Alan Roper: We were all exhausted. We’d come out of Covid, we’d done all of this. I said, ‘I’ve got these garden centres. Shall we buy them?’ And they said yes. They love it. They love being part of a success story.
Alan Roper’s presentation
Stage presenter: I’m delighted to introduce our keynote session with Alan Roper, the CEO of Blue Diamond.
Alan Roper: Thank you, thank you. So I thought I’d talk all about wind. I’ve been running businesses for 43 years and, up until 2019, I could always feel a tailwind in business. No matter the size of the challenge, there was always a tailwind. You could feel it.
Alan Roper: So let’s think about businesses as boats, because a lot of businesses hit icebergs and get holes in the hull. You’ve got this boat, you’re charting a course, you’ve got up some speed and you can feel the tailwind. But now, six or seven years later, from 2019 to 2026, there are no tailwinds in business at all. And I’m not just talking about garden centres. Look at any sector, particularly retail and hospitality. There are no tailwinds. We’re stuck with headwinds. I’ll talk a bit about what those tailwinds were and what those headwinds are.
Alan Roper: Why are we stuck with headwinds? Because as a country, like many others in the world, we’re £3 trillion in debt. So you’ve got a macroeconomic situation which is going to take a generation to fix. And if you’re in business, you’ll recognise some of these headwinds. If you think the sun’s going to come out, and it came out this year, it came out too much! If you think there’s going to be a sweet spot and a season will take care of your challenges, or things are going to get better, well, I’m telling you, after 43 years in business, they’re not going to get better. Not for a generation: 10, 15, 20 years. That is the environment we’re living in today.
Alan Roper: I think those people who recognise that and face up to those challenges will succeed. Those who think, ‘It’ll get better like it always did. It’ll change. There’ll be a housing boom again. They’ll lower interest rates to zero per cent.’ Those days are gone.
Alan Roper: So, just a statistic for you from the British Retail Consortium and ONS: there are approximately 2.76 million retail jobs, a historic low, because all of these headwinds have resulted in companies reducing their headcounts. But using AI, and I am going to talk about AI, it’s my new best friend, you can automate the routine, as I’ve put it: a lot of the processes you do back of house.
Alan Roper: But when it comes to our business, this is not in my plan, because garden centres should continue to invest in people to create the best customer-facing experience. You can’t do that without people. If I were a volume discounter, where the price sells it, you don’t need people. You put the product out at a low price, like a lot of these big discounters do, and they can afford to let staff go. But if you’re creating an experience and targeting a more middle-income audience, you need to keep investing in people. So there’ll be no staff reductions in our stores to mitigate these headwinds.
Alan Roper: Think about it. If you’re running a category, it could be Andrew running seeds, it could be any business, and you’ve got an EPOS system full of data. You’re trying to navigate it: what is it telling me? You’re going through the numbers and you’re zoning out. You can sit down and have a conversation. You can now analyse your business by having a conversation: ‘Tell me, give me all the genera in seeds. Are cabbages on an upward trend? Do I need more facings? Did I lose out because we kept selling out of our bestselling variety of carrot?’ It’ll tell you, like that.
Alan Roper: We’ve plugged all of our data into AI. It’s a system called Snowflake. We did it just under a year ago. The team are working with it and we’re now having conversations with AI. You do it by making sure your data has all of the reference codes you need. So let’s talk plants for a minute. Plant colour: huge. I could tell you right now, in some of our stores, where hebe is the biggest profit driver. The people who aren’t earning the money on hebe have got the wrong colour in.
Alan Roper: They would have taken ages to work that out, even if they bothered. But they can have a conversation with AI, or we can write the script for them. AI can tell us about our staff costs, efficiency. It can analyse our rotas. We’re using it for our rotas in our restaurants. You can have a conversation with AI about anything. The only limitation is your imagination.
Alan Roper: And AI, I kid you not, as a data guy, the ability for all of my team to now be positive about detail, because they can have a conversation with a machine about their business and get that insight back, is huge. It’s one of the biggest drivers for retail and hospitality. AI to drive profit and new technology are going to help you face those challenges down.
Alan Roper: So I thought I’d just remind you, you all know this: the population gets older. They start to love their gardens. There’s a youth infusion, driven a lot by the houseplant market. So, to end on a positive note in terms of those headwinds, I’m glad I’m in retail, in garden centres, and not any other form of retail. Thank you.
In conversation with Phil Wright
Phil Wright: Thank you for that, Alan. I’m going to put you in charge of morale!
Phil Wright: Alan, last year when we spoke, you mentioned, and you mentioned it there in your slides, how wage increases and the National Insurance rises had impacted Blue Diamond to the tune of £12.6 million. However, looking at Blue Diamond’s results, the figures you’ve posted, you’ve increased your profits by 44%. Is that right? So I guess last year you were telling us what the problem was. This year, I want to know how you went about tackling it.
Alan Roper: Well, as I said in my speech, when there’s a challenge… At the end of 2024 I was thinking, ‘This feels like you’re stuck in a quagmire.’ You’re in this sort of quicksand. You don’t seem to be getting anywhere. We’re growing. And that’s when I did the calculation about the impact of all the minimum wages.
Alan Roper: A corporate person would have said, ‘Okay, we’ve got to tell all of the centres to get rid of X number of staff to bring our staff costs down.’ But the way I work in the business, and it’s very useful because I’ve got a number of garden centres, in my centres I’ve got some really good people. In particular, in some centres they’ll be working at a very efficient staff cost as a percentage of turnover. That’s what we call best practice.
Alan Roper: So what you do is, I put them into bands. We’ve got the £10 million-plus club, then you’ve got £5 million to £10 million, and then £1 million to £5 million, because your percentages will vary depending on the size. And we just said, in each of those bands, ‘Well, these guys are delivering the same experience with the same product, the same retailing, more efficiently than you.’
Alan Roper: I give them a tool so they can work out whether they’re overstaffed, because we measure everything by profit, whether they’re overstaffed in plants, or overstaffed in gardening, or home, or fashion, or whatever, or on the tills. Till rotas tend to be a significant problem. We gave them the tools and they all worked it through. They managed to get within the same efficiencies as the best.
Alan Roper: And it’s a nice place to be. Rather than me saying, ‘I want you to do this,’ I’m saying, ‘The people running this centre over here and this one over here are telling you you can do a better job.’ And that’s how we got there, and that helped our profits grow. So that’s benchmarking. You benchmark all the time. Benchmark against the best. The biggest thing you can do is benchmark on every level you can think of. And outside of that, I benchmark against the industry, through the GCA.
Phil Wright: Is there anything in particular, or any department, that’s coming under particular scrutiny at the minute?
Alan Roper: They all come under scrutiny. But no, we’ve gone a long way. We’re now working on the restaurant side, which is tricky, because you’ve got to navigate that risk of bad customer service. So I’m recruiting, we’re calling them ‘gems’, people who are very customer-centric and know how to teach people how to be a conductor of front of house, to get a double win: better customer service with fewer staff. It’s about being a good conductor of an orchestra.
Phil Wright: Across a garden centre, staff are integral and really important. You’ve got plant experts, managers, people in charge of the restaurants, welcoming people and being customer-facing. How do you manage that productivity without becoming a skeleton crew?
Alan Roper: When you’ve got centres that are already delivering with plenty of people on the shop floor, and we measure the customer Net Promoter Score for customer service, so they’ve got good customer service and efficient staff costs, you never get to that point of a skeleton crew. As I say, you’re just telling the people who are not organised with their staff that they can do a better job, because these guys are telling you you can. So you’re never in that place.
Alan Roper: I have to accept a sort of three or four per cent increase in staff costs, which is where we kind of are compared to 2019. I accept it because, as I said on the slide, I’m not going to destroy the business by not having quality staff, and enough of them, to give the customer the right experience. I will accept it, but I won’t accept inefficiencies across the group.
Phil Wright: You mentioned in your slides the fact that you’re embracing AI as a business, and you in particular are quite evangelical about the use of AI. Do you see the possibility that AI could actually start taking people’s jobs within Blue Diamond?
Alan Roper: Well, it kind of has.
Phil Wright: Okay. Do you want to explain that?
Alan Roper: Only in design. Before, if you were designing a product, packaging, or designing anything, it would take days, hours. Now you can do it in seconds. Even members of my team who are developing products are using AI. They’re doing it on their own. They’re not sending it to design any more. So design, if you’re in design, I am reducing that, and it will be reduced again.
Alan Roper: I think in other areas, I mentioned it, there’s an ability in production of management accounts. All the back-room processes, invoices, invoice reconciliation, all of that in time will move to AI. And so it will affect the back-of-house processes, and there will be some efficiencies. But in our business, as I say, I’m going to maintain my wall of people in the centres. I can’t replace that.
Alan Roper: Although I am having a… it launches this Christmas. Let me get this right. It’s in Van Hage. Here we go, at Van Hage we will have our first AI Blue Diamond staff member. It’s a full-size lady, and you can go up to her and have a chat. When she’s finished being Mother Christmas and doing all of that stuff, a bit of fun, I’ll be putting her in the plant areas and the gardening departments. And if that’s a success, I’ll be rolling it out.
Alan Roper: Customers want information. They want advice. They want it in the plant areas and in garden care, and with the best will in the world, your staff a lot of the time can’t field every customer enquiry. Increasingly, getting people with horticultural knowledge is difficult. But if you plug AI into the Hillier A–Z shrub book, or whatever manual you want, and all of the garden care advice, you’ll be able to go in and it’ll tell you what to plant against a north-facing wall. Like a [unclear] rose, which I think is a climbing rose variety for a north facing wall. Going back 30, 40 years, I’m pretty sure it’s a north-facing climbing rose. Anyway, it will tell you all about that. It’ll tell you how to deal with your lawn.
Alan Roper: If you’ve got a pest, it’ll tell you what to do. You can go in and have a conversation with an AI lady in Blue Diamond, and she’ll give you advice. So we’re trialling that this year and, if it’s successful, we’ll roll it out. But it’s not there to take anyone’s job away. It’s there to offer people more advice.
Phil Wright: Are you concerned, you mentioned there about design, and outsourcing design work to AI, which I understand is quick and gets results, are you not concerned that with everybody else doing exactly the same thing, everything’s just going to end up looking the same?
Alan Roper: No. Well, there is… I tell you, it’s an interesting point you make. AI does have a default look. I’ve seen it myself. You can spot it. You can spot it. But if you work with it and tell it to stop going that way and go this way, it will go that way. I will still have people in my design department, but there’ll be fewer of them, and they will refine it. You get it to a point more quickly and then you use these people to refine it into something else.
Phil Wright: It’s the prompts that you give.
Alan Roper: It is. Yeah, exactly.
Phil Wright: So, putting so much of your company information into the system and trusting what comes out, are you not worried about errors that might creep in?
Alan Roper: If you know your business, you can spot it. But also on that point, what we’re doing is we always have the physical data and we can cross-reference what it’s telling us to check it’s accurate. We’ve been doing that and we’ve made some minor adjustments, but it’s now virtually 100 per cent. It gives us an accurate response. It will always give you an accurate response if it’s set up properly.
Phil Wright: It’s interesting, because you’re saying there are certain people within the business who don’t sweat the detail, or find the detail a bit overwhelming, and so AI can be great for that. But those are the people who aren’t going to spot the issues, are they? So there needs to be…
Alan Roper: You see, all of our centres have customer conversion benchmarking. It benchmarks the profit per customer and I rank them. So if they’re 38th, they know they have a problem. They can be 38th in plants. Then they go into roses, but it might be shrubs, and then they can go to the genus and find out the bestselling genus. They’re not ranked anywhere near the top, they’re down at the bottom. Then they can ask why that is.
Alan Roper: I have this customer conversion tool. I call it the ‘potential opps’, the potential opportunities you’re missing. They immediately, by looking at their low ranking on customer conversion, can see they haven’t got the right plant in the right place, at the right time, in the right colour, with the right POS. That’s all it is. Every time people miss that, customer conversion drops off a cliff. When you see you’re at the bottom, you start asking why, and it tells you, ‘All of your hebes are pink and you should have had blue.’
Phil Wright: And just to be clear, that’s implemented in the business now? And your staff are using that?
Alan Roper: We’re using it operationally and getting people dialled into that. Then next year at some point, hopefully before the spring, I’ll roll it down. We’ve moved it now into something called Streamlit, where we’re putting some structured AI reports and making it easier for people to navigate and have those conversations.
Phil Wright: Last year when we talked, we were talking about your loyalty programme. You were saying you were just starting to get better insight into the numbers. How’s that going? And, as a follow-up, are you looking at implementing AI into that as well?
Alan Roper: Oh yeah. It’s having the time. But AI is going to go into everything, and analysing the customer, our customer information, is a priority. We haven’t got there yet because we’ve been working on the other stuff, but there won’t be a place that AI won’t go. We’re making progress on the loyalty. We’re now developing a gold membership based on people’s spend. We’ll actually be rewarding people at a higher level for reaching a certain level of spend. So we’re making good progress. What else can I tell you?
Phil Wright: Last year you made the point that growth had largely come from the cash the business generates. However, this year Caledonia Investments has put £60 million into Blue Diamond. Why is now the right moment to bring such substantial outside capital in?
Alan Roper: When I look at headwinds, one of the things is that when we took over the Wyevales, they were all leases. And I have always liked to maintain a healthy portfolio of freeholds and leaseholds. We spent, I think it’s out there in the public, so you won’t mind me saying, we spent £21 million on Barton Grange and £3 million on the nursery. That’s £24 million. We spent a pretty good sum, because I always pay people a fair price for their businesses. And that’s a lot of money.
Alan Roper: So that £60 million is nothing at all if you’re buying freeholds. I want to direct the Caledonia money into being able to pay good prices for freehold garden centre properties. And having that investment enables me to turbocharge that.
Phil Wright: Do you see a number of prospects that you’re actually vying for at the minute?
Alan Roper: Yeah.
Phil Wright: Okay. We won’t go any further into that! So I just want to ask you, what’s one thing you think the garden sector could learn from outside the garden sector?
Alan Roper: Everything. [Short phrase unclear.] Get into the detail. AI gives you that. Now you can have a conversation with it. As I say, it’s become a lot easier to be an entrepreneur, a lot easier to optimise your business.
Alan Roper: Barton Grange was an exception, but every garden centre I’ve ever bought has been under-optimised. And it’s that optimisation. I see so many businesses that could be making more profit out of the turnover they’re taking. They don’t need to worry about buying more garden centres, or trying to drive turnover, or worrying about a season. It’s right under their noses: how they could improve their turnover per square metre, how they could improve their margin by looking at the profit gap between margin and net margin, and all the levers that destroy margin. Which we do. I won’t bore you today, but that profit-gap management, the cost efficiencies I talked about, and driving retail…
Alan Roper: As a business, our turnover on average per square metre across the group is £2,000. If you compare that to some other groups and some independents, you’ll find that’s quite a high watermark compared with other people. So my message is, if you’ve got a business in garden centres, think now, with the headwinds, about how you can optimise your business. Work at that, because that way you’ll be around in ten years.
Phil Wright: You’ve talked about these headwinds a lot, which I totally understand. It’s a really tough trading environment at the moment. What’s the one thing you’re most excited about at Blue Diamond at the moment?
Alan Roper: Oh gosh. The opportunity that’s still out there. I really love my business. I love my team. The relationships in the group are good. It’s a positive journey, and I can see that, with the right opportunities that come, there’s so much more that we can grow. We’ll do £450 million this year. No other garden centre group has ever got near that and survived. And I would like to see that grow more. That’s what Caledonia is about.
Alan Roper: And that is the appetite of my team. I remember when I asked them a couple of years ago, we were all exhausted, we’d come out of Covid, we’d done all of this. I said, ‘I’ve got these garden centres. Shall we buy them?’ And they said yes. They love it. They love being part of a success story. And that energy that we all get from it, we all love it and we all enjoy it. So I hope that answers your question.
Phil Wright: Yeah, that’s good. And it’s good to finish on a positive note. I’d just like to say thanks so much to Alan for sharing with us today. It’s been really insightful. Thank you.
Alan Roper: Thank you.