Scotts Hopes Reduced Health Costs Will Help Boost Marketing Budget

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CINCINNATI (AdAge.com) -- Scotts Miracle-Gro Co. plans to cut its health-care costs by forcing its employees to quit smoking -- and intends to use the savings from this and other cost-cutting programs to boost its advertising spending.
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Overall, Scotts will boost advertising spending from 5.6% of sales in the fiscal year that ended Sept. 30, or $143 million, to around 7% of sales this fiscal year behind its Smith & Hawken garden supply line and a series of new Scotts and Miracle Gro lawn and plant-care products, executives said in a presentation to analysts Dec. 14.

'Project Excellence'
Bob Bernstock, president-chief operating officer of the company, said funding for the increased spending is coming largely from Project Excellence, a wide-ranging efficiency and cost-cutting program that includes more focused product rollouts, headcount reductions and an effort to control health-care costs by eliminating smokers from the company’s employment rolls.

Marysville, Ohio-based Scotts is instituting the anti-smoking policy over the course of the next year, meaning existing employees will have to quit smoking or lose their jobs. The company is offering smoking cessation programs to the roughly one-third of Scotts employees who now smoke, Chairman-CEO Jim Hagedorn said.

Scotts is equally exacting in its advertising, aiming for its TV ads to test in the top 5% in persuasion in copy testing. Hitting those targets has resulted in a series of successes in the past year, including 9% sales growth for the 50-year-old Scotts Turfbuilder fertilizer brand.

'Southern Strategy'
Expanded media advertising in 2006 will include broader use of radio for some brands, a 33% increase in TV support for Turfbuilder and more new products and spot TV support behind the company’s “Southern Strategy,” aiming at a fast-growing Southeastern U.S. market that Mr. Bernstock said is currently underserved by lawn and garden marketers.

With a 54% share of its core retail lawn and garden business, Scotts already handily outspends its nearest competitors, including Spectrum Brands. “Advertising is a key competitive advantage of Scotts, whose competitors cannot match [its spending] levels,” said Bank of America Securities analyst Joseph Norton in a research note.

Target stores
Part of its push will be against a rollout in Target stores of the Smith & Hawken line. The rollout, which will reach all 1,400 stores, includes a 24-foot section in most stores and an additional “store within a store” in the 250 Target outlets with outdoor garden centers, mainly in California and the Southwest. The line will include Smith & Hawken-branded garden tools, pottery, trellises, benches and dining and lounging sets, said Barry Sanders, senior VP-general manager of Smith & Hawken.

Independent ML Rogers, New York, handles creative, and WPP Group’s Mediaedge:cia, New York, handles media planning and buying.

Mr. Bernstock said he originally planned to boost ad spending to the 7% level within 10 years of when he joined the company in 2003. But he said strong top-line growth and efficiency measures are allowing Scotts to hit the target earlier.

“We want to be the Procter & Gamble of lawn and garden,” Mr. Hagedorn told analysts.

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