Author: Mintel Group Ltd.
Last saved by: HTTP server

UK Retail Briefing - February 2020
Analyst Comment: Why the Garden Centre Sector is Thriving
 
While 2019 was a tough year for retailing as a whole, garden centres performed well, +4.5% in 2019 helped by a particularly good year for their cafes and restaurants.

What we've seen
●	Sales through non-food retailers were up 1.2% in 2019 including inflation. (ONS).
●	Household goods stores suffered a 1.9% decrease in sales and the worst performers were the DIY stores (-9.5%). (ONS)
●	Sales of garden centres increased by 4.5% in 2019, helped by particularly strong sales in catering (+10%). Catering now accounts for more than 20% of turnover in the sector.
●	In 2019 the largest garden centre chain Wyevale was sold off to 57 different companies, changing the competitive landscape considerably.
●	Following the breakup of Wyevale, Dobbies, British Garden Centres and Blue Diamond have become the largest garden centre chains.

Wyevale bows out
Before its sell-off by owner Terra Firmer, Wyevale was the UK’s largest garden centre chain with 148 stores and turnover of £336 million. Dobbies, now owned by Midlothian Capital Partners, bought 37 Wyevale stores and as a result turnover will be more than doubled to £300 million, making this the largest garden centre chain in the UK. Blue Diamond’s acquisition from Wyevale adds eight very large-scale garden centres taking it up to 30 outlets with a combined turnover of around £105 million. Other chains that have bought Wyevale outlets include Hillier which will increase turnover by some 23% to £37 million, British Garden Centres +£19% to £38 million, Otter +30% to £26 million, Cherry Lane +25% to £20 million and Caulders +50% to £12 million. 

Most of the Wyevale stores that have been sold are enjoying a period of investment as their new owners convert the stores to fit with their own identities. Dobbies development plan will upgrade 10 centres a year will be upgraded over the next 7 years. This, as well as the refurbishment plans by others that have bought Dobbies stores should help to boost turnover in the revamped outlets, adding even more to the turnover and profits of the new owners. The purchases will be transformational for several of the groups that have bought them, boosting their buying power and building economies of scale.

Stronger negotiating powers
The sell-off of Wyevale has led to a significant change in buying power for many of the other garden centre groups. This will give them better negotiating positions with suppliers. There will be other economies of scale, such as more stores to contribute to central overheads, from running these enlarged groups which should help these chains improve profitability.

Management will be stretched in the short term as new stores are absorbed into existing chains, systems need to be changed and new identities injected into the stores acquired. It is important that retailers overcome the integration of their acquisitions quickly, as they need to continue to focus on raising standards in order to compete with the intensifying competition from Amazon, the DIY chains and generalist retailers such as B&M, The Range and Dunelm.

Calmer year ahead in 2020
It is unlikely that we will see garden centres being opened on greenfield sites, as land and prospective areas for development are hard to come by. So growth of the chains will come mainly through acquisition. But, as so many existing businesses have made acquisitions in 2019, expect to see little more in 2020 as the sector will need time to digest and convert these new purchases.

The pleasure of a garden centre visit
26% of purchasers said an in-store café or restaurant influences their decision about where to buy things for their gardens. Garden centre operators are differentiating by developing larger restaurant areas and higher standards. The ambience of restaurant areas has been greatly enhanced and menu innovation and quality is an important part of development strategies. The role of garden centres as a destination for a leisurely shopping trip will continue to draw visitors to the stores. A trip to the garden centre is a leisure outing for many consumers, especially retired people.

Garden retailers have been investing in improvements to café and restaurant areas and for many this has transformed their fortunes. 36% of garden centre shoppers agree that the café influences their choice of where to buy. Mintel Trend Experience is All looks at the way retailers’ over-emphasis on speed, convenience and price has led consumers to crave experiences in brick and mortar spaces and physical places. By elevating the visitor experience in food halls, garden centres are tapping into this trend. 20% say that are influenced by the extra departments that are on offer at a retailer. Mintel Trend Extend My Brand looks at the way brands can build on their position of trust by expanding into new markets.

Catering for a broad audience
Garden centres have made strenuous efforts to attract younger shoppers too, catering for young children with indoor play areas such as soft play. While this attracts parents, it is also an attraction for the growing army of grandparents who are involved in looking after their grandchildren on a regular basis. For example, Dobbies has created soft play areas in several of its garden centres.

What it means
●	Management of the companies that purchased Wyevale stores will be stretched in the short term as new stores are absorbed into existing chains, systems are changed and new identities injected into the stores acquired.
●	It is important that retailers overcome the integration of their acquisitions quickly, as they need to continue to focus on raising standards in order to compete with the intensifying competition from Amazon, the DIY chains and generalist retailers such as B&M, The Range and Dunelm.
●	We expect to see innovation at the heart of these changes. This will include more focus on restaurant menus and ambience as restaurants prove to be a significant draw for garden centres, helping create an immersive leisure shopping experience.
●	Plus, garden centres will continue to evolve their sustainability policies, in areas including use of plastics and peat, chiming with growing customer awareness of environmental issues. Expect to see more emphasis on locally sourced food for restaurants and food halls, as part of this initiative.
●	Garden centres, including Dobbies, are raising the standards in the sector, creating compelling reasons to visit and true points of differentiation from competitors such as DIY chains and internet sellers.
●	Expect to see the sector continue to perform strongly in 2020.

This report is supplied in accordance with Mintel's terms and conditions.  
© Mintel Group Ltd.