TerraCycle Forced to Settle With Scotts

Champion of Worm-Poop Fertilizer Was Accused of Infringement, False Advertising

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BATAVIA, Ohio (AdAge.com) -- The cost of free publicity has been catching up fast with TerraCycle, the ultra-green marketer of organic worm-poop fertilizer in recycled soda bottles. So it's looking to cut its losses both on the legal and recycling fronts.
Terracycle's lawsuits against the $2.7 billion giant Scotts Co. took its toll, despite the free publicity.
Terracycle's lawsuits against the $2.7 billion giant Scotts Co. took its toll, despite the free publicity.

TerraCycle has settled a lawsuit brought by Scotts Co., which accused the organic brand of trade-dress infringement and false advertising. TerraCycle, which has built a $6 million business largely on free publicity about its green marketing program and unlikely startup by Princeton University dropout Tom Szaky, used the lawsuit to help build publicity, too. It launched a website, SuedByScotts.com, lampooning the lawsuit and Scotts.

But at this point, the costs of the lawsuit, and even of free publicity, are starting to outweigh the benefits for TerraCycle, which also finds itself buried in more recycled pop bottles than it can handle affordably.

Halt on comparative claims
As part of the settlement, TerraCycle will take down the website within three months, alter its packaging and stop using comparative claims to Scotts' Miracle-Gro products.

The new packaging was already in the works, noted Albert Zakes, whose title with TerraCycle is Eco-Revolutionary and who also serves as spokesman. New TerraCycle labels replace yellow (found on Miracle-Gro) with orange in what Mr. Zakes called a "younger, cooler, tie-dye-like pattern."

While the settlement bars comparative claims based on prior research, it doesn't bar future claims based on new research, Mr. Zakes said, noting that several universities have indicated interest in doing independent testing of TerraCycle vs. other nonorganic fertilizers.

Scotts said in a statement that it "believes that the settlement serves the public's interest in ensuring the accuracy of advertising claims, as well as protection of the valuable Miracle-Gro brand."

Too many bottles
Scotts has sales of $2.7 billion annually, but legal costs were starting to weigh on much-smaller TerraCycle, which is also struggling with the costs of a school-based recycling and marketing program that's grown beyond the company's ability to pay for it.

TerraCycle's program of having schools collect old plastic bottles has soared from 1,000 to 4,000 sites this year -- thanks in large part to a write-up in the religious publication Guideposts -- giving the company more bottles than it can afford to fill with worm poop and eating up much of its profit.

Paying to ship all those bottles back, cutting checks to the schools for as much as $200 a year (at 5 cents per bottle) and having three employees handle and administer it all is costing TerraCycle $20,000 to $25,000 a month as it brings in 7,000 to 10,000 bottles a day, Mr. Zakes said. "It's been an amazing marketing tool for us -- in fact, our most effective by far," he said. "But for a small startup company, the costs are just starting to bury us."

It costs TerraCycle as much as 25 cents a bottle to collect them through its school-recycling program, vs. a few pennies getting them from local recycling centers. Mr. Zakes said TerraCycle has been looking for a deeper-pocketed marketer to underwrite and co-brand the soda-bottle recycling project, so far to no avail.

TerraCycle has, however, recently launched a co-branded school recycling program with beverage marketer Honest Tea to collect cheaper-to-ship juice pouches from schools, and another to collect yogurt containers in conjunction with Stonyfield Farms.
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