in the industry for 30 years I can assure you the profits estimated by you sound inflated.

Posted by: Bill | June 4, 2008 12:12 PM

I've known Gary from High School days. He's always been a hard worker and in his purple shirt talking about plants. I wouldn't think he had a lot of money from the way he acts. I saw him a few months ago and same farmer talk you always hear from him. He and Mike have always put everything into their business - well done and if anyone deserves it, it's them!

Posted by: Penny G | June 4, 2008 12:31 PM

Oh come on Gary. The cat is out of the bag. Who is going to believe that Tom erred. If he did we'd see a correction. Don't be embarrassed about your success. Don't worry about your employees. Tell them the truth, that other companies get way better margins.

You should worry about what Home Depot thinks. Why couldn't they buy their own nurseries and cut you out. One customer? That's a lot of risk isn't it?

Great story Tom. Don't let these owners try to dumb down these stories. These columns work because of all the great detail: margins, earnings, costs, the screw ups that execs make...

Keep them coming.

Posted by: Petunia | June 4, 2008 12:35 PM

As one of the growers in the network, we can attest to the fact that Gary and Mike have built an incredibly well-run organization that bridges the small, local business with the large corporation. We became a grower after carefully evaluating the risks since we would be leaving the corporate world and transitioning to the farming community. Thanks to the support from Bell Nursery, we have been able to make a successful transition and live out our dream of raising our children on a farm.

Posted by: Cathy and Peter | June 4, 2008 12:44 PM

I'm involved in the ownership of the VA business. The model these guys have is outstanding. I've retained equity in the business and have every motivation to help take it to the next level. I was surprised to see the article. We're currently working to add farm families in southern VA!

Posted by: Brett | June 4, 2008 2:53 PM

Echoing Petunia, the details and reporting on these posts is what make them so valuable and interesting.

As a small business owner, it is enlightening to see how others do it.

While anyone can have a blog, those featuring actual reporters and backed by real news outlets are significantly better.

Hope the Post can make the revenue model work in the digital age.

Posted by: Doc Katahdin | June 4, 2008 10:19 PM

A couple of years ago we drove by a Wal-Mart Distribution Center in South Carolina before dawn one morning. It is where the trucks bring the merchandise in from manufacturers which then get sorted and shipped out to the various stores in the region I am sure there are dozens of them world-wide, but this one was as large as Reagan National, and just as busy. At that point I began to think of how tight margins must be given the costs of the raw materials, manufacturing, packaging, shipping, transfer, rent, utilities, sales labor cost all taken into account before we take our widgets or petunias home. It is amazing that anyone can afford anything. Next time I buy my flat of flowers from Home Depot I will think of Bell Nursery and its success.

Posted by: Cooper | June 6, 2008 5:30 PM

Just got back from my Home Depot in College Park and had a great time in the flower center. Heard somebody talking about the nursery article in line and had to see for myself. When I left the store my basket and flat cart were full, After reading this I know the camera guy would have enjoyed watching me load my car.

I love that my flowers are grown by farmers close to home. Thanks for letting us know - good stuff!

Posted by: Sue | June 8, 2008 12:22 PM

Great to see the local angle here. I use to buy their flowers at Costco and didn't know they were exclusive at the orange box. I've been a Lowe's advocate. Always liked the Bell's plants and will definitely get into the Depot nursery. Thanks for the insight.

Posted by: Betty | June 8, 2008 12:24 PM

Gary,

Don't be ashamed of success. After reading this article, I'm going to make sure my plant purchases are made at my local Home Depot. Finally, a good story about large corporations and small businesses working together! Locally grown has always been important to me. I never would have thought that HD would have figured it out so well.

Posted by: Carol | June 8, 2008 10:33 PM

Thank you so much for such a wonderful article. My congratulations and encouragement ot Bell Nursery. It is good to know how that my dream of locally producing flowers could be possible some day and that Maryland plates "Our farms;our future" motto is not chimera

Posted by: Luis A Hernandez | June 9, 2008 11:48 AM

I have worked for Gary and mike for almost two years. They are two of the most honest down to earth guys I've had the privilage to meet. They both work extremely hard, very long hours.They encourage us every day and are never negative!
Great job guys!

Posted by: gillie | June 9, 2008 10:09 PM

I was just at the Aspen Hill Home Depot. The flowers were buetiful and the staff was very helpful,especialy Heather, who answered all my questions and was very friendly. Great story.

Posted by: Mike | June 10, 2008 12:23 AM

Exceptional article, and two exceptional guys. I have worked for Mike and Gary for almost two years and I can say with pride that I love my job. I will be here for a long time to come.

Way to go Gary and Mike......

Sheila

Posted by: Sheila | June 10, 2008 8:18 PM

I have experienced both sides of this great partnership. I was with Bell for 3 years, then managed the garden department for my local Home Depot for 3 years before coming back to Bell. Encouragement from Mike and Gary and the positive attitude this gives us is what makes everything work for all, Bell, Home Depot and the consumer. I am proud of the "impact" we have made in the Home Depot Stores and enjoy listening to the great comments we get from our customers and from The Home Depot staff.

Posted by: Teresa | June 11, 2008 9:00 AM

I have been working with Bell Nursery for many years as a flowerbulb supplier to their business. It is a lot of fun to see how effective the Bell system really is. The plant quality is fantastic and the displays are great. Checking out many of the mid-atlantic stores on a regular basis to see the displays and get a feel for the sell through, I have been thorougly impressed with it all. Gary & Mike got greengoods retailing & merchandising figured out. Way to go guys, keep it up.

Posted by: koknows | June 11, 2008 5:14 PM

good job daddy(Mike) and uncle gary love,madi

Posted by: madi | June 11, 2008 6:19 PM

as someone who grew up in the industry - it is great to read their success. however, the majority of the 'farmers' of flowers do not price things properly or grow plants well.

The box store quality is typically poorly produced and maintained... I would encourage the readers to support their local garden centers as well, as those too are locally produced. Of course, support quality goods such as Bell's...

Posted by: ohioian | June 11, 2008 10:42 PM

How do plants grow in foam and save water? I'd like to try it as the hot days of summer are upon us as I look at my beautiful thirsty petunias.

Posted by: Rick | June 12, 2008 7:19 AM

In terms of keys to success: Any company with a lack of long term debt would seem like a likely candidate for a private equity LBO. Used smartly, leveraging a business with long term debt can increase its ROE. If his margins were 20% before, you had better belive that he could have been squeezing more juice from that business, and that the capital influx from the PE firm mentioned was likely to have been highly levered.

All in all though, it was a great article on an interesting green-growth industry.

Posted by: New_Yorker | June 12, 2008 6:11 PM

Gary and Mike are great guys. Super smart in business and growing. I am excited to be working with them to bring a new product to the market.

Posted by: Joe in Texas | June 13, 2008 12:50 PM

Good job MIKE!!!
Being a "FARM" girl I can appreciate
all the hard work that goes into raising
things.
I am so proud to have known you since
you were born!! I am your Mom's Nursing
School Roommate! Also was there when your
4 children were born! I am retired now
and enjoy reading the POST-each AM. How
great to read about two successful business-men. Especially when I have had
the privilege & pleasure to know one of them.

Best Wishes for continued success!
Audrey

Posted by: Audrey Carder-Thurman | June 13, 2008 4:19 PM

This is a facinating story - I would have never guessed that anyone would have such a large agriculture based business in the DC area or in Montgomery Cty. Having only one customer is a bit disconcerting but it seems like that they have taken enough off the table to weather the risk of Home Depot pulling out.

Posted by: David | June 18, 2008 3:05 PM

Great to see the comments here. We had planned to skip the gardening this season but were inspired to action after seeing your piece Tom. Love the local farm idea.

Home Depot or any retailer using local resources should be advertising this fact. Giant did a good job of this for years, but then chased away their customer base by keeping more register lanes closed than open.

Kudos to Bell Nursry for their efforts close to home.

Posted by: garden guru | June 19, 2008 8:19 PM

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