Longer-term, the biggest player in the $3.5 billion U.S. lawn-care products category is looking to expand its national lawn-services business nearly fivefold by 2007 through a combination of organic growth and about $150 million in rollup acquisitions of local operators, a spokesman said. While that won't likely mean more media, he does foresee an increase in direct-mail support, adding that "business certainly benefits from our spending on consumer products." Scotts also aims to build its $1.8 billion in sales with an expanded presence in adjacent categories, such as plants, pottery and tools, the spokesman said.
Scotts didn't disclose its media budget, but Taylor Nelson Sofres' CMR reported spending of $67.1 million during the company's fiscal 2002, ended Oct. 1, behind brands that include Scotts and Miracle Gro fertilizers and Round Up herbicides, the latter marketed under an agreement with Monsanto Corp. Wolf Group, New York, handles the brands. Ad campaigns begin next month in Southern states.
Scotts reported ad spending, including production costs and agency fees, fell 9% to $82.3 million for the fiscal year ended Oct. 1. The spokesman said the drop stemmed from yanking TV support for Ortho because of dissatisfaction with creative. But he said the Marysville, Ohio-based company is looking to support new Ortho TV ads from Wolf in 2003.
While drought affected much of the country in 2002, he said that didn't hurt Scott sales, which are concentrated in spring months where the weather was more favorable.
response to rival
Scotts' more aggressive posture comes on the heels of a merger-and-acquisition binge by its distant rival in U.S. lawn care, St. Louis-based Spectrum Group. Through a series of deals in the past year, Spectrum, a closely held company owned primarily by the investment firm Thomas H. Lee Co., acquired or merged with the makers of Sta-Green, Vigoro and Schultz and reached a technology and merchandising alliance with Bayer's U.S. pest-control business, including Bayer Advanced.
After spending much of 2002 consolidating consumer lawn-care brands, Spectrum looks to increase its own minimal media spending in 2003, according to Bob Rubin, VP-strategic accounts and corporate development.
more pull programs
Spectrum has marketed in recent years primarily through trade promotion with the retail giants that control most lawn-care product sales, including Wal-Mart Stores, Home Depot and Lowes. But Mr. Rubin said "we're going to be increasing our pull programs in 2003," including consumer advertising via Rodgers Townsend, St. Louis. He expects more support in particular for Spectracide, Cutter and Garden Safe, an organic-positioned line.
Banc of America Securities analyst Bill Steele said in a report that the company is poised to grow aggressively in coming years. "Scotts' categories have proven very responsive to advertising, and the large spending increase could lead to upside surprises," he wrote.
Mr. Steele projects Scotts sales will rise 7% to $1.9 billion in 2003. Overall, he estimates the U.S. lawn and plant care market at $3.5 billion of the $6 billion global total, and said global lawn services, where Scotts is now only a minor player, is another $4 billion. He estimates Scotts has a commanding 57% market share in its core U.S. lawn care products categories.
A variety of factors, including rising home ownership spurred by low mortgage rates and an aging population, favor rapid growth for the entire category, Mr. Steele said.