Gardening Biz Blooming After Year in the Ground

Scotts, Others Looking to Recession-Fueled DIY Trend to Keep Sales Up

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BATAVIA, Ohio (AdAge.com) -- Jim Hagedorn, chairman-CEO of leading lawn- and garden-products marketer Scotts, declared at the kickoff of his Feb. 3 annual analyst conference: "2008 had to be one of the shittiest years of my life."

Leading U.S. seed marketer Burpee has been selling $10 'Money Garden' packages that will grow $650 worth of vegetables, but it's hoping that consumers who take to vegetable gardening because of the recession will stick with it.
Leading U.S. seed marketer Burpee has been selling $10 'Money Garden' packages that will grow $650 worth of vegetables, but it's hoping that consumers who take to vegetable gardening because of the recession will stick with it.
He wasn't talking organic fertilizer. He was talking about a year when a cold, wet spring combined with spiking commodity costs and 30% price hikes led to a drop in lawn-product purchases. Scotts' high-end Smith & Hawken cut staff pay at headquarters 25% after sales fell 23% in the quarter ended Dec. 31.

Now, green shoots are showing for an industry coming off one of its worst years. Sales in Scotts' U.S. consumer-lawn business rose 10% last quarter, with retail sales up an even more robust 18%, though unit volume was roughly flat.

Not everything is rosy. Sales to professional growers fell 25% last quarter, leading Scotts to miss analyst earnings expectations and sending the stock down 9% April 28, though it's still more than double its July low.

Scotts and other marketers are counting on a recession-fueled interest in gardening to boost sales well into the summer. Even before Michelle Obama took a shovel to the White House lawn, Google showed searches on vegetable gardening soared more than 50% in 2008, and have since accelerated further.

Perennial gardeners
Burpee, the leading U.S. seed marketer, has been selling $10 "Money Garden" packages that will grow $650 worth of vegetables, but it's hoping that consumers who take to vegetable gardening because of recession will stick with it. "We feel this is much more than a short-lived trend," a spokeswoman said.

Though commodity costs are down, Scotts isn't cutting prices, looking to regain margins lost in years past. It even plans another price hike this year. Retailers, facing a downturn in big-ticket hardware items, are focusing more on lawn and garden.

The recent bankruptcy of Spectrum Brands, the No. 2 player in the business, created new opportunities for Scotts, including $100 million in private-label goods that Spectrum stopped supplying to Walmart and Home Depot.

Scotts plans to hike marketing spending 12% this year, including $7 million to $8 million in the U.S., after a 6% cut in global ad spending last year to $142.4 million. It's also launching some of its biggest new-product initiatives in years, including grass seed and fertilizer that promise to reduce the need for watering.

Though it's spending more overall, Scotts is cutting national TV, sacrificing some cost efficiency for effectiveness given the varying timing of regional markets. Scotts is hiking regional spending 160%, including more Hispanic and targeted "weather-triggered" radio, where it can decide on Tuesday whether to start ads for the weekend.

Pruning expenses
More people staying home has increased the amount of eyeballs watching Scotts' smaller network TV buy, helping boost cost-efficiency of Scotts' advertising spending 8% this year, Mr. Hagedorn said on an April 28 conference call.

It's making adjustments in other ways, too. Rising cancellations of lawn-service agreements has led Scotts to put prices in mailers rather than automatically sending sales reps to give quotes.

Scotts is picking its spots, as Mr. Hagedorn indicated in this analogy to the Victory Garden metaphor: "Carpet bombing is not the future for us in terms of marketing," he told analysts. "We're going to have to be much more like a bomb [targeted to] the window of 455 E. 51st St."

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