Paying Closer Attention to the Consumer

Sept. 8, 2011
Scotts Miracle-Gro is hoping for a bountiful return on its new business model.

It is not your grandfather's lawn spreader. In fact, it resembles a sleek lightweight vacuum more than the familiar green hopper on wheels sitting in your garage. Scotts Miracle-Gro calls it the Snap, and it will launch nationally next year. The Snap is not just a new product, but a prime example of the company's new approach to business.

The new approach started with a corporate retreat in Florida. For three days, executives wrestled with a vision and mission statement for the company, which has annual revenues of $3 billion, 8,000 associates and more than 48 facilities.

Going forward, they decided, Scotts would see itself not as a specialty-chemical manufacturer but as a branded consumer-goods company. "We completely blew up our business model," says Jim King, senior vice president for investor relations and corporate affairs.

Though the company did not relocate from its attractive headquarters in Marysville, Ohio, about 30 miles west of Columbus, it certainly shifted its priorities. Scotts had benefited hugely from the rise of mass retailers such as Home Depot, Lowe's and Walmart, but it now decided it had to focus less on retailers and more on its end users. It also moved away from an Ohio-centric approach to the market. As King notes, "Our business comes to life at different times of the year with different products." So Scotts began pursuing a regionalized approach to marketing its products.

One example: While poison ivy is the scourge of the Midwest, it is not a problem in the Pacific Northwest. There, wild blackberry is a widespread nuisance. Yet Scotts did not say on the label of its Roundup weed killer that it killed wild blackberry. When Scotts changed the label in that region, its market share shot up 20%.

Another change came in how Scotts advertised its products. In the past, it spent 95% of its advertising dollars on national media, with a major ramp-up in time for spring gardening in the Northeast. That strategy fit poorly with a market such as California, where the growing season starts earlier and lasts longer. Scotts changed its marketing mix, shifting 65% of its $160 million ad budget to local and regional outreach.

Scotts also is streamlining its supply chain. For years, the company essentially operated two supply chains. For its growing media (dirt and mulch), it set up 29 facilities where it did composting, packaging and distribution. The objective was to have facilities across the country, because shipping the product more than about 200 miles ate into profits.

For its fertilizer and liquid products, Scotts had 10 different distribution centers. There, the company put an order together and shipped it to retail stores. Trucks were often not completely full, making it very inefficient. Scotts decided to start shipping the fertilizer to the 29 growing-media distribution centers. From there, it was easy to add a pallet of those products to the frequent dirt and mulch truckloads headed to stores. King said the company was now shipping the fertilizer to stores "essentially for free." This allowed Scotts to consolidate its fertilizer distribution centers from 10 to five. King said these moves freed up $100 million in working capital.

Scotts is focusing much of its innovation on packaging, making packages smaller and easier to handle so women will be more likely to purchase them. For example, it is testing a product called Expand n Gro, a potting mix that includes coconut husk and holds 50% more water than basic potting soil. Scotts is betting that while a woman will not pick up a 40-pound bag of dirt with the flowers she wants to plant, she will pick up the 8-pound Expand n Gro bag.

Scotts also is applying the quick and easy formula to its Snap spreader. Fertilizer for the spreader will come in 13-pound, reusable bags that literally snap into place. Nothing to cut open and pour; no spreader settings to dial in; and a bag that self-seals when it is removed for storage.

Poor weather hurt Scotts' results this year. Company officials believe a continued focus on customer needs, innovation and efficient operations may not promise miracles but will certainly lead to future growth.

Steve Minter

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