marketing disorder

 

Marketing Disorder

Dan Hanauer, Jr., Wisconsin Christmas tree grower

Unicorns, mermaids, and other people who are going to help me market my trees all occupy the same fond corner of my heart.  The difference is that believing in unicorns and mermaids is harmless and free, the magical marketer about to be imposed on us, supposedly by us, is not.

I see two distinct portions of the marketing order discussion: the Promise and the Process.  First, the Promise.  I believe we all work in an industry that we love.  We have one of the best stories in the marketplace, the natural green product grown in America, versus the petrochemical based fake imported from abroad.  No argument there.  Many of us are second generation growers perhaps hoping for a third, our lives are inexorably tied to our profession.  What a wonderful career to follow in this world!

However, our beloved industry must exist in the cold calculating arena we call the marketplace.  Here, I believe, are some indisputable facts about our marketplace:  1) We exist in a country with excess agricultural capacity, resulting in a very elastic supply.  2) The KEY TO SUCCESS is neither supply nor demand, but the RELATIONSHIP between the two.  3)  Firms within our industry must turn a profit over the long run.

Now, how is the marketing order going to help us in light of these facts?  Remember, this is being sold to us on the basis that increased funds for marketing and research will increase demand for our product and improve our industry.  Let’s look at the main parts of the argument.

MARKETING – Demand.  Probably the main component, since, after all it is called a marketing order.  I believe most growers are actually thinking SALES, which is the ultimate goal of the marketing effort.  I believe that many supporters of the marketing order have unrealistic expectations that someone else is going to solve their sales problems using primarily other people’s money.  This is my main objection concerning the Promise of the marketing order.  We have the dual problems of competing in an industry that suffers from chronic oversupply, within an economy that currently stinks.  Would increased marketing result in more real trees being sold overall?  Probably so.  Therefore, I have consistently and voluntarily contributed to the market expansion program.  However, an increase in demand would only be a temporary boon to those who currently have a tree inventory.  Will the marketing order change the long term relationship between supply and demand?  I don’t think so, remember our excess agricultural capacity.  Demand creates its own supply; we will simply grow more trees in response to increased demand.  What is the goal of the marketing order?  The real tree market in the U.S. has historically been 30 to 40 million trees.  Do we expect to increase it by 1 million, 5 million, 10 million? Does anybody doubt that we can grow another 10 million trees in the U.S.?  What is the difference if we grow 40 million trees and sell 30, compared to growing 60 million and selling 50?  It is human instinct to want your industry to be “bigger”.  However, a bigger industry does not do the individual growers any substantial good if there are still too many trees to sell.

MARKETING – Supply.   Here is my question.  If we agree that we grow too many trees, why do we ceaselessly try to increase the supply of trees?  Certainly as individuals we have an incentive to grow more in our own operation.  But as a group this makes no sense.  How many times have you read an incoming state or national president’s column talk about how they want to increase the membership in the organization?  Why??  Because bigger is better, right?  Often the organization becomes the end itself instead of the means.  Bring in more growers, bring in more new growers, teach them how to grow trees and then suffer the consequences of too many trees. This makes no sense.  This was the problem with the community grazing grounds in earlier centuries.  The individual had incentive to add more livestock until the grounds could not support the entire herd and everybody’s livestock starved.  Yes, we are a generous group bound by a common spirit.  Yes, I and many others have benefited by learning from the group.  Ultimately, however, we are not only peers, we are competitors.  We can affect the relationship between supply and demand by not encouraging an increase in the supply.

TURNING A PROFIT.  Sell your trees.  Take the proceeds and subtract direct costs you cannot eliminate including labor, fuel, electricity, telephone, postage, interest, loan payments, equipment, twine, fertilizer, herbicide, maintenance, planting stock, your own marketing costs and many others.  Now subtract the government costs that you also cannot eliminate such as property taxes, payroll taxes (Social Security and Medicare), state and federal income taxes, unemployment taxes, workman’s comp, excise taxes on tires, taxes on electricity telephone and other services, fuel taxes, groundwater fees on herbicide, vehicle registration fees, WDATCP license fees, and more. Expect this bite from your pocket to increase substantially in our current political environment.  To this we want to add a self imposed per tree tax with the hope it will improve our sales?  Now look at optional costs such as WCTPA and NCTA dues and convention costs, and market expansion and legislative fund contributions.  These could be and very well might be eliminated or reduced to offset marketing order taxes.  The result would hurt our marketing efforts because of the fine work these organizations do.  Then ask yourself who you are working for, because a whole lot of people get in your pocket before you do.  Do you really want to add another?  Finally, consider this.  A new tax has to either increase the cost of the product, making sales harder, or decrease your profit, making your life harder.

RESEARCH.  The supporters of the marketing order also tout research as a benefit to our industry.  In 2009, I attended two Christmas tree growing seminars held at universities.  One was held at Penn State, number of attendees from Wisconsin: 1. The other was held at Michigan State, number of attendees from Wisconsin: 5. We have research coming out of our ears that almost nobody takes advantage of.  Is more research good?  Of course it is.  But how much and at what cost?  We have all sorts of research that is underutilized and I am not in favor of adding another tax to my current burden to generate more.

THE PROCESS.  I believe the Promise of the marketing order is misguided and exaggerated.  I believe the Process used to impose this on us has been devious and indefensible.  Keep in mind that the general premise of the marketing order is that the brute force of the Federal Government is brought to bear upon the members of an industry, supposedly for their own good, and supposedly at their request.  What has happened here is that a small group has exceeded their mandate, and determined that they must do our thinking for us.  At some point they transitioned from researchers of the marketing order to advocates for it.  To be fair, I believe that the advocates for the marketing order have good intentions and have put a lot of their own time and money into this effort.  I also believe they have done an adequate job of informing the industry that they were exploring a marketing order and seeking input.  However, they strayed way off track when they decided that since they were appointed to study the marketing order they also represented the industry.  It is shocking to me that without a vote (at least in Wisconsin) ten people can jet off to Washington and volunteer an entire industry for a self imposed tax and further regulation and enforcement at the hands of the Federal Government.

Early on in the process, June 21, 2008, I said the following in an e-mail to our marketing order representative “EVERYONE WHO IS GOING TO HAVE TO PAY SHOULD GET AN OPPORTUNITY TO VOTE”.  I went on to say “It sounds to me like they are considering the fact that these meetings could constitute the approval to go forward.  That is slippery.”  This was in response to a summary of a marketing order meeting held in North Carolina.  Reading the minutes, it was clear to me that the committee members were considering simply anointing themselves as “The Industry” and petitioning the USDA without being inconvenienced with a messy problem like a vote of industry members.  As we now know, this is exactly what they did.

I raised this issue at the Michigan State Fir Conference, during an impromptu presentation by some of the team of 10 that petitioned the USDA for all of us regular folks.  The answer I got was that they would not know how to find all the people who should vote.  Really??  How much do you want to bet they will find these folks when it is time to assess the marketing order tax?  Another feeble argument the presenter laid on us was that you can’t vote on something until you try it.  Really??  I have not tried crack cocaine, but am completely ready to vote against any referendum legalizing it.  Another big argument is that many or most industries currently operating under marketing orders did it without an advance vote.  Really??  This makes my whole case; they had to sneak it through the back door just like this one.  Finally, a member of the marketing order committee told me that there was overwhelming support for the marketing order.  Two sentences later the same person said they were not sure a vote would pass.    Really??  How can you have overwhelming support and the vote not pass?  My belief is that the committee is afraid there is a different viewpoint between them and the industry members as a whole, so they had to slide it through without a vote to insure it goes their way.  I wonder how up front these people will be once they have a million or two of our dollars to play with.

Marketing order advocates will tell you that there will be a comment period before the USDA issues its decision on the marketing order.  Rest assured, I will comment, but does anybody really believe the USDA is going to turn down an opportunity to further regulate us?  After “we” asked them to?  Another tactic to reassure us before they regulate us is that in three years we will be allowed to vote on the issue, and maybe even get some of our money back.  Wow, let’s look forward to closing the door three years after the horse left the barn.

I don’t doubt that a vote would pass.  I think many believe in the false hopes I laid out in describing the Promise of the marketing order.  I do know that I will not vote for, nor do I support the marketing order.  I do not want another tax; I do not want another layer of government imposing its will on me.  If you are opposed to this marketing order, do not be afraid to comment to the USDA, and to the marketing order committee, at this point it appears to be our only option to have our voices heard in advance.

When this battle erupted twenty years ago, one of our Wisconsin leaders fought very hard to keep us free from this burden.  I have been appreciative ever since and repeat here some of his warnings about what a marketing order will mean to us.  There will have to be some type of data collection and enforcement mechanism.  Do you want to turn your customer list over to a panel of other growers so they can determine if you properly paid your tax?  Of course, there will be another set of confusing forms to fill out and payments to be made.  When you deal with the government, your time is valued at zero.  Do you want to spend more time in your office documenting your finances so you can send more of them off to yet another nanny who promises to make your life better?  If the marketing order had passed twenty years ago, would we be better off now?  I doubt it.  How many of us would be glad we paid marketing order taxes for the last twenty years?  How much would that have cost you?  Are the industries currently covered by marketing orders living the high life?  Do they have such great sales they can’t fulfill them all?  Is everyone winning?  Or do they still have producers struggling to make it?  Success will not be gained by creating some utopian

industry where everyone wins – that is a fantasy.  The key to each of our successes is to be high enough on the competitive ladder within the industry to be profitable in the long run.  Unfortunately, there will always have to be some who do not make it; hopefully they will go on to success in some other endeavor.

There is always somebody promising to solve your problems for you, but – oh yes – there will be a fee.  I do not want another group of people doing my thinking for me, and promising to solve my problems if only I will turn over some of the money I earned to them.  I spend a lot of time and money doing my own marketing, and that is the way I want to keep it.  When I have to submit to and pay some self appointed elitist group for the privilege to grow Christmas trees on my own land, and sell them to make my own living, I am no longer living in the America I grew up in and love.  Well……… at least I will still have my unicorns and mermaids.

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