SCOTTS MIRACLE-GRO CO (SMG)

The Scotts Miracle-Gro Company is a leading manufacturer and marketer of branded consumer lawn and garden products in North America, and also has a presence in similar branded consumer products in China. Its heritage traces to a company founded by O.M. Scott in Marysville, Ohio in 1868. Key brands include Scotts and Turf Builder lawn fertilizer, Scotts grass seed, Miracle-Gro soil, plant food and gardening products, Ortho herbicide and pesticide products, and Tomcat rodent control and animal repellent products. The company is also the exclusive agent of Monsanto, a subsidiary of Bayer AG, for marketing and distributing certain consumer Roundup branded products in the United States and certain other countries. It holds an equity interest in Bonnie Plants, LLC, a live plant joint venture with Alabama Farmers Cooperative.

The company reports three segments. U.S. Consumer covers the consumer lawn and garden business in the United States. Hawthorne covers indoor and hydroponic gardening, including lighting, nutrients, growing media, growing environments and hardware under brands such as General Hydroponics, Gavita, Botanicare, Agrolux, Can-Filters, Gro Pro, Mother Earth, Hurricane, Grower's Edge, HydroLogic and Cyco. Other primarily covers the consumer lawn and garden business outside the United States. Product categories include lawn care (fertilizer, grass seed, lawn weed, pest and disease control, spreaders), gardening and landscape (water-soluble and continuous-release plant foods, potting mixes, soils, mulches, organic products, live goods), hydroponic hardware and growing environments, lighting, and controls (insect, rodent and weed control). In fiscal 2022 Hawthorne acquired Cyco, Luxx Lighting and True Liberty Bags. It later decided to exit certain lighting products and brands, including Luxx Lighting. The company also made a $25.0 million convertible note investment in cannabis investment firm RIV Capital.

Products are sold through a direct sales force, an e-commerce website, and a network of brokers and distributors. Customers are home centers, mass merchandisers, warehouse clubs, hardware chains, independent hardware stores, nurseries, garden centers, e-commerce platforms, food and drug stores, and indoor gardening and hydroponic distributors, retailers and growers. Home Depot and Lowe's are the two largest customers and each exceeds 10% of consolidated net sales. The North America consumer lawn and garden business is highly seasonal, with about 75% of annual net sales in the second and third fiscal quarters. Hawthorne sales are also affected by seasonal patterns.

Raw materials come from various sources and include urea and other fertilizer inputs, resins, diesel, gasoline, natural gas, sphagnum peat, bark and grass seed. The company uses forward purchase commitments and hedges certain commodities such as diesel and urea. Third parties manage the key consumer distribution centers across the United States and Canada, while Hawthorne mostly self-manages its own. Competitors include Spectrum Brands, Central Garden & Pet, Kellogg Garden Products, Reckitt Benckiser, FoxFarm, Hydrofarm and Premier Tech in Canada, as well as private-label and regional players. Research and development spending was $45.3 million in fiscal 2022. The company is subject to regulation including FIFRA and EPA pesticide registration. It employed approximately 6,100 people at September 30, 2022, and its fiscal year ends September 30.