scotts miracle-gro at raymond james conference: strategic growth plans

On Tuesday, March 4, 2025, Scotts Miracle-Gro (NYSE: SMG) presented at the Raymond James & Associates’ 46th Annual Institutional Investors Conference. The company outlined its strategic initiatives, focusing on cost management, innovation, and digital transformation. Despite pandemic-induced sales fluctuations, the company is optimistic about its future, with plans to exit the Hawthorne business and improve gross margins.

Key Takeaways

• Scotts Miracle-Gro aims for a 30% gross margin in fiscal 2025, with a longer-term target in the mid-30s.
• The company plans to generate $250 million in free cash flow this fiscal year.
• A strategic exit from the Hawthorne business is underway, with revenue projected at $250 million to $300 million this year.
• Investment in advertising and R&D is increasing to enhance consumer engagement and innovation.
• Supply chain optimization includes reducing distribution centers from 18 to 5 by year-end.

Financial Results

Scotts Miracle-Gro’s lawn and garden business, representing 90% of its revenue, has shown resilience with a 5% CAGR over the past seven years. The company generated $1 billion in free cash flow over fiscal years 2023 and 2024 and aims for $250 million this year. The gross margin target is set at 30% for fiscal 2025, with aspirations to reach the mid-30s through cost reductions and pricing strategies.

Operational Updates

Scotts Miracle-Gro is actively pursuing an exit strategy for its Hawthorne business, which has stabilized. The company is also focused on reducing costs by $75 million this year in the U.S. consumer business, with a three-year goal of $150 million. Advertising spending is increasing to $150 million, with a long-term target of over $200 million. The company is investing over $35 million in R&D, with a focus on innovations like CRISPR. Supply chain enhancements include reducing distribution centers and leveraging AI for inventory management.

Future Outlook

Looking ahead, Scotts Miracle-Gro aims for 2-3% sales growth, driven by volume and pricing, and targets an EBITDA of $570 million to $590 million, with a longer-term goal of $700 million. The company is committed to innovation and environmentally friendly practices, such as recyclable packaging. The strategic exit from Hawthorne is expected to conclude this fiscal year, potentially through a monetizable investment form.

Q&A Highlights

During the Q&A session, executives discussed the gradual improvement of gross margins to the mid-30s range over the next two years. They anticipate low single-digit volume growth in the U.S. consumer business. The company views private labels as a minor component of its revenue, posing no significant threat. There is a strong focus on revitalizing the lawn category through strategic investments in products and media.

Readers are encouraged to refer to the full transcript for a detailed account of the conference call.

Full transcript - Raymond James & Associates’ 46th Annual Institutional Investors Conference 2025:

Operator: Right there. Yeah.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: Appreciate everybody’s time today. We’re real happy to be here. I’m Nate Baxter, President and Chief Operating Officer, and I’ve got Mark Shire, Interim CFO with us. Between the two of us, we’re going to take you a little bit through the history of the company and then talk a little bit about some of the strategies of growth both on gross margin and top line. Do you

Mark Shire, Interim CFO, Scott’s Miracle Gro: want him to do any opening remarks?

Operator: I did the intro for you. It’s okay. Sorry. Good afternoon. Welcome, thanks for joining us.

Our next presentation, which is Scott’s Miracle Groove.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: Thank you. We have President

Operator: and CEO Nate Baxter, who you all know well, and Interim CFO, Mark Scheuer. Welcome to you both. Obviously, Scott’s, as you’re probably aware, is the unquestioned leader in The U. S. Consumer lawn and garden industry.

The brands include, obviously, Scott’s and Miracle Gro, but also Ortho and Roundup, amongst others. The company also has a Hawthorne hydroponics segment, which is a key key supplier to cannabis growers in North America and Europe. Though it’s had to confront a sharp downturn in demand over the past several years amid industry oversupply. We do have a few slides, which management will go over and then I’ll jump back up here for some Q and A. And so with that, let me hand things over to Nick.

All

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: right. Thank you. For real this time. All right. So Mark and I are going to tag team, and we won’t dwell on any of these.

But I think we’re a 150 year old It’s one of the reasons that I came to join this company. You look at the brands we carry, they’re just they’re world class. You look at the potential for growth in the lawn and garden segment. There’s still a huge opportunity for organic growth, and I’m sure we’ll get into that in Q and A. We’ve had a tough few years, but I think hopefully we’re starting to build a track record to show that we’re very serious about managing costs and streamlining the business.

And I think our margin recovery last year points to that, and Mark will comment on sort of our journey for this year. But at the end of the day, we’re very focused on being an investor friendly company and making sure we’re doing the right thing. I don’t know if you have any more.

Mark Shire, Interim CFO, Scott’s Miracle Gro: Yes. The only thing else I would say is we have a long track record of delivering strong gross margins, strong cash flow, free cash flow. And from a capital allocation standpoint, longer term, we’re getting back into shareholder friendly down the road once our leverage gets down. So, we’re on our way down. We’ve made outstanding progress.

We generated $1,000,000,000 of free cash flow over ’twenty three, our fiscal ’twenty three and ’twenty four. And we plan to continue to generate free cash flow. We’ve got about $250,000,000 planned for this fiscal year. I would say longer term, we view ourselves as a much higher free cash flow generating machine. And we should be able to provide that, that good shareholder friendly activity, both quarterly dividend and then eventually, I think, longer term share repurchase activity.

Yep.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: So just a little bit of history for those of you who don’t know us. We actually still are headquartered and operate out of Marysville, Ohio. It’s where we were founded back at the turn of the century. We still operate out of that store. It’s actually our company store in Downtown Marysville.

So if you’re ever there, let us know, and we’ll bring you over. But I think the point here is that we’ve got a a deep legacy, not only in the lawn side of the business, which was founded by O. M. Scott in 1868, but also, on on the gardening side of the business, through the merger with Miracle Gro back in the mid nineties. You know, we feel we’ve got the best brands.

We’re the leading investor in terms of R and D and innovation and marketing and field sales and supply chain. We’ll talk a little bit about that, but we talk about those as our superpowers. And it’s a legacy that we have the privilege of trying to continue. If you look at our brands, hopefully, these are well recognized. You’ll notice a new brand in the upper right, O.

M. Scott and Sons. We’re actually bringing back a legacy brand. Tied and targeted towards sort of that next generation of consumer. This will be lawn care, so lawn food as well as, lawn seed, both traditional grass seed as well as alternative seeds that are equal friendly and drought resistant.

One of the things I’m most proud of is we’re going to be debuting this in a new fully curb recyclable paper bag. So, you know, as we talk about innovation and look at what we’re trying to do for the future, we’re trying to, you know, lean into improving our existing products, but we’re also trying to make our products, more environmentally friendly and safer for folks to use as well as easier. The only other callout I’ll make here is Bonnie Plants. We’re a 50% over owner with Alabama Far Farmers Coop. We love that business.

We look at it as the tip of the spear. It’s hard not to go to a depot or a Lowe’s or another big retailer and see all those live goods outside and sort of get that itch to go into the gardening center. Mark take these. Sure.

Mark Shire, Interim CFO, Scott’s Miracle Gro: All right. So we have these outstanding brands that we just showed you. We lean on them heavily. We invest in them. And we kind of we’ve gone through so much what I’ll call fluctuation in our sales activity recently because of the pandemic.

You know, we saw twenty years of sales growth during the pandemic, twenty fiscal twenty and twenty one. And then we obviously then had a deceleration in that as folks began to travel and go back to work. But if you just take a step back and look at our overall on a broad basis, seven year CAGR, we’ve grown this business 5% on a top line perspective for the lawn and garden. And the reason we have the lawn and garden business up here, it’s, it is the dominant engine of Scott’s Miracle Gro. It is the, it represents the, the 90% of the business from a revenue standpoint.

So it’s an outstanding business that’s built on the backs of the brands that you saw. This, this CAGR, it doesn’t happen overnight. It includes things like pricing. We have pricing power we can pass on to our, to our customers and work with, with, with them on that. We also, have innovation.

Things like, Easy Seed, for example, that was a great innovation several years ago. And last year we introduced Miracle Gro performance or Miracle Gro Organics, which is the pink bag soil that did outstanding with Martha Stewart. So those are some of the things that we feel, you know, ours are our superpowers that Nate talked about. We can consistently deliver on what I’ll call it three to 5% longer term consumer products growth. So we have that track record.

I know it’s been a little bit choppy along the way as we’ve gone through the pandemic, but as we’ve come out of it and have begun to stabilize, we’ve seen outstanding, I think, long term trajectory. As we look to profit margins, this is The US consumer profit margin on here. What I didn’t show you on here, you’ll see it on a slide a couple more slides later, is the gross margin, and is really a recovery story. You know, as we, as we kind of came out of the, the, the peaks of the pandemic, we obviously were impacted both from a cost structure and our supply chain. And then as the, as the, our customers were trying to sell, sell more products and end up having a sales volume decline.

So our margins obviously got impacted by it. We started to recover, stabilized last year. At the gross margin level, we improved our gross margins. This year we’re looking to get to 30% total company gross margin rate. What that tells me and it’s things we can control.

So if you look at and I’ll go into more detail in a couple slides, but our gross margin recovery, a lot of it has to do with what we can control and what we’re executing on as we speak. We had a great Q1 results. In that you saw gross margin recovery. Well, what does gross margin do? It’ll result in a higher operating margin for our US consumer business.

We are reinvesting some of those dollars, so not all that gross margin recovery will go completely down to the operating margin. We are reinvesting in advertising and Nate will have a slide to show you kind of how we, how we have continued to increase our advertising spend. We believe advertising works. It’s one of the pillars of our investments. It’s how we get our sales growth.

To me there’s, there’s three big things the way we invest. It’s advertising, it’s promotional activity and consumer activation and just really spend with our customers. On our last earnings call, we mentioned that approximately north of 10 Percent of our net sales within that number, we invest with our customers in various consumer activation promotional activities, whether it be in season promotions like the five for 10 or volume rebates and things like that. So we have a lot of good activation. And then the third piece that helps make a lot of this happen is obviously our supply chain network.

We’re constantly looking to get costs out. We’ve delivered on those last year a little bit, a good amount. This year, we’re we’re, planning, and we’ve communicated 75,000,000 of costs out in The US consumer business. That’s outstanding. We think we have room to go.

Jim, our CEO, Jim Hagedorn, has challenged us with 150,000,000 over three years, and we have a track record of proving that. Those that three year, glide is 25, 20 six, and 27. So we’re gonna get 75,000,000 this year. Moving on to quickly to Hawthorne. Just, you know, last couple calls we’ve talked about an exit strategy.

What I’ll say with Hawthorne is we’ve done a lot of work in general to right size this business. Pre COVID, this business, you know, it was a much different environment. It was experiencing double digit level growth. The industry was growing lots of, lots of investment in it, in the industry, in the hydroponic space to the point where it peaked out at upwards of over, about a billion 4 in sales. It’s now, I’ll call it in that, you know, last year it was $2.95, dollars 2 90 5 million.

This year, it could be in the range of, you know, it’s going to be a little less because we exited our distributed brands, but just call it a $250 to $300,000,000 business. It’s now stabilized. It’s predominantly a branded hydroponic input supply called picks and shovels business that supplies products for for growers across North America. It’s it’s this past quarter, q one, we delivered $2,000,000 of segment profit. And, as part of this year’s, glide path in our guidance of $570,000,000 to $590,000,000 EBITDA, we are looking to deliver $20,000,000 of EBITDA out of this business.

It is stable. I think the long term trajectory of this business, you’re looking at a much lower growth business. From our perspective, it’s better served to be in a plant touching enterprise. So we’ve begun discussions with strategic partners. Now that it’s stabilized, we feel a lot more confident than say a couple years ago as we’ve looked to exit strategies around Hawthorne.

There’s two pieces or two components of Hawthorne. So just to to confuse you just a little bit and I apologize. So there’s the Hawthorne Gardening, which again I just talked about has great brands. It’s picks and shovels, sells to hydroponic retail shops across The U. S.

And Canada. The collective, the Hawthorne Collective is an investment portfolio. We decided to invest in around ’twenty one fiscal ’twenty one. It’s now about $40,000,000 of passive investments on our balance sheet. We will look to exit that or transfer it as well over in a package.

I think our again, we’re looking to close on this hopefully this fiscal year. As we begin to update you each quarter, you’ll hopefully begin to see progress on that front. And again, given the stabilization of this business, we feel a lot better prospect wise as we look out into the future. Ideally, then, we don’t plan to get cash for this. Most likely, it would be in an investment form, that we would look to monetize or provide optionality in the future.

So that’s that’s Hawthorne, and I’ll be happy to answer questions on the topic in the Q and A. Real quickly on the the gross margin story and in EBITDA, we’ve come a long way. You can see from the pandemic highs, even pre pandemic in fiscal ’seventeen, if you look at fiscal ’seventeen, we were at 36.8% gross margin rate total company. At that point, we were mostly a lawn and garden company. Okay.

Hawthorne was real small. You know, that’s kind of where we’re heading now, right? As I as I just described to you, we are going back to being a predominantly a lawn and garden company. And so gross margin profile, we know what we need to do to get back to that mid, mid 30, mid 30% gross margin rate. A lot of it just comes from just things we can execute on our behalf, which is costs out.

It includes our portfolio of innovation and, and given us leverage on pricing with our customers as well. So there’s a whole there’s a whole step to that process. And again, we feel comfortable about where we’re heading on on the 30% for this fiscal year ’25 and then the latter up to the mid 30s. Again, it’s going to come with additional costs out. So Jim has challenged us to get another 75 on top of the 75 we did this year, and we we definitely have line of sight to that and that’ll happen over a two year period.

So that’s a big piece of it. The other piece will be pricing. People, if you if you just take a step back and say 1% pricing, that that would be kind of what we we we traditionally go for from a consumer products company is that, is that 1% pricing. It doesn’t get peanut butter. You can take it targeted.

We offer things in both fertilizer, grass seed, soils, mulch, controls products. We have a big breadth of product portfolio that we can, we can leverage and utilize with our customer base around pricing. And another piece that Nate talked about a little bit is innovation and that’s a big driver of that. The other is going to be ultimately then getting back to what I’ll call and what I showed you on the front end, which is sales growth. You know, we, we’re, we’re viewing is, is like around two to 3% type sales growth.

So I think, I think the, that we set a target of growing our sales overall about 3% to me that represents about 2% on volume growth, 1% pricing. So that’s how we get back up to that kind of that target range of mid-30s, which I think would be an outstanding goal. And then EBITDA is to follow our guidance range. We’re expecting about another, another big jump in our EBITDA up to $570,000,000 to $590,000,000 and we see a path to well north of that as Jim has challenged us to get to $700,000,000 All right.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: So just to shift gears a little bit from the financials because I think this is really important to sort of add some color of how we’re going to get here. It’s the culture of the company. These core convictions are, I think, close to 20 years old. And in a conversation with Jim, we dusted these off. And with maybe one small exception, I don’t think any of these would change.

They’re all pretty relevant. And I think that’s an important piece because, you know, as I’ve come into the company, we took $400,000,000 out in Project Springboard, reinvested $100,000,000 that was really just cost cutting. We didn’t really change the work. We didn’t change the workload on people. In fact, it went up as we reduced headcount.

So now we’re moving into a phase of the company where we really talk about transformation. And I think this is where, you know, my background in tech, to me, this is not really that difficult. You know, we sell dirt, dirt, and round up as we say. But my belief is this is a tech company and we just our associates don’t necessarily fully understand that yet. And I’ll give you some examples.

So, in supply chain, we’re streamlining, we’re driving automation into our factories. We are looking at new planning tools. We’re obviously heavily invested in AI and other technology, and we can address some of that in the Q and A. But we’ve already put this into a fact. We’ve already cut our consumer services group by half, for example, because we developed, both with external partners and internally an AI tool that just sort of accelerates the ability to understand what a consumer is asking.

So I think, you know, these core convictions are important. The one I’ll probably highlight the most because I think it’s the biggest force multiplier is Advertising Works. Jim likes to talk about it a lot. I think you guys know that. It’s nuanced.

It’s in order for us to grow the business, we have to engage new consumers. And that involves we love the advertising when you look at the top of funnel stuff, whether it’s with Martha or Scotty, but it’s much more than that. Jim referenced it on our last earnings call. It’s about our digital assets. It’s about our user interface.

It’s about taking a category that’s fairly complex. If any of you have stood in front of a wall of fertilizer at one of our big retailers to try to understand what you’re supposed to use on your yard. So part of this investment we’re understand what you’re supposed to use on your yard. So part of this investment we’re making, in media is not really just top of funnel media, but it’s also developing AI tools that leverage our database to help consumers take a picture on their phone, ask us a question, be able to get an answer and help direct them to the product. It’s actually something we’ve already rolled out to our field service engineers.

So I think, you know, for me, these are all really, really important, but I think the advertising works is probably one of the most important pieces. I talked about our superpowers. This is them, you know, and and Jim has said this multiple times. We are taking costs out of the business and we are reinvesting it in these superpowers. And I’ll be honest, I had to clarify with my team.

That didn’t mean that if you were in one of these superpowers, you were immune from transformation and trying to take cost out. But what we really mean is all the dollars we save, we’re going to reinvest whether it’s in our brands in the form of marketing, whether it’s innovation, whether it’s in our supply chain and our field sales team. For those of you that follow us, we have a tremendous field sales team. You can either look at it as a big expense. We look at it as a big asset.

There is nobody out in the field that has a field sales force with a number of people we do in season that are out there hustling, jockeying, making sure our product is off shelf, making sure that it’s merchandised appropriately. We have deep personal relationships with our retailers. It is most definitely a superpower for us and we’re just about to get into the point of the season where this really starts to show. Advertising, you know, this is one, you know, my number is north of 200. If you look at our A to S ratio, it’s probably around 3% right now.

If you get, say, north of 200, that puts us close to the 5% range. It’s still well under indexed to our CPG, partners. But it’s important to us because it’s important not only as we look to engage a new generation of consumer, like I said, it’s not just the fun advertising that you see streaming or on TV. It’s all about building the digital assets, building the subscription and loyalty programs, engaging in social where we can. And I feel like we’re on the right path.

We’ve had some churn over the last year with some of our digital agencies and our creative agencies, but we’re starting to settle in. And, we started to build a really small but mighty team in house that’s able to work with our agency partners. The speed at which we have to innovate and deliver, especially when you look at the timeliness of events, for us, this is something we really need to have control of. So like I said, this year, we’ll probably be closer to the $150,000,000 mark, and our target in the long term is to get north to 200 or 5% or 6% of sales. R and D is another big one.

I would argue there is nobody else in our category that invests this much in R and D. It’s north of $35,000,000 We have 200 plus associates, deep expertise. Just before I came in here, I got to pass down on work we’re doing with some partners looking at CRISPR. You know, CRISPR is a is a technology that is being used in big ag, whether you’re looking at, you know, gene editing of live goods, which is a real opportunity, but also gene editing of bacteria that can be more effective at helping you with natural controls or as a force multiplier for a synthetic chemical. So, you know, I would say the big change that I’ve seen in the last couple of years is we’ve filled our innovation pipeline back up.

And innovation takes many forms. CRISPR and biologicals, that’s a ten year out thing. But in the near term, there’s form fit and function, there’s packaging, there’s ease of use, there’s safety. And I would say when I came to the company a couple years ago, innovation really took the form of cost out because that’s what we needed. We’ve completely revamped and reworked our innovation sort of circle as we call it to make sure we’re focused on short, medium and long term.

And it really is important to driving the margin accretion that Mark talked to. If you look at supply chain, we’ve got 45 growing media plants. I think 38 of those are ours and the others are co packers. We don’t ship a bag of dirt more than about 125 miles or a bag of mulch. That’s a real advantage relative to our competitors.

We’ve gotten a lot of questions about private label today and I would argue, first of all, I like private label. We participate in it. It helps fill volume in some of our plants. But at the end of the day, I don’t see it as an existential threat. It’s all part of a good, better, best strategy.

And I would argue in categories like growing media, which is mulch and soil, we we supply a dominant share of that, and it’s because we’re the lowest cost manufacturer and, you know, we don’t spend a lot of money on diesel moving bags of dirt around. That’s not very efficient. So that’s a big part of our strategy. Same with liquid durables. We have a few plants around

Operator: the country.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: We manufacture all of our fertilizer products for lawns in, our for lawns in, our Marysville plant, maybe with a few exceptions with co packers. All of that is distributed right out of our, sort of, Uber warehouse that our Uber distribution center that we call the cord, which is just a mile down the road. All of our retailers pick up their loads from there. We don’t have to ship it anywhere. That’s that that is a really nice advantage of the scale we have.

As part of the supply chain transformation, I think distribution centers, we had 18 at peak. We’ve got nine today. There’s an asterisk because some of them are third party. We’ll have that down to five by the end of the calendar year. And then again, our ability to deliver on time, order fulfillment, we’ve enhanced that over the last year.

We’ve leaned heavily into our data analytics team. We’ve built a very small but mighty team that are experts in machine learning and analytics, and we’re using that to help us predict where we need product, in the network at what given time. In the past, it was we stuffed our distribution channels our distribution network full of inventory. Since the pandemic, we’ve sort of worked with average inventory levels that we’re call it $800,000,000 and we’re now down to below $600,000,000 and we’ll stay there, and maybe even look at taking that down further. Point I’m trying to make here is we’ve come a long way with supply chain.

We have a lot of opportunity to continue to automate it and take cost out of the business. And that is a big piece of the gross margin bridge that Mark talked to. Our field sales team, I talked about it. I won’t belabor it, but I can’t underscore just how critical of a strategic factor this is for us, especially this time of year. We’re really the only ones in the stores.

A lot of our

Operator: competitors hire third parties to do this merchandising. And I

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: can tell you the level commitment that our associates have and the relationships, the long term relationships they’ve built with retailers, it is very significant for our success in season. All right. Went through that quickly. Joe, we’re now at Q and A. We’re fireside chat.

Although, actually, we didn’t go through that quickly. We’re like out of time.

Operator: So much for five to ten minutes of slides. Yeah, that’s okay. Nice overview. Thank you. We do have maybe a few minutes left.

So before I have some questions, obviously, but I’m curious, anybody in the audience have a question? I guess we could start there. Just raise your hand.

Mark Shire, Interim CFO, Scott’s Miracle Gro: Yeah. So this year we’re getting to 30%. I would say then it would begin to ladder up over the next following two years to that mid-30s, type range. So it’d probably be a staggered approach that we would look to get there on that.

Operator: Can you just pull

Mark Shire, Interim CFO, Scott’s Miracle Gro: up on to disclosing sort of consolidated volume growth metrics? Repeat that again.

Operator: Yeah.

Mark Shire, Interim CFO, Scott’s Miracle Gro: So the, so on our guidance page for U. S. Consumer, we lay out our volume growth assumption, which is low single digits. We have some one time non repeat items related to our U. S.

Consumer business. This is kind of what I’ll call kind of further overhang from COVID, but we did some inventory sales for bulk fertilizer and grass seed where we exited inventory positions, And that was probably call it almost a point of impact to sales that we did in 2024. And then our AeroGarden business, we really made changes to that product line. And, and so we won’t be, we won’t be producing and selling the products like, like we have in the past. So that, that, that is also a non repeat.

Outside of those, we do expect the core US consumer lawn and garden business to be low single digits, which we think is a very achievable attainable goal based on both the incremental advertising we are investing in promotional spend, new listings, things like that. So we’re in great partnership with our customers.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: Yes. So I think a research report came out earlier this week focused on Lowe’s and they lean into private label. Private label, it’s an important business for them. It’s again part of a good, better, best. We’re pretty familiar with it because we participate in almost all of it, not consistently, but across all the retailers we play in all the categories.

I think the concern that we are hearing is how real is the migration to private label from branded products. And while it’s very clear why retailers would like to steer towards private label, you know, just I think, they they took a lot of margin during the pandemic, and they’re really reluctant to give that up. But I also think as the especially the brick and mortar retailers try to compete online, you know, they’ve got to be able

Operator: to fund that.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: It’s expensive to compete with Amazon and even walmart.com. So I think for for for one in particular, they like to they, you know, they’re leaning into that. Now my view is I like the business. It’s a pretty small part of our revenue. It’s less than 5%.

I like the volume. It helps me just deal with the unabsorbed overhead. It’s also really important for the relationship with the retailers. But at the end of the day, I don’t we don’t see it as an existential threat. If I look at the five year CAGRs on it, it’s negative growth.

I know, you know, Mark has a view that I think is really sharp, which is if you break our, if you if you break it into our categories, controls, gardens, and lawns, you know, the controls segment, that’s chemical heavy. You need a lot of regulatory review and approval. That’s not really an area right for private label. So then it really becomes lawns and gardens. In gardens, the volume is mulch and dirt.

Like I said earlier, we Lawns category, I could talk for an hour on because I just think there’s so much opportunity. We’ve seen a massive decline over twenty years. We as an industry, not we as Scotts, we’ve all seen a decline in units as people have stepped away from lawn and garden. One of the most interesting data points we see is when we look at private label fertilizers, people don’t trade down. They just sort of take a pause and step away from the category.

So that tells me it’s not necessarily price that’s driving it or value perception. There’s something else there and that’s a big part of when we talk about our investments in supply chain and product and media getting consumers sort of back into, let’s say, feeding your lawn four times a year. That’s a fundamental tenant of this company that we started decades ago and we’ve sort something you’ll see this season as as we get into our our creative. Anybody else? Maybe that was more than you wanted to know on Friday, William.

Operator: Alrighty. I guess we’ll, wind it there. All right. Nate, Mark, thank you. Thank you, everybody, and enjoy the rest of the conference.

All right.

Nate Baxter, President and Chief Operating Officer, Scott’s Miracle Gro: Thank you.

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