Consolidation may transform landscape contracting industry
BY LUCY BODILLY
Consolidation may change the way the landscaping industry is structured over the next few years.
Regional landscapers that serve growing industries are attractive buyout targets.
And single source vending -- the desire to obtain as many services or products as possible from one company -- is the moving force. Property owners and managers realize the cost savings of cutting down their vendor lists.
One example is Washington Mutual Bank, whose properties are managed by CBC/Koll Commercial. Until last year, landscape maintenance, parking lot cleaning and snow removal were all completed by separate companies, chosen by individual branch managers. Even in the same city, managers could chose different vendors, which had to be paid separately from the main office.
Just by consolidating those services in a four state area (Washington, Oregon, Idaho and Montana) the bank managed to cut hundreds of vendors from its list, according to Tim Aalbu president of Aalbu Landscape & Maintenance, Inc. the company that took over management of the accounts.
The owner of the landscape maintenance firm, which opened in 1979, expects to see the trend continue.
"We've already submitted proposals to two other banks for the same type of services, and local customers such as Costco are asking for proposals to consolidate properties in this area," Aalbu said.
Others experts are taking a wait and see attitude. "We've seen some movement in that direction," said Rob Bailey, president of Evergreen Services, a landscape maintenance company that works throughout the state.
There has been some pressure to provide multiple services, especially from banks and companies like U.S. West. But Bailey believes the change is still in the experimental phase. "Sometimes it works and sometimes it doesn't," he said.
To land the Washington Mutual account, some changes were necessary at Aalbu's home office in Everett. Though no new people were hired, everyone took on additional responsibilities. The company opened two satellite offices in Washington state. To serve the other states, it contracts out all services, and it contracts out the everything except the landscaping in Washington state.
Aalbu itself has consolidated contracts with vendors to ease management difficulties.
"We work with about 25 to 30 vendors," Aalbu said.
This includes contact with each company at least monthly, and more often when specific work is requested. Work can be ordered by the owner on a priority basis; emergencies such as broken irrigation systems are fixed within four hours. Other problems are handled when crews make a scheduled visit or on an as needed basis.
At first it was difficult to set up the system, but it is easy to duplicate, Aalbu said. And, the company may have the opportunity to do just that. Washington Mutual is now deciding if it wants to consolidate services for its California branches.
The key to Aalbu's success was contacting the right subcontractors to begin with. In many cases, the company stayed with the vendor who was originally doing the work. But when that work had been unsatisfactory, new vendors were found.
"We've had pretty good luck. We only had problem with one company so far," Aalbu said.
Further account consolidation will probably continue because of recent mergers and acquisitions in the industry, according to the March issue of Lawn and Landscape Magazine, a trade publication.
TruGreen-ChemLawn purchased Northwest Landscape Industries of Tigard, Ore. and also Environmental Landscape Services of Houston, Minors Landscape Services of Fort Worth and Otey Bros of Boston. Six more acquisitions by the parent company are rumored to be in the planning stages. These appear to be the first mergers of their kind in the landscape maintenance industry. Only one landscaping company so far -- ServiceMaster -- is publicly traded.
The advantages are clear. Overhead costs will go down. Companies can share best business practices. They can offer a wider range of services.
If the present owners of landscape maintenance firms acquiesce, mergers could start at a fevered pace. Aalbu has discussed a merger with a larger company, but will not give out the details. Bailey would not comment on the possibility, but said that at a recent national trade convention, "almost everyone was approached by somebody."
"I don't think we have anything to fear from these mergers," Bailey said.
Landscape maintenance is a service industry, and there will always be owners who prefer to deal with a single contractor.
The net effect, according to the Lawn and Landscape Magazine, will probably be similar to what occurred in the construction industry. Companies in largely populated areas, such as Seattle, will see increased competition from the nationals.
A crew from Aalbu Landscape & Maintenance Inc. trims the hedge at a property managed by CBC/Koll Commercial. It now has a contract for similar work in four states.
Copyright © 1998 Seattle Daily Journal of Commerce.