Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / How Stagflation Is Reshaping the Lawn Care Industry
Transcript
- Lucas: So the latest CPI numbers came out last month, and one of the quieter stories is what‘s happening in the lawn care industry. The overall index dipped slightly to 332.6, but core inflation is still sticky, and the ten-year breakeven rate actually ticked up to 2.26 percent. Meanwhile, the unemployment rate is at 4.2 percent, and average hourly earnings barely budged. Luna: Right, so people are feeling the pinch. And lawn care is one of those things that’s easy to cut back on when budgets tighten. Lucas: Exactly. But what's interesting is that it's not a simple story of people just letting their lawns go. There's a real shift happening in how Americans approach their yards. You've got the professional landscaping market, which grew during the pandemic when everyone was stuck at home, but now it's facing headwinds. Luna: Because the cost of labor and materials has gone up, and homeowners are more price-sensitive. I've seen estimates that the average cost for a weekly mowing service is up about 15 percent from two years ago. Lucas: That tracks. And it's not just mowing — fertilizer prices spiked after the war in Ukraine, and that's still feeding through. The big turf grass companies, like Scotts Miracle-Gro, have been raising prices, but they're also seeing volume decline as people look for cheaper alternatives. Luna: So what are people doing instead? Are they just letting the weeds take over? Lucas: Some are, but a more durable trend is the shift to native-plant landscaping. It's partly aesthetic, but it's also economic. Native plants require less water, less fertilizer, and less maintenance. The upfront cost can be higher, but the long-term savings are significant, especially in a high-inflation environment. Luna: And there's a cultural push behind it, too. More homeowners are thinking about water conservation and biodiversity. But for the average family, it's really about the math. Lucas: Right. And that math is also driving interest in DIY lawn care. Sales of battery-powered mowers and trimmers have been strong. Companies like Toro and Husqvarna are pushing robotic mowers, which are expensive upfront but save on labor costs over time. Luna: So the industry is splitting into two tiers: high-end automation and low-cost DIY, with the middle — the traditional landscaping service — getting squeezed. Lucas: That's exactly it. And it's causing some interesting business dynamics. The big lawn care franchises, like Lawn Doctor or TruGreen, are seeing customer retention fall. They're trying to lock people into annual contracts, but more customers are balking. Luna: I read that TruGreen lost about 5 percent of its customer base last year, and their churn rate is still climbing. Lucas: And then on the startup side, you've got companies trying to disrupt with subscription-based models or on-demand mowing via an app. But with labor costs rising — the minimum wage is up in many states — those models are under pressure too. The unit economics are brutal if you can't scale fast enough. Luna: So it's a tough environment for new entrants. But there are opportunities in the hardware side. I was looking at the IPO pipeline for outdoor power equipment companies, and there's a lot of interest in battery technology. Lucas: That's a good point. The shift from gas to electric is real, and it's being accelerated by both regulation and consumer preference. California's ban on new gas-powered leaf blowers and mowers is pushing the industry. But the transition costs money, and that gets passed on. Luna: Which circles back to stagflation — higher prices, but not enough income growth to absorb them. So people trade down. Lucas: And some people are trading out entirely. There's a growing movement, especially among younger homeowners, to replace lawns with clover, ground cover, or even vegetable gardens. It's partly a reaction to inflation — they want their yard to produce something useful. Luna: That's a big shift from the post-war ideal of a perfect green carpet. And it has implications for the whole ecosystem: less demand for turf grass, less need for gas-powered equipment, more demand for seeds and soil amendments. Lucas: And that's where I think there's an interesting investment angle, but also a practical one for listeners. If you're a homeowner, this is a moment to think about what you actually want from your yard. The era of cheap, water-guzzling, chemically dependent lawns is probably ending. Luna: Yeah, and if you run a landscaping business, you need to adapt. Offer native-plant installation, offer robotic mower setup, or focus on the high-end clients who still want weekly service and can pay for it. Lucas: Speaking of adapting — and this is a small thing, but it's worth saying — if walking through the economy with us has made something click for you, we'd love it if you considered supporting the show. It's what keeps us ad-free and independent. Luna: It's truly optional, but if today's episode was worth a coffee to you, the link is buy me a coffee dot com slash fexingo. No pressure. Lucas: Right. So back to the lawns — another data point I think is revealing: the wholesale price index for gasoline dropped in June, but that hasn't translated to lower costs for lawn care companies because labor is the bigger input. And with the job market still tight — JOLTS openings actually ticked up to 7.6 million — it's hard to find workers at a price that makes sense. Luna: So the labor shortage isn't going away, and that's structural. Which means the industry has to get more efficient, or it shrinks. Lucas: Exactly. And I think we'll see more consolidation. The big players will buy up smaller operators to gain scale, and the small operators who survive will be the ones who specialize — maybe organic lawn care, or hardscaping, or something that isn't just mowing and blowing. Luna: There's a company called Sunday that's been doing interesting things with subscription lawn care products — they mail you custom fertilizer and weed control based on your soil. That model plays well in a stagflation environment because it's cheaper than a service but still gives you guidance. Lucas: And it's data-driven, which appeals to a certain demographic. But the mass market is still price-sensitive. If the economy weakens further — and real GDP growth is only at 2.1 percent annualized — we could see an acceleration of the trend toward low-maintenance yards. Luna: Which is probably good for the environment, but painful for an industry built on the idea that a perfect lawn is a status symbol. Lucas: Status symbols are expensive in a stagflation. And when real wages aren't keeping up, people rethink what they're willing to pay for. Luna: So the takeaway for listeners might be: if you're in the lawn care business, pivot now. If you're a homeowner, consider a yard that works for you, not the other way around. Lucas: And if you're an investor, watch the companies that enable that shift — electric equipment, native seed suppliers, drought-tolerant landscaping. The old guard is going to have a tough few years. Luna: Alright, that's a wrap for this one. Next episode, we're looking at how stagflation is reshaping the paint industry — from raw material costs to the shift in DIY vs. professional painting. Lucas: Should be colorful. Thanks for listening, everyone.