Whitman Voices

Introduction

Where Do Christmas Trees Come From?

Where Do Christmas Trees Come From?

E-commerce giant Amazon now sells full-sized live Christmas trees online. The retailer offers a wide range of trees, from 7.5 foot Kingwood Firs for around $80 to 6.5 foot Dunhill Firs for almost $140, with Prime shipping options for consumers. The trees from Amazon are largely sourced from North Carolina and are shipped within 10 days of being cut down, which begs the question: where do Christmas trees come from? How do trees get to millions of living rooms around the world?

The National Christmas Tree Association (NCTA) reports that 25-30 million live Christmas trees are sold in the U.S each year. In 2017, live Christmas trees were purchased at an average of $75 each, while fake trees were purchased at an average price of $107. One to two percent of live Christmas tree purchases in the U.S. were made online last year. According to Patrick Penfield, assistant professor of supply chain practice at Syracuse University’s Martin J. Whitman School of Management, online shopping for live trees may increase with Amazon’s new offerings and encourages consumers in large cities to consider shopping online.

“Online shopping is a great option for consumers especially if you are living in a large city like New York,” explained Penfield. “The only issue a consumer might encounter is that all trees are different from a size and shape standpoint and it may not be the tree you envision.”

While some consumers might have an easier time shopping for trees this holiday season, supplying the yearly demand for live Christmas trees is more complicated than it appears, even for online retailers.

Many Christmas trees are grown on tree farms. According to NCTA, there are about 15,000 farms growing Christmas Trees in the U.S. with over 100, 000 employees, both part-time and full-time, in the industry. Around the world, seeds are typically planted in the spring or early fall depending on the area. In some parts of the world, for instance impoverished parts of Europe, collecting the seeds for Christmas trees can be illegal and dangerous. Each year, hundreds of people, including children, from impoverished villages in the country of Georgia, visit the mountains to collects the seeds of Nordmann firs, a beloved Christmas tree in Europe. This process can include climbing high in the trees, sometimes without proper safety equipment. In doing so, people can fall to their deaths.

Once seeds are collected, they are planted and nurtured. Christmas trees can have an average growing time of seven years, but growing time may varying depending on the type of fir seed planted and desired height of the tree. When Christmas trees are harvested is largely based on the species and climate. During the harvesting process, trees are graded, cut, hauled and bailed. Many farms in the U.S. start cutting trees in early November. Trees shipped to other countries are usually harvested first, while trees for domestic sales are harvested later. After bundling trees, trucks are loaded and sent off to retailer lots or directly to homes. Due to many factors, explained Penfield, retailers have to carefully project their needs as many factors can affect their supply chains.

Economic Impacts on Trees
According to All Things Supply Chain, some of the most sought-after real Christmas trees can take up to 10 years to grow to the height consumers are looking for.

“Due to the long production cycle of Christmas trees, the economy has a significant impact on future production and potentially drives up prices,” explained Penfield.

For example, this year marked the 10th anniversary of the 2008 Financial Crisis. A USA Today article pointed out that during the recession Christmas tree sales fell and there was less room to plant new trees 10 years ago, issues that might account for current prices. Christmas Tree prices have more than doubled between 2008 and 2016 and may rise as much as 10 percent this year. However, the strong economy now could lead to an abundance of trees 10 years from now, thanks to short supply and an uptick in sales.

“The price of Christmas trees could potentially fall as long as there are no natural disasters or growing issues (droughts, fires and insects),” stated Penfield.

More than 40 states have commercial Christmas tree producers. Vox.com reported in 2016 that Oregon, North Carolina and Michigan were the three largest providers of Christmas trees, producing a combined total of 12.4 million trees. The concentration of Christmas tree farms in these areas has led to fuel price becoming a major factor in producers’ supply chains. Farms have to transport trees in order to reach their customers, and most often the trees are being moved by commercial trucks. Diesel fuel prices are currently averaging $3.25.

Choose & Cut lots, which allow customers to pick trees right off the farm and have them cut down on the spot, sold the largest portion of trees in 2017, capturing 27 percent of the market, according to the NCTA. The next largest portion of the market belonged to chain stores like Lowes, Home Depot and Walmart, which sold 26 percent of trees in 2017.

Some Christmas tree growers have started to shift toward other crops because of the sheer amount of labor and time needed to produce trees, Bloomberg BNA reported. Instead, many former producers are choosing to grow hazelnuts, the core ingredient of the popular spread Nutella, which is in demand in China.

The NCTA told Bloomberg BNA that the shift toward Hazelnut production was not the primary driver of the supply shortage in 2017, rather the financial crisis ten years prior was a much larger factor.

International Trade Agreements Impact Supply Chain
The Trump administration’s renegotiation of the North American Free Trade Agreement could further complicate the Christmas tree supply chain. The President has repeatedly criticized the deal and earlier this year the United States-Mexico-Canada Agreement was established after a series of contentious negotiations. The New York Times (NYT) published a story in December 2017 tracking the supply chain of a Christmas tree. The story began with Wayne Silver, the owner of Silver Farms in Nova Scotia, Canada, and ended in family’s living room in Queens, New York.

According to the story, Silver was quite concerned with the NAFTA renegotiation talks. A lot of Silver Farm’s trees are shipped over the Canadian border into the United States, according to the NYT. The farm pays $3,500 to have a batch of trees shipped to New York. Silver also said the fees he paid to cross the border were around $100, but the fees could increase to between $500 to $1,000, claimed the NYT.

According to Vox.com, the National Agriculture Statistics Service is concerned Christmas tree farms could be hurt by competition from artificial trees.

The first artificial Christmas trees date back to late-1800’s when Sears, Roebuck & Company introduced two fake trees, one with 33 limbs for $.50 and a larger version with 55 limbs for $1.00.

Balsam Brands, an artificial tree provider founded by Thomas Harman, is capitalizing on the growing popularity of artificial trees. The company, featured in a Forbes article in October 2017, sells a variety of different artificial trees that resemble real tree types like a Stratford Spruce or a Berkshire Mountain Fir.

In an interview with Forbes, Harman described Amazon as a “frenemy” because the company is a sales channel for Balsam, but also a competitor. According to Harman, selling artificial trees is just as much of a seasonal business as selling real trees.

Daniel Strauss

Daniel Strauss is a junior in the Whitman School of Management majoring in finance with a minor at Newhouse. He has held several internships in strategic advisory, global supply chain, and business development. He is passionate about economics, technology and social impact. Daniel believes that an appropriate mixture of economic and regulatory policy can enable businesses to achieve economic prosperity and generate a measurable social impact.
Daniel Strauss