Chad Eckerlin

The Scotts Miracle-Gro 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

Divided into 3 SegmentsGlobal Consumer “Do it yourself”

Lawn CareGardening and LandscapeHome ProtectionOutdoor Living

Global Professional Commercial NurseriesGreenhousesSpecialty crop growers

Scotts LawnService “Do it for me”Residential/Commercial lawn care in United States2ND largest U.S. lawn care service business

Snapshot of Company Continued

84%

9%

7%

Net Sales $3.14 Billion

Global Consumer

Global Pro-fessional

Scotts LawnService

Pest Analysis(Political)Government

manipulation of currency and other international regulationsExchange RatesHigher Rates of inflation

than in the U.S. Difficulty obtaining

distribution and supportLess protection of

intellectual property under foreign laws

Compliance with environmental and other public health regulationsFIFRAU.S. EPAFood Quality

Protection Act Regulations in the

EURegulations 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

Declining Consumer Confidence

Consumers wanting to meet neighbors expectations of lawn

Brand Loyalty

Potential New Customers

PEST Analysis(Social)

PEST Analysis(Technological) Research and

DevelopmentWeb 2.0

BloggingReviews

E-CommerceThe ability to shop onlinePerceived value of

Convenience Social Networking

FacebookTwitterLinkedIn

Factor Trend Evaluation Impact (1 = low; 5 = High)

Rank in terms of Importance

Political •Government manipulations of currency•Environmental regulations•International regulations•Regulations in EU•Regulations in Canada

• Opportunity•Threat•Threat•Threat•Threat

•5•5•5•5•5

2

Economic •Fluctuating Raw Material Prices•Adverse Weather Conditions•Reduced Discretionary Spending•High Unemployment •Drought• Decline in construction of new houses• Decline in size average of yard • Urbanization and shift to apartment living

•Opportunity/Threat•Opportunity•Threat•Threat•Opportunity• Threat• Threat •Threat

•5•4•5•4•5•5•4•5

1

Social •Declining Consumer Confidence•Consumers wanting to meet neighbors expectations

•Threat•Opportunity

•3•4

3

Technological •Web 2.0•E-Commerce•Social Networks

•Opportunity•Opportunity•Opportunity

•2•2•2

4

PEST Analysis(Conclusion)

Threat of New EntrantsHigh competitive

market InternationallyRegionallyLocally

Low start-up costs Lawn Care Service

IndustryDistribution

ChannelsNeed of suppliers

Compliance with health regulations FIFRAU.S. EPAFood Quality Protection

Act Regulations in the EURegulations in Canada

Already Established Brand Loyalty/AwarenessTrusted Brand Name

Research and DevelopmentFinancials

Market Share Leaders

Nature of Barrier Extent of Barrier

Supply-side of economies of scale High

Demand-side benefits of scale High

Capital Requirements Low

Incumbency advantages independent of size High

Customer-switching costs LowUnequal access to distribution channels HighRestrictive Health Regulation Policy Very High

Threat of New Entrants

Rely on numerous vendors in United States and EuropeNegotiation of contracts with favorable terms

directly with vendorsEntered into arrangements to partially mitigate the

effect of fluctuating direct and indirect fuel costs420,000 gallons of fuel62,000 tons of urea

Rely heavily on third-party manufacturesDecreased control over production process and

quality controlSubstitute manufactures may not be available

The Power of Suppliers

The Power of BuyersSignificant

CustomersThe loss of any of

these customers could have

a material averse effect

on their financial

condition

47%

28%

25%

Global Consumer SegmentHome Depot Lowe's

The Power of BuyersBuying Power is STRONGNo Contract IndustryPrice 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 destockinglimitations on access to shelf spaceprice demands

The threat of substitutes is HIGH...Budgeting and fixed income customers may

rather spend money on other expendituresPut it towards monthly billsActivities on weekends Social Events Savings Entertainment

The Threat of Substitutes

Intensity of Rivalry Compete against

private-label as well as branded products

InternationallyBayer AGCompo GmbHWestland

Horticulture Variety of local

companies

Primary CompetitorsSpectrumBrands Bayer AGCentral Garden &

Pet CompanyEnforcer ProductsGreen Light

Company Lebanon Seaboard

Corporation

Rival’s Means of CompetingPrice DiscountsFinancial Resources and Research DepartmentsAdvertising Product Innovation Product Quality Brand Strength (Trademarks, Patents and

Licenses)Service Improvements Supply Chain Competency Relationship with Major Retailers Field Sales Support

Factor Evaluation

Intensity of Rivalry Strong Force(High demand in service, seasonal, small start-up costs)

Buyer Power Strong Force (Users choose price over quality. Retailers: inventory destocking, limitations on access to shelf space, price demands)

Supplier Power Strong Force(Having to negotiate contracts with major vendors)

Threat of Substitute Products Strong Force ( Due to consumers willing to spend luxury expense on other expenditures)

Threat of New Entrants Strong Force(unlimited amount of small local services)

Industry Analysis

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

Conclusion

Key Competitors Spectrum Brands

Bayer AG Central Garden & Pet Company

The Scotts Miracle-Gro Company

Product Line Sales $ 341 (million) $6.8 (€ million) $683.1 (million) 3.14 (billion)

Sales Growth 19% 4.9 % • - 5.6% 5%

Segment Net Income (million)

$ 40 $1.4 (€ million) $53 212.4

Generic Strategy •Reaching a broad array of household insecticides:• Spiders• Roaches• Ant Killers• Etc.

•Improving quality of fruit and vegetables •Improving plant traits •Safeguarding Harvests•Global Support for Farmers

•Offering both premium and value-oriented branded products •Producing Wal-Mart Private Label Brands

•Helping consumers obtain the lawn they want•Improving consumers gardens•Helping protect homes from insects •Enjoying outdoor living experience

Spectrum Brands

Bayer AG Central Garden & Pet Company

The Scotts Miracle-Gro Company

Key Products/Services

•Rodenticides•Herbicides•Plant foods

•Herbicides•Fungicides•Insecticides •Seed Treatments

•Grass seed•Wild Bird Feed•Insect control •Lawn and Garden Care Products •Decorative Outdoor Patio

•Lawn Care•Gardening and Landscape•Home Protection•Outdoor Living•Horticulture•Lawn Service

Key Brands •Cutter•Repel•Hot Shot•Spectracide

•Prosaro•Stratego•Aviator •Xpro•Luna

•AMDRO •Ironite•Wal-Mart Private Label Brands•Sevin•Smart Seed

•Scotts•Turf Builder•Miracle-Gro•Ortho•Roundup

Key Customers •Wal-Mart•Home Improvement Centers•Mass Merchandisers• Hardware Stores• Grocery Stores• Drug Chains

•Farmers•Breeders•Growers•Food Trade

• Wal-Mart• Home Depot• Lowe’s •Price Sensitive Customers

•Global Consumer•Global Professional•“Do it for me” Consumers• Home Depot•Lowe’s•Wal-Mart

Key Competitors

Marketing Focus Sales Distribution

Observation

Spectrum Brands

•Perceive value of alternative for consumers who want products that are comparable to but sold at lower prices than premium-priced insecticide brands. Focused on a broad range of insecticides.

• United States •Spectrum Brands based marketing efforts towards a specific problem “Insecticide” by offering various insecticide products• Global Consumer

Bayer AG

•Development, production and marketing of a wide range of products for the green industry, garden care, non-agricultural pest and weed control, as well as seeds and traits for food trade and farmers.

•Global • Bayer AG is a very diverse company that offers products based on technology, health care, and crop science• Global Professional • Global Consumer

Central Garden & Pet Company

•Premium products are focused on meeting consumer needs through product performance, innovation, quality, upscalepackaging and retail shelf placement. Value products are focused on promotion of the quality and efficacy of value brands at a lower cost.

•United States • Central Garden & Pet Company offers premium products and value products• Global Consumer • Differentiates with outdoor decorations and Pet Supplies

The Scotts Miracle-Gro Company

• Leading manufacturer and marketer of branded consumer lawn and garden products, with products forprofessional horticulture as well. Focusing more attention towards global consumer segment.

• Global • The Scotts Miracle-Gro Company reaches each segment in the lawn care industry:• Global Consumer• Global Professional• Lawn Service

Strategic Groups

Competitive Advantage

Spectrum Brands • Discounted Price• Product Packaging and Design Innovation • Perceived Product Quality • Insecticides • Diverse Business Portfolio

Bayer AG • Intensive Research and Development • Farmers Globally • Food Trade• Diverse Business Portfolio• Product Development • Innovation •Strong Financial Backing

Central Garden & Pet Company • Premium and Value Brands • Wal-Mart Product • Quick Response to Preferences • Product Placement • Private Label Products

The Scotts Miracle-Gro Company • Brand Name Recognition • Creative Marketing, Promotion and Distribution • Intensive Research and Development • Global• Brand Loyalty•Brand Awareness • Product Features and Enhancements •Strong Financial Backing

How Competitors Compete

Spectrum Brands Bayer AG Central Garden & Pet Company

The Scotts Miracle-Gro Company

Product Scope •Broad range of insecticides •High Quality•Relative Low Cost •Exterminate Insects•Environmentally Safe

•Herbicides•Fungicides •Insecticides •Seed Treatment•Non-agriculture pest and weed control• Safety• Quality Control

•Broad Range of Products with price variances of quality•Home Protection•Outdoor Living

•Lawn Care•Gardening and Landscape•Home Protection•Outdoor Living•Horticulture•Lawn Service •High Quality

Geographic Scope •North America •Europe•North America•Asia/Pacific•Latin America/Africa/Middle East

•North America •North America•Canada•EU•Asia/Pacific

Core Competence •Household Insect Control•Well known products throughout other market segments

•Health Care•Crop Science •High Tech•Research and Development

•Premium and Value Brand Products •Outdoor Decorative •Pet Food Industry •Retailer Relationship

•Manufacturing •Marketing•Retailer Relationships•Research and Development•Brand Awareness

How Competitors Compete

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

Spectrum Brands Bayer AG Central Garden and Pet Company

The Scotts Miracle-Gro Company

Characteristics of People/Organizations

•Family •Gardener •Lawn Cultivator

•Farmers •Gardeners•Professional Harvesters

•Adults over 55 years old•Empty Nesters•Baby Boomers

•Hispanics•“Snow Birds” Retirees •Family•Professional •Land Cultivator

Purchase/Use Situation

•Prevent Insecticides •Cheap Purchase •Quick decision

•Brand loyalty •Similar to an Insurance Expense •Safety •Harvest Control •Long Purchasing behavior

•Price Negotiation •Quick Decision •Cheap/Premium Purchase

•Luxury Expense•Brand Loyalty •Fertilize and Weed Control Lawn•Purchasing behavior involves research, time

Users’ Needs and Preferences for Product Characteristics

•Price > Quality •Brand Awareness •Product Similarity

•Product Similarity •Quality •Research and Development •Seed Control

•Product Similarity •Price=Quality •Brand Awareness

•Product Similarity •Quality > Price •Brand Awareness

Target Market: Consumer Market

Spectrum Brands Bayer AG Central Garden and Pet Company

The Scotts Miracle-Gro Company

Characteristics of people/Organizations

•United States •Wal-Mart •Drug Stores •Retail Stores

•Farmers •Scientists •Food Trade •Food Quality Control •Global

•Home Centers•Mass merchants •Independent nurseries •Hardware Stores •Wal-Mart•Home Depot•Lowe’s

•Lowe’s•Home Depot•Wal-Mart •Regionally Disbursed •High Profits •Global

Purchase/Use Situation

•Stock shelves •Brand Awareness •Lower Cost Option •Insecticides •Low Volume

•High Volume •Brand Awareness •Research and Development •Underdeveloped Countries

•Stocked Shelves•High Volume •Quick change of preference •High and Low Cost Option

•High Volume •Stocked shelves •Brand awareness •Seasonal •Lawn and Garden Retailers

Users’ needs and preferences for product characteristics

•Price•Broad features of insecticides

•Safe Harvesting •Quality

•Price =Quality •Differentiation •Outdoor Decorative•Outdoor living specialization

•Quality •Desired Features •Service Requirements

Target Market: Industrial/Organizational Markets

Relative Market Share

SMG

Bayer AG

Central Garden and Pet Company

Spectrum Brands

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 BlogsTwitter Feed

Importance of Social Media

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 FundingSupplier 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!

Conclusion

Retail Centric Philosophy (Past)

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 StatesFloridaTexasCalifornia IllinoisNew York

Business Model Regional Model (Present)

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20102009200820072006

Segment Results (Millions)

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

71%

15%

8%6%

North AmericaInternationalScotts LawnServiceCorporate & Other

Gro, Excel, Win (2006)

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

76%

10%

8%6%

Global ConsumerGlobal ProfessionalScotts LawnServiceCorporate & Other

It’s Gro Time (2007)

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

75%

12%

8%5%

Global ConsumerGlobal ProfessionalScotts LawnServiceCorporate & Other

Cultivating a Strong Future (2008)

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

78%

9%

7%5% Global

ConsumerGlobal Profes-sionalScotts LawnServiceCorporate & Other

Growth…It’s What Were All About(2009)

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

84%

8%

7%

Global ConsumerGlobal Profes-sionalScotts LawnService

This is Our Consumer (2010)

Position of Segments in the U.S.

Global Consumer

Global Professional

Scotts LawnService

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

Generic Strategy

Principle Markets and Methods of Distribution Home CentersMass Merchandisers Warehouse ClubsHardware Chains

2,500 full-time and seasonal in-store associates

Nurseries Garden CentersFood and Drug

Stores

Distributors and Common CarriersNorth America

Strategically PlacedEurope

UK, Canada, France, Germany

Regional Supply ChainManufacturing 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 networkInvest in regional fertilizer and liquids production

capacity

Changes in Distribution

Ortho 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 launchExtended ControlPoison Ivy Tough

BrushEurope

Change in Products

Roundup

Product DevelopmentRegional Relevant

New ProductsImproved ProductsInnovation Research and

Development Find niche in each

region Product Label Change

Ansoff’s Matrix

Resource Description Benefits

Product • With such a wide variety of solutions to all problems relating with the lawn, they are able to establish a broad variety of consumers to help with their lawn needs.

• Touching every aspect of the lawn and garden market• Trusted brand• Brand Loyalty • Perceived value of quality

Retail Partners • Home Depot• Lowe’s• Wal-Mart

• Bringing over 80% of the Global Consumer segment with just these three retail partners.

Partnerships • Cincinnati Reds• Chivas’• Martha Stewart

• National TV recognition with professional organizations such as Cincinnati Reds, and Chivas’. Martha Stewart is a great partner with educating consumers about their lawn. • Branching out to other consumers nationally

Resources

Value Chain Analysis Inbound logistics • Urea

• Resins• Fuel • Sphagnum Peat• Grass Seed• Wild Bird Food Components

Production • All products containing pesticides must comply with FIFRA and be registered with the U.S. EPA and similar state agencies before they can be sold or distributed.• Product Quality• Order Fulfillment • Quality Expectation

Outbound logistics •Ordering • Order Fulfillment • Emergency Load•Inventory Management • Transaction Management • On Time Delivery

Marketing & Sales • Account Management • Pricing• Invoicing • Understanding the value of the product• Understanding what customer needs

Strength (Internal)

• Brand Name • Track Record of Innovation• Field Sales Force• Supply Chain • Management Team • Research and Development• Advertising

Weakness (Internal)

• High Overhead Costs• Product Recall • Discontinued Operations • Environmental Costs • Pending Legal Proceedings

Opportunity (External)

• Government manipulations of currency• Fluctuating Raw Material Prices• Adverse Weather Conditions• Drought• Consumers wanting to meet neighbors expectations • Web 2.0• E-Commerce• Social Networks

Threat (External) • Environmental regulations•International regulations•Regulations in EU•Regulations in Canada• Reduced Discretionary Spending•High Unemployment • Decline in construction of new houses• Decline in size average of yard • Urbanization and shift to apartment living • Declining Consumer Confidence

SWOT

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.

Conclusion