Arecent announcement by a major lawn and garden manufacturer has created a void in the fertilizer market and sent retailers scrambling to line up product for the spring. Spectrum Brands, the industry’s No. 2 player, has decided to shut down its “growing products” business, saying it can no longer make money on fertilizers, potting soils and grass seed. As a result, gardeners will have a hard time finding a bag of Schultz cactus potting mix or a box of Garden Safe all-purpose organic fertilizer in their local nursery next year.
But few consumers, purchasing their favorite house brands at the nearest big box, will realize what went on behind the scenes at Home Depot, Lowe’s and Wal-Mart this winter: all three retailers use Spectrum Brands as their private label fertilizer supplier, and each retailer must find a replacement, fast. The spring selling season for fertilizers in the southern and western states starts in March. Product shipping into distributors’ warehouse starts six weeks earlier.
Spectrum will cease production of its growing products on Jan. 31, according to the announcement. “We are transitioning to make sure the key retailers are not left without product,” said Spectrum Brands CEO Kent Hussey, speaking to analysts at the company’s fourth-quarter earnings conference on Nov. 11. “They are in the process of transitioning [to] other suppliers as we speak but will take them a while to get up to speed… Hopefully they’ll be in a position to start getting supply from other people come January.”
One of those “other suppliers” is Scotts Miracle-Gro, the industry’s largest lawn and garden manufacturer. Well entrenched as the number one brand of fertilizer among consumers—Scotts makes Turf Builder lawn fertilizer and Miracle-Gro plant food—Scotts issued a press release saying it has entered into “discussions” with several large retailers to provide private labeled fertilizers and growing medium. Should Scotts replace Spectrum at Home Depot, Lowe’s and Wal-Mart, it would dominate the lawn and garden fertilizer market.
There are other possible contenders, of course. The Andersons, a Maumee, Ohio, company that operates six home centers, also produces agricultural and consumer fertilizers. Its products are carried by Do it Best, True Value, Menards and a number of independent garden centers. Central Garden and Pet makes grass seed under the Pennington brand, as well as pest control products, but has not yet entered the fertilizer category.
Ace Hardware ultimately chose Lebanon Seaboard, the maker of Preen, to replace Spectrum Brands as its private label fertilizer provider. The Lebanon, Pa., maker of professional and consumer lawn care products was one of two final bidders (the other was Scotts) for Ace’s 15-sku line of Green Turf fertilizers.
Ace lawn care buyer Wayne Janovsky got the news about Spectrum’s pullout on Nov. 4, shortly after the co-op’s fall show. Ace retailers had already placed their spring fertilizer orders, and warehouse shipping was due to commerce in December.
“My legs got a little weak for about 10 minutes,” Janovsky, recalled. But within three weeks, the lawn and garden buyer and his team had solicited bids, narrowed the list and paid visits to the two finalists.SPECTRUM’S BRANDS
The Atlanta-based global consumer products company Spectrum Brands will no longer make “growing products.”
Here are some brand names in the $2 billion company’s portfolio:
Cutter (insect repellant)
Schultz (fertilizer and soils)
Garden Safe (organic products)
Tetra (pet supplies)
Lebanon Seaboard will be packaging Ace fertilizer before Christmas, Janovsky, said, and Spectrum has granted them the rights to the packaging and the EPA certificates for a full year. “The transition should be seamless to the consumer,” he added.
Ace, along with a number of other retailers, became a customer of Spectrum’s when it purchased Pursell Industries in 2001. The deal also gave Spectrum the trademarks and marketing rights to Vigoro (sold at Home Depot) and Sta-Green (Lowe’s). Wal-Mart’s private labeled fertilizer, made by Spectrum Brands, is called Expert Gardener.
Lowe’s did not respond to an inquiry about its spring fertilizer program, but a Home Depot spokeswoman Jean Niemi said, “We are currently in discussions to continue to supply the Vigoro brand through other top fertilizer companies and do not have any final decisions.”
Whoever wins the big boxes’ business will face some of the same hurdles as Spectrum did. A sluggish housing market and slower foot traffic in stores curtailed fertilizer sales. An unprecedented rise in the cost of raw materials like urea, DAP and potash also worked against the company’s margins. When Spectrum raised its prices, retailers cut back their orders and tightened up their inventories, a decision that may now come back to haunt them.
“We’re seeing a very, very tight inventory situation at the key retailers,” Spectrum’s CEO told analysts on Nov. 11. “Retailers are watching their POS on a daily, weekly basis, and they are relying on key suppliers like us and other major consumer product companies to carry the inventory to be able to fulfill those orders in 48 hours to replenish their shelves.”
Spectrum tried, unsuccessfully, to sell its growing products business. When that didn’t work, company officials decided to shut it down, describing the division as a “drag on profitability.” Year-end figures for the company showed a loss of $931.6 million for 2008, coming on top of last year’s losses of $596.8 million.
Analysts have begun issuing dire predictions for Spectrum Brands, which is in the process of being delisted from the New York Stock Exchange. A deal to sell its pet product division fell through after one of its senior lenders put the kibosh on the deal. But the company has a number of consumer brands in its portfolio, including Rayovac batteries and Remington personal grooming products. Spectrum’s Home and Garden division has retained all its insect control and repellant products, which include Spectracide, Hotshot, Cutter, and Repel, as well as its Garden Safe line of eco-friendly pesticides.