The Scotts Miracle-Gro Company Chad Eckerlin
Snapshot of Company • The world’s largest maker and marketer of branded consumer lawn and garden products • Reported $3.14 billion in net sales • Operates primarily in North America, • along with businesses in Europe and Asia Pacific • An Ohio Corporation • Resulted in the 1995 merger of The Scotts Company and Stern’s Miracle-Gro Products, Inc.
Snapshot of Company Continued • Divided into 3 Segments • Global Consumer “Do it yourself” • Lawn Care • Gardening and Landscape • Home Protection • Outdoor Living • Global Professional • Commercial Nurseries • Greenhouses • Specialty crop growers • Scotts LawnService “Do it for me” • Residential/Commercial lawn care in United States • 2ND largest U.S. lawn care service business
Pest Analysis(Political) • Government manipulation of currency and other international regulations • Exchange Rates • Higher Rates of inflation than in the U.S. • Difficulty obtaining distribution and support • Less protection of intellectual property under foreign laws • Compliance with environmental and other public health regulations • FIFRA • U.S. EPA • Food Quality Protection Act • Regulations in the EU • Regulations in Canada
PEST Analysis(Economic) • Fluctuating Prices of Certain Raw Materials • Urea • Resins • Fuel • Sphagnum peat • Grass seed • Wild Bird Food Components • Adverse Weather Conditions • Soil Conditions • Reduced Discretionary Spending • High Unemployment • Urbanization • Shift to apartment living • Decline in construction of new houses • Decline in size average of yard
PEST Analysis(Social) • Declining Consumer Confidence • Consumers wanting to meet neighbors expectations of lawn • Brand Loyalty • Potential New Customers
PEST Analysis(Technological) • Research and Development • Web 2.0 • Blogging • Reviews • E-Commerce • The ability to shop online • Perceived value of Convenience • Social Networking • Facebook • Twitter • LinkedIn
Threat of New Entrants • High competitive market • Internationally • Regionally • Locally • Low start-up costs • Lawn Care Service Industry • Distribution Channels • Need of suppliers • Compliance with health regulations • FIFRA • U.S. EPA • Food Quality Protection Act • Regulations in the EU • Regulations in Canada • Already Established Brand Loyalty/Awareness • Trusted Brand Name • Research and Development • Financials • Market Share Leaders
The Power of Suppliers • Rely on numerous vendors in United States and Europe • Negotiation of contracts with favorable terms directly with vendors • Entered into arrangements to partially mitigate the effect of fluctuating direct and indirect fuel costs • 420,000 gallons of fuel • 62,000 tons of urea • Rely heavily on third-party manufactures • Decreased control over production process and quality control • Substitute manufactures may not be available
The Power of Buyers • Significant Customers • The loss of any of these customers could have a material averse effect on their financial condition
The Power of Buyers • Buying Power is STRONG • No Contract Industry • Price Negotiation • Economic downfall = Price > Quality • Significantly dependent upon key retailers • Increasingly sensitive to deterioration in the financial condition • Negatively affected by changes in the policies of their retailers, such as • inventory destocking • limitations on access to shelf space • price demands
The Threat of Substitutes • The threat of substitutes is HIGH... • Budgeting and fixed income customers may rather spend money on other expenditures • Put it towards monthly bills • Activities on weekends • Social Events • Savings • Entertainment
Intensity of Rivalry • Compete against private-label as well as branded products • Internationally • Bayer AG • Compo GmbH • Westland Horticulture • Variety of local companies • Primary Competitors • Spectrum • Brands • Bayer AG • Central Garden & Pet Company • Enforcer Products • Green Light Company • Lebanon Seaboard Corporation
Rival’s Means of Competing • Price Discounts • Financial Resources and Research Departments • Advertising • Product Innovation • Product Quality • Brand Strength (Trademarks, Patents and Licenses) • Service Improvements • Supply Chain Competency • Relationship with Major Retailers • Field Sales Support
Conclusion • Demand is driven by consumer income and commercial real estate construction. The profitability of individual companies depends on anticipating demand for various types of plants, and an efficient distribution system. Large operators have economies of scale in distribution. Small operators can compete successfully by raising specialty plants or serving a local market
Key Trends • Regional Operating Offices • Getting “Closer” to the consumer • Reaching distinct needs in various regions • Research and Development • Advancements of old products • Customer Orientation • Reaching different demographics • Hispanics • Retirees “Snow Birds” • Higher Prices of Raw Materials • Condensing the market size • Higher Barriers to get in • Demand for Underdeveloped Countries • Droughts • Adverse Weather Conditions • Demand in Seed and Crop Market • Double Digit increases in people growing vegetables by region • Decrease in retailer store expansions • Major retailers focusing on increasing same store sales • Regionally Relevant • Differentiating product labels
Relative Market Share SMG Bayer AG Central Garden and Pet Company Spectrum Brands
Importance of Social Media • Social Media doesn’t appear to be a factor within this industry when reading past annual reports. • I consider social media a huge factor within this industry due to the high power of the buyer. • Could have an adverse impact on reputation or vise versa through: • Reviews • Comments • Blogs • Twitter Feed
Conclusion • The Scotts Miracle-Gro Company faces competition from key competitors that already fill a niche with several other industries. • Segmentation is a huge factor. • Spectrum Brands: Focusing on the Insecticide aspect of the market while touching base on other industries. • Bayer AG: Playing a huge role in the trending consumer education of vegetable growing and crop science, while maintaining R&D of health care. • Central Garden and Pet Company: Focusing on the price sensitivity of consumers, offering both premium products as well as value products. In doing so, they are pertaining to their niche as well in the pet food industry.
Conclusion • The Scotts Miracle-Gro Company should not take lightly of any of these competitors. • The following are all key factors that play a huge role within this industry. • Research and Development • Funding • Supplier Relationships • If The Scotts Miracle-Gro Company does not change it’s strategy model with trends in this industry we may see a new market leader!
Business Model Retail Centric Philosophy (Past) Regional Model (Present) • Respond to the needs of retail partners • Drive growth through retail channels • Improve market share • Continue to be a best-in-class supplier • To develop plans, programs and products that are specifically focused on the distinct needs of gardeners in various regions throughout the United States • Florida • Texas • California • Illinois • New York
Gro, Excel, Win (2006) • We will Gro by… • Focusing on core business • Extending reach into new markets • Providing products for garden-inspired lifestyles • Using knowledge about consumers to better serve their needs • We will Excel by… • Developing a high-performance culture • Driving innovation in all areas • Forging stronger relationships with retail partners • Strengthening infrastructure • Demonstrating corporate responsibility • We will Win by… • Creating a dynamic, productive workplace • Increasing market share • Enhancing shareholder value • Making a positive difference in communities
It’s Gro Time (2007) • Support North American sales force • Expand relationship with the consumer • Radio and print media • Launching state-of-the-art Website • Online community for gardeners • Strengthening efforts in NASCAR • Upgrade technology platform and provide more globally uniform process • Regionalized manufacturing and distribution footprint
Cultivating a Strong Future (2008) • Driving brands with consumers • Continue to invest in further strengthening the relationship with the consumer • Building on a history of innovation • Invest in game-changing innovation • Leveraging sales force • Further assist retail partners • Driving out costs with supply chain • Transform supply chain platform in the U.S. • Driving growth platforms • Develop and leverage the proprietary technologies in Global Professional business
Growth…It’s What Were All About(2009) • Determinate Smith & Hawken • Focus on core consumer business • “Old School” Lessons • Marketing • Innovation • “Feet on the street” • Advertising Investment • Increased spending over 13% • Seasonal Sales Force • 30% more in store hours • “Local” Opportunity • Regional offices in Florida, Texas, and California
This is Our Consumer (2010) • Reaching Hispanic Consumers • West and Southwest Regions • Partnership with Los Angeles’ Chivas USA • Hispanic TV Advertising • Spanish Version Website • Essentials for “Snowbirds” • Marketing program that educates these homeowners on the core products best suited to get their lawns, homes and gardens in shape for the winter season. • Consumer Education • Partnered with Martha Stewart Living Omnimedia and The Home Depot to educate tens of millions of consumers • Regionally Relevant • Label change • Local knowledge
Position of Segments in the U.S. Global Consumer Global Professional Scotts LawnService
Generic Strategy • The Market is highly competitive and many competitors sell their products at lower prices • Higher Cost • Leading manufacturer and marketer • Most recognized brand names in the industry
Principle Markets and Methods of Distribution • Home Centers • Mass Merchandisers • Warehouse Clubs • Hardware Chains • 2,500 full-time and seasonal in-store associates • Nurseries • Garden Centers • Food and Drug Stores • Distributors and Common Carriers • North America • Strategically Placed • Europe • UK, Canada, France, Germany
Changes in Distribution • Regional Supply Chain • Manufacturing and distribution strategies • Leverage growing media’s low-cost model to store and distribute fertilizer regionally along with growing media products • Rationalize the 3rd party mixing warehouse network • Invest in regional fertilizer and liquids production capacity
Change in Products Ortho Roundup • More new product launches in 2009 than any year in Ortho’s 103 year history • Focusing on the eco-minded consumer • Strengthening core weed and insect businesses • New advertising campaign • Successful entrance into rodenticide category • $100M category • No category leader • Roundup Pump n go most successful new product launch • Extended Control • Poison Ivy Tough Brush • Europe
Ansoff’s Matrix • Product Development • Regional Relevant • New Products • Improved Products • Innovation • Research and Development • Find niche in each region • Product Label Change
Conclusion • The growth of SMG over the past decade was based on retail partners. Since about two-thirds of sales in the United States are generated by just three major retailers, success was dependent upon the ability to drive growth through their channels, improve market share, and continue to be the best-in-class supplier. • Future success can no longer be based solely on a retail-centric philosophy. Nearly all of the retail partners around the world are now focused on growing by increasing same-store sales, not by new store expansion.
Conclusion • With increased expenditures of R&D and Marketing and advertising, SMG will have the ability to become innovative to enhance product features and provide a strategy within each region, becoming more relevant to consumers.