Retailers fill void in growing-products market

A recent 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 number two 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.

One of those “other suppliers” is Scotts MiracleGro, 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 buyer Wayne Janovosky got the news about Spectrum’s pull-out 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,” Janovosky 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.

Lebanon Seaboard will be packaging Ace fertilizer before Christmas, Jaovosky 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 a 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.

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 showed a loss of $931.6 million for 2008, coming on top of last year’s losses of $596.8 million.

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 pesticides.