Grower Statements on Bunnings

'Bunnings almost broke us: why we had to walk away,' as told by Brocklands Nursery

Brocklands Nursery is a wholesale nursery supplying plants grown in our laboratory in Winkleigh, Tasmania. We grow a wide range of berry plants, fruit rootstocks and ornamentals.

Established in 1996, Brocklands is managed by my husband Tim Phillips and me. Today we employ eight regional staff and turn over $750,000 per year. We are an accredited nursery with a reputation as a high-health specialist grower, using the latest technology to propagate plants of a consistently high standard to supply to the agribusiness sector.

In 2003, we started supplying plants to Bunnings. We quickly became a preferred Bunnings supplier: we grew high quality plants which were locally produced rather than imported from the mainland. Demand grew quickly as Bunnings expanded across the state, opening new stores in Burnie and North Launceston and later in Mornington and Kingston. At the peak of our activity with Bunnings, our plants occupied 26% of the available store space in Tasmanian Bunnings stores.

Although Bunnings consistently purchased high volumes of plants from us, they did this without any contractual commitment. What this meant in practice was that we were encouraged by Bunnings to grow huge volumes of plants whilst they reserved the right to buy only some – or none - of these. At the peak of our business with Bunnings, 95% of the plants we produced were set aside for Bunnings – but without any certainty at all. This was a huge source of worry for us: if Bunnings didn’t buy the plants we had grown for them, there was nowhere else for us to sell them.

Bunnings asked Brocklands to start growing water lilies for them. We were reluctant to do this as it required investment from us to set up the right growing facilities without any certainty that Bunnings would take the plants. Over three years, Bunnings pressurised us and eventually we gave in and agreed to invest $10,000 and started growing water lilies. Bunnings praised the quality of the plants and purchased every water lily we could grow in the first year. In the second year, we experienced a shock when, having allocated 5,000 water lilies to Bunnings due to their popularity, they purchased only 500 of these, despite having opened new stores in the meantime.

This was not the only time we risked an investment without any certainty of being able to recoup it. At the peak of our activity, we spent $150,000 on a robotic planter so we could produce the volume Bunnings said it needed. Making such investments on the basis of informal arrangements posed a serious risk to our business: at one point we had $750,000 of plant stock grown for Bunnings without any contract from them to buy any of it.

On another occasion, Bunnings asked us to grow 700 plants for a special promotional campaign. There was huge build up to the campaign and we were put under pressure to ensure we had the plants ready on time. We were devastated when they took only six plants – and obliged us to deliver them to store, at our own cost. Obviously, we made a huge loss on that campaign: the ‘no-ties’ relationship with Bunnings hurt us again.

The obligations Bunnings place on growers to supply plants into stores are very unfair. We were required to deliver to any store in any location in Tasmania, at our own cost. Because Bunnings refused to commit to a minimum order, we sometimes found ourselves delivering only a handful of plants to Hobart (a six hour round trip), should the store require it. We were also required to supply plants at a discount whenever a new store opened or when an existing store was

refurbished. Typically, the discounts demanded were 15%, plus the cost of transport. Often, we made a loss. A variation to the trading agreement requested by us for a minimum order of $300 was rejected.

When we first started supplying Bunnings, they only agreed to pay us on a monthly basis if we gave them a ‘prompt payment discount’ on our plant prices. We agreed to do this because we needed the cash flow. Once in place, we were paid promptly by Bunnings every time. The certainty of this payment kept us hooked; we told ourselves it compensated for the money we were losing – but it didn’t.

We noticed that whenever we raised a concern or challenged Bunnings’ behaviour, they reduced the plants they purchased from us. I have no doubt that this was a form of punishment and a way of reminding us that Bunnings held all the power in the relationship. From 2012, Bunnings adopted an even tougher attitude to us. They became hostile and unpleasant to deal with and we were under enormous pressure to keep growing plants without knowing where we stood. The stress was so extreme I was genuinely worried that it would kill my husband Tim.

Eventually, in 2016 we realised that we could not continue supplying Bunnings. The lack of certainty, the obligations placed on us to give Bunnings discounts all the time and Bunnings’ refusal to recognise our own cost increases meant our business was on the brink of collapse. We took the difficult decision to stop supplying Bunnings. This was a huge risk as we had to rebuild the business almost from scratch. As Bunnings dominates the plant retail market in Tasmania there were very few other places we could sell our plants. We opened a seasonal pop- up shop to sell plants directly to the public whilst we expanded our propagation business. We now specialise in growing plants from tissue culture in a lab. It was a huge gamble to break from Bunnings: in our fifties we were effectively starting again. But we don’t regret it: it saved our mental health, our livelihood and our marriage.

We know many, many other growers still supplying Bunnings who suffer the same treatment we experienced. Because these businesses rely on Bunnings for their survival and they know that Bunnings has a reputation for being vindictive, they are too scared to speak out. At the time we were dependant on Bunnings, we would have felt the same way. It is only now that we are free of Bunnings that we can tell our story without fear of retribution.

We know that Bunnings exists to make a profit and we have no problem with this. In many ways, their expansion and success have been impressive to observe. However, our experience with Bunnings illustrates that they aggressively chase profit at the expense of growers’ viability, well- being and even survival. They can do this because they are all-powerful and are able to exercise this power without any scrutiny at all.

If the government believes the supermarkets warrant regulation, we beg them to also consider the same approach to Bunnings. Just like fruit and vegetables, greenlife products are

perishable: they require time and skill to grow and must be sold in high volumes to be profitable. Every grower I know agrees that Bunnings has a huge share of the plant retail sector in Australia: we estimate it to be 70% nationally and probably higher than that in Tasmania.

Government-mandated accountability is the only way Bunnings will do the right thing for the growers they rely on to put plants in their stores, for the benefit of home gardeners everywhere.

Karen Brock, owner, Brocklands Nursery, 28 March 2024

'Stepping off the Bunnings cliff.' as told by Boomaroo Nurseries

Starting as a small family market garden, Boomaroo Nurseries has grown into one of Australia’s most prominent and thriving vegetable seedling and greenlife suppliers. In over 30 years of business, we have opened facilities in Lara, Victoria and Southbrook, Queensland, spanning over 17 hectares and employing 140 employees, with customers in Victoria, New South Wales, Queensland, South Australia and Tasmania.

In 2013 a decision was made to expand into greenlife products, starting with Cyclamen and later increasing the range to indoor foliage, ferns and succulents, which we supplied to Bunnings as the predominant retailer of plants in Australia.

In the beginning, Boomaroo’s established vegetable seedling business arm subsidised the fledgling greenlife business unit. Bunnings actively encouraged us to expand our greenlife production, saying the more products it grew, the more likely Bunnings was to order from us. However, Bunnings refused to enter into contracts with us and instead asked us to grow plants for them in “good faith”.

This gave us no security whatsoever and was not the way that we usually did business, but as newcomers to the greenlife sector, we accepted it. We were confident that as a sophisticated and experienced operator, we would be able to make it work. Ten years later our greenlife business was generating $8.5 million in annual sales, producing over 1.3 million units, 80% of which went to Bunnings. However, even though Boomaroo’s plants were among the best quality on the market, the greenlife side of the business continued to run at a loss: our analysis showed us that it was break-even at best, and more typically ran at a loss.

We were carrying out a thorough analysis of why we were losing money, and in doing so identified the impact that Bunnings were having on the mental health of our team, the quality of our range and our profitability. The absence of a commitment to purchase was the biggest challenge. This way of working does not provide the clarity required to grow a living product to specification, in the correct volumes and at the right time. We were effectively growing huge volumes of plants entirely speculatively, which is in complete contrast to the way our vegetable business works.

Endless discounts

Bunnings operates a system of discounts (or rebates) which eroded our profit margins. For example:

• We had a 2% volume rebate and 1% marketing allowance, effectively a 3% deduction.
• We had to discount any plants purchased by Bunnings to supply a new or refurbished store, usually at a rate of 15%.
• We had to discount our plants by 5% if we wanted Bunnings to pay within 14 days, 3% payment in 30 days. If we accepted 60-day payment terms, no discount was required – but this meant the plants had likely sold to a consumer before we were paid for them.
• The more Bunnings purchased from us (% level above last year), the greater the price discount we had to make. 0.5% volume discount (known as LTI (Long Term Incentive) was not unusual, and as high as 1.5% in some years.

Some of these discounts might have been acceptable had we received from Bunnings a commitment to purchase from us but in the absence of this it made it very difficult to plan with accuracy and preserve profit margins.

Unreasonable demands

Bunnings also imposed operating requirements on us that we regarded as unreasonable. For example:

• Bunnings preferred that we used their transport system to get stock into store. This required us to deliver our plants to their nominated cross dock by whatever means possible and at our own cost. Bunnings then charged us an “agreed greenlife logistics fee” for transporting our plants into their individual stores by imposing further discounts on our plant prices, ranging from 15% to 28% depending on the requested store location. These costs and discounts were hard to predict and had a major impact on our margins.
• Over the years there were constant rule changes. We were asked by Bunnings to change pots and labels at the drop of a hat and at our own expense, and although we always agreed, these demands were disruptive and costly.
• We were encouraged by Bunnings to invest in the business to become more productive. We discussed with Bunnings our idea to invest in a new $4.5 million greenlife production facility, potting shed and equipment. They encouraged the investment and on this basis we went ahead. However, when we proudly invited them to tour our new facilities, they were completely disinterested. We were utterly deflated by this response which felt like a power game: it seemed to us that Bunnings didn’t want us to feel in any way important to them.

Price increases

During and after COVID, Boomaroo’s labour costs and input costs increased significantly, which was driving the need for a price increase in products we were losing money on. In August 2023, which was much later than we hoped, we met with Bunnings and openly explained the basis of our rising costs. We requested clarity from Bunnings on their planned orders (especially on plants with lead times of six months plus grow time), which we should have received by this time, and we requested feedback on our request for an increase in our plant prices which had been submitted some weeks earlier, acknowledging that if some were not achievable we would remove them from our range.

In response to the pricing issue, Bunnings advised that they were “not offended” by the proposal, and they gave us the impression they would strongly consider it, which gave us hope for the future. However, at the same meeting, Bunnings instructed us to cease production of indoor plants. This came as a shock to us and left with a stockpile of the inputs we had purchased to grow the indoor plants, including plugs that we are still taking delivery of 8 months later. Bunnings’ decision, which came unexpectedly, immediately stripped $2.7 million of forecast revenue from our bottom line. We were also informed that the SA and NSW Bunnings stores would be taking considerably less volume from us as they had found local supply, and we would need to focus on Victoria from now on. During the same meeting Bunnings advised that our ‘delivery in full on time’ performance (known as DIFOT) had been poor over the last 12 months and that if it failed to improve, we could be dropped as a supplier. It’s an unreasonable stipulation: without firm orders or prices, it’s almost impossible to deliver in full on time.

By November 2023, nothing had improved for us and the losses on the products we supplied to Bunnings continued to accumulate. We were also carrying over $700k of stock that we had grown but had not been taken by Bunnings. Despite multiple requests to Bunnings, we had still not received a response to our requests for firm orders or feedback on a price increase. By November 2024, our losses were in excess of $600k and the nursery was in an untenable position.

The next team meeting at Boomaroo was grim. We made the decision to stop producing greenlife products. Over the following four weeks, we redeployed as many staff as we could but there were inevitable redundancies. One worker who we made redundant had been a valued employee for over 20 years. It was a heartbreaking time for us.