It's good to see, you know, seeing a lot of faces I haven't seen in a while. So welcome to our place. You know, I think this is a little bit like giving a tour of a house, especially a house you like. So, you know, the thing about this campus is, you know, the CEO's office is like the Oval Office, kind of, you know, and people come to brief and get decisions made. And I'll go through weeks where the only—like, I'll be lucky if I say to somebody: "Hey, can we meet in the hallway and just walk?" And that's how I get out.
You get out of the office, and you see what is going on here, it makes you pretty proud to understand this company, and I think that's a little bit what we'd like to impart on you guys today. You know, this, this is, this is our place. This is, you know, our home. And this place is the center of the lawn and garden universe. After we merged Miracle-Gro with Scotts, I had this idea we'd keep Miracle-Gro in Port Washington to kind of preserve my options to, as a New Yorker, to not have to move here. So I figured, you know, we'd kind of keep that option open. And what happened was, having one of our key brands not in the center of the lawn and garden universe meant that the brand people couldn't have lunch together.
You know, a lot of the things you benefit from having the team together didn't happen. We've been here in this town, you know, since 1868, and that's another reason we're not in New York or Vermont, where I live now, is we're in the same place we were founded by O.M. Scott when he got back from the Civil War. And from the time that O.M. Scott started this business, which is about grass seed, we have been a market leader since 1868, and that's, I think, pretty rare. In 1995, I merged Miracle-Gro into Scotts, and we, the business became, like, a way better business. Later, we put Ortho, Roundup, Tomcat on there, and, you know, we have become the sort of undisputed leader of the lawn and garden category with really iconic brands. Our brands are our license.
You know, that's our ticket with the consumer, is that if you take our brands and our ability to fulfill, that is like a very special thing for us to be able to do. Take the brands, the ability to execute, the sales force, just the relationships. You know, they're probably, I would say, Behr Paints and Scotts are like critical vendors in store who, like, do the work. I, I hope when we're done, that we have, like, traded some enthusiasm with you guys, and you, you understand what a special franchise we have here, okay? It's a profitable... I, like, I wrote this on the airplane on the way home last night, you know, and durable consumer goods company in a very unique and important category.
I would've told you the results today, wouldn't have required a halt, but Matt was like: "No, man, like, 2 weeks. Wait for the call." So what I was gonna say is, in a nutshell, we very comfortably got through the quarter, very comfortably, okay? And we're—what, we need a special release now? I was told those words were okay. And we're very confident the year is in hand, so if that is any help. Other than that, you're gonna have to torture it out of Matt or... He was the one who let me do whatever I wanted. That was the good news. Anyway, so Nate, you're up.
All right. Thanks, Jim. First of all, good morning, everybody. You know, thank you for making the time to come to Ohio in the middle of the summer. I think what you're gonna see today is the beginning of SMG 2.0. You know, picking up didn't really take much convincing for me to take this role. You know, working for a 150+ year-old iconic American company and being able to support those brands and, and bring an outside perspective was a challenge that I was 100% up for. It was really, as Jim said, sort of my wife, who I had to convince, and, and she's here, and she's happy. You know, when you look at us, what do we do?
We bring joy to people, and Jim talked about all of our superpowers, you know, our, our manufacturing, our distribution, our brands, our sales force. But what that all really is, it's about bringing joy to the consumer. I think we learned a lot during the pandemic about who the consumer is. There's a lot of stickiness there, and we're gonna continue to lean into that. We also recognize the consumer is changing. So what my team is gonna show you today is how we're evolving, and if I go back to the springboard, you know, you can't take $300 million out of a business and have everything run smoothly underneath the hood. You just end up with people, lack of clarity on roles and responsibilities, critical skill sets that are gone.
So one of the things that is gonna be a common thread throughout this is the people... because it's the people that matter, and it's the people that have the passion, and we wanna inject more of that, and I'll talk a little bit about that later. So we're gonna outline a three-year strategy that really centers around how we lean into the superpowers that we have. It's not a hard story on the margin recovery piece. We will get there, but it starts with the people in the organization. And so, you know, coming in a year ago, I knew where the company was, but coming in as an operator and seeing it, it was shocking. You know, we just had to let a lot of people go, and it was really hard to run a business.
Think about our ability to run a business when we have a bunch of holes in the organization. What have we done? We've done a couple things. We've made sure that every employee knows what the North Star is, and I'm gonna talk about that in a second. We've started implementing sort of fast and light approach. You know, I know we're a biggish company, but we really wanna behave like a startup, so we introduced sort of an agile approach to how we solve problems. I would say we're almost a year into that, and the culture has changed. I, when I go out to a plant, and I hear a plant manager tell me he's got an agile team to help him improve production, I think that's success.
We're now moving into the second phase, which is how we evolve the organization, how we make sure our associates understand what their role is, how we inject some new, fresh talent into the brands and the marketing side, which is something we're in the process of doing. We're gonna organize around three business units: Controls, Gardens, and Lawns. But all of this comes down to investing in the brands and investing in innovation. You know, consumer is the tip of the spear, and I would argue that between the pandemic, when it was all hands on deck, and the last couple of years, we were very retailer-focused 'cause we needed those partners to help us get through this. We lost sight a little bit on the consumer. And so what you'll see moving forward is a very clear focus on consumer first, brand, innovation.
Everything else is there to support that. Jim mentioned technology. I'm a tech guy. I don't wanna overemphasize it, but you'll see elements of that throughout the presentations today. I would say, in general, we are not doing anything like we were 12 months ago, and you'll understand what I mean when the team talks about it, but we are leveraging technology. Data is king. You know, a company of our scale, leading lawn and garden, the category, we are in a position to collect that data, whether it's in partnership with our retailers, whether it's through our own sort of 1P data acquisition. We're also hiring data scientists. We're starting to look at how we can use simulations to understand where the markets are going on a week-to-week basis. I was telling a couple of folks earlier, we used that to great effectiveness this season.
You know, we moved on the order of hundreds of thousands of dollars around on a weekly basis in terms of where we targeted regional media, just because we knew that not something wasn't gonna work, say, in the Southwest this weekend because of weather or some other factor. So we're getting better, and you'll see elements of that. The retailer relationships are extremely strong right now. Josh is gonna talk about that, but Jim's right. We flew down, had dinner with Ted and Billy. We have great relationships with all the retailers. We are partners. I do not consider ourselves a vendor, and I know they see it that way, too. Supply chain, always been a superpower. You're gonna see the transformation and a ton of cost out.
I've challenged the team with a pretty big number, and you'll see that number today. Between the supply chain cost outs, between our ability to take selective pricing, and I don't mean large-scale blanket pricing, but we now have the tools, again, going back to the tech stack that we're building, that allow us to pinpoint with precision, elasticity, you know, on a SKU-by-SKU basis, and we know where we can take surgical pricing. And then there's innovation. You know, the greatest way to gain margin is to introduce new products that the consumer needs that you can charge a premium for. So all of these things together, efficiency, pricing, new products, supporting our brands, that's gonna lead to that crawl back on margin. And, you know, I'll just leave you with this, you know, exiting May, the lawn and garden category was down 3%.
We were up 4%, okay? So to have the performance we've had this year, in a year when the category is down and when retailers are struggling with footsteps, that really says a lot about the power of our brands. We invested 9% more in our brands and media this year, but we also invested those dollars differently, and I guarantee you've seen that. I don't think anybody in this room hasn't seen that advertising. It works. We must support our brands. Jim's right, we are not a low-cost operation, but we are driving the category, and we have to continue, whether it's from the brand or the innovation side. All right, I'm gonna, I'm gonna close here. Just... I, I just wanna talk about people for a minute 'cause culture is extremely important. It's the people that make this business work, it's not our processes.
One of the first things we did sort of exiting 2023 was say, "Hey, we need to put together a clear North Star." This is an internal document. This is something we put together called the Journey to Balance Top and Bottom Line Growth. I'm not gonna go through it, but I, I wanna just read the vision 'cause it's a, it's a slight tweak on what we've published externally, just so that this drives some of the impact to the people. Our vision: To help people of all ages express themselves on their own piece of earth. Our actions as a company and as individuals are guided by our cultural attributes. Every day, we ask ourselves, "What would a good company do?" Then we set out and do it. That's really important. That is what's gonna make this work.
So I'm gonna turn this over, but before I do, I'll let you know that part of the goodie bag, you know, we use something around here called challenge coins. It's a great tradition. I did it in my old world, and I'm glad it's here. I created a challenge coin that really focuses on excellence in action. It comes from the Office of the COO. Each of you are going to get one of these in your goodie bag, but when you take this away, just remember, it's the people here and the passion of those people that are going to drive this business, okay? I'm going to turn it over to John Sass, our head of creative, and he's going to share with you the journey we're on with our brands.
Good morning, everybody. Thank you, Nate. As Nate said, John Sass, I am our Chief Creative Officer here, and I'm thrilled to be able to talk to you a little bit about our approach to advertising and marketing. And I got to tell you at the start, you know, me and my team get the unbelievable privilege of being able to create and deploy all of the advertising that you get to see for these brands. You know, everything from the big-time national TV campaign that airs during March Madness, to the Instagram post that shows up on your phone, down to the banners that hang over top of our displays in the stores. We get to touch it all, and that's truly a fun job to have.
So over the course of the next couple slides, couple of minutes, I'm going to share with you a little bit about our approach. And of course, I will show you a TV commercial as well. You know, here's a picture of Horace Hagedorn, one of the co-founders, as you know, of Miracle-Gro, and a true marketing expert. You know, his philosophy and his approach to products and advertising was pretty simple: find a need and fill it. And that's exactly what we do here at Scotts Miracle-Gro, and frankly, arguably better than anybody else in the lawn and garden category. But as Nate just mentioned a moment ago, everything we do starts with the consumer and having a consumer-first mentality in everything we do.
You know, our collection of brands, our portfolio of products, give us the solutions to solve nearly every product or every problem that a consumer has in their lawn and garden. But better yet, we actually have everything they need to create a space that they love and enjoy right in their own backyard. 'Cause a lot of people come to this category, clearly, and buy our products, not because they have to. Many of them buy it because they want to. This is a category that is solved, that consumers engage with because of passion and, and enjoyment. And that's not something you get with a lot of other categories or a lot of other industries. That's something that's pretty powerful and unique to lawn and garden. But we don't take that for granted. We spend a lot of time making sure that we truly understand our consumers.
We want to make sure that it's just not their interest and their passion in the category is what brings them back. We spend a lot of resources making sure that we know our consumers, know what they want, what they like, what they're looking for in products both today and tomorrow. And those are the insights that you're going to see that we turn into product innovation, and you're going to get a chance to see here later today. So what do consumers want? Well, let's be clear. At the end of the day, the products have to work. They want products that perform. Regardless of who they are, how they come into the category, if you're an expert or a newbie, the products you buy have to perform. Product performance is paramount to everything we do.
But where they shop, what's in the product, how they recycle the packaging, those are the things that we're starting to see differences with consumers today. So for each of our brands, we spend a lot of time and resources digging in and really segmenting our consumers. You can see on the screen here some of the segmentation that we have. And when we do that, it truly allows us to dig into those consumer behaviors and solve and create products and, and solutions for them, geared to what they are looking for, to really solve their unmet needs. So if you look at the slide here on the left side, you have our conventional core. These are the consumers that we all know, right? They tend to be a little bit older. They have the time, and they have the money to engage in the category.
They are a tried-and-true consumer base, big-time DIY shoppers. They go to the big home centers. They are the weekend warriors. They pretty much know how to tackle their lawn and garden problems. They don't need a ton of handholding, but they do need that reminder every spring to get out there, and it's time to go. If you compare that to the segments on the right here, you can see I called out two of our segments for our biggest brands, Scotts and Miracle-Gro. These consumers, at the end of the day, still want products that work, but they're also concerned about things like sustainability, naturals and organics. Or maybe they want to buy lawn and garden products at a place not at a home center.
Maybe it's at Costco on a Wednesday night on a grocery trip, or maybe it's even right off their phone from Amazon. So solving having solutions for these consumers is super important, and that's also something we do. You're going to get to hear a lot about some of these innovations, but I'll highlight for you, and you can see on the screen, our new organic line from Miracle-Gro is just one of the great new solutions. We have a new innovation coming next year from Scotts, also solving that sustainability and natural organic, solve that consumers want on this side of the house. In addition to the products, they also need a little extra handholding. These consumers on the right aren't as educated on lawn and garden, so they need extra tips. They need the guidance and support, and that's where these brands come into place.
You know, I joke with Jim a lot, but there's probably a lot of marketers in the country that would love to switch places with me and have the chance to be able to market these brands you see on the screen. Iconic brands, and our biggest flagship brands, have over... They have massive awareness levels, over 75%. That rivals some of the biggest brands in America today. And you don't reach those levels just overnight. We get there through sustained support and advertising investment in our brands. Because advertising investment in our brands is fundamental to who we are. You can turn that down just a bit there. Yep, I'll keep talking. Advertising our brands is who we are, and it dates back to 1951. You can see this left side of the page here.
This is a print ad that Horace put out for Miracle-Gro. Horace was doing direct to consumer before it was even direct to consumer, but he knew fundamentally, advertising and driving the brands is what works. And year in and year out, we've had that sustained commitment to advertising for our brands. It is how we go to market each and every spring. Now, as Nate alluded to, we do make a lot of adjustments each year. We obviously are making sure that our marketing plans are delivering to make sure that we have efficient plans that can reach consumers where they're at in each given market, but we also free up the big time campaigns to launch each spring and excite consumers about lawn and garden season.
You know, Jim mentioned, and Nate did as well, like, you could hopefully you didn't miss any of our advertising this past spring, and in fact, we even made adjustments going into the spring to put even 30% more into that spring part of our season. Big time advertising campaigns to really kick off the season, which I'll show a little bit more here in a second. But once we launch those, we don't just sit back and wait. We're using our tools and analytics to make sure we can adjust our media, as Nate alluded to, in each week, to make sure we're deploying the right message in the right markets at the right times. We're constantly monitoring, and we're constantly making adjustments.
But powerful plans also need powerful creative as well, and I'm gonna share with you and highlight three of our campaigns, all rooted in those consumer insights that drive our biggest brands. Our Roundup campaign, This Stuff Works. It's pretty simple, pretty powerful. How did we get there? Well, when you talk to consumers, weed control is a constant problem. It's a battle. Every time they go out, weeds just keep coming, popping up all over the place. It can seem like a never-ending battle for consumers. So we ask them: Why do you buy Roundup? And they told us, played back for us, "Because it works every single time." Roundup works. It's so powerful, yet so simple, but ownable for this brand, so much so that we made an entire campaign, and that's what you see on the air today, Roundup: This Stuff Works.
Hopefully, you've also had a chance to see this guy on TV. This is our passionate campaign for Scotts brand, with our featured character here, our lawn guru, Scott, better known as Scotty around the office. You know, Scott is played by famous actor, Kristofer Hivju, known in his role in Game of Thrones. You know, this campaign really addresses all those new homeowners that came into the category since COVID. There's a lot of people with homes, and they just don't know what to do when to solve their lawn problems. Well, that's why this campaign is so perfectly lined up, because Kristofer, Scotty, always seems to come on at the right time to solve consumers' needs, tell them what to do in their lawn to get a great result. And of course, he knows the best solutions are always Scotts products.
Finally, speaking of celebrities, hopefully, this past spring, you all got to see this on the airwaves, but this is our newest campaign for Miracle-Gro in our organics line, featuring Martha Stewart. You know, we launched this campaign, this past spring, based on the very fact that Martha used our Miracle-Gro Organic Soil in her very own garden in New York, at her own farm. And according to her, in her words, she had the most unbelievable garden that she has ever had. Talk about authentic and believable. That story is so compelling, we decided to make an entire campaign around it and put it on the airwaves. Take a look at one of the spots.
Organic soil from Miracle-Gro has grown me the best garden I have ever had.
Good soil, and you get good results.
Look at that!
The broccoli was fantastic.
That broccoli, I think some of them were 6-7 pounds.
That's a true story. Those pictures are literally her phone from her garden that we filmed and put that commercial on air. That commercial right there, that 15-second spot, is one of our highest-scoring TV commercials in years here at Scotts. And not only did it do a great job of launching our Miracle-Gro Organics product line this past spring, it's also helping to improve our brand perception on things like quality, trust, and safety. So it's a fantastic campaign, one we're really excited about, and you're gonna continue to see more of that campaign in the future. So I'll just close by saying, everything we do in marketing and advertising is rooted in consumer insights. We have a consumer-first mentality. We invest behind these brands with big media and advertising campaigns.
We feature big-time celebrities and have breakthrough creative that drives our brands in this category and gets people up on the weekends and into the stores. So with that, I'm gonna turn it over to Josh Meihls, who runs our sales team.
All right, thanks, John. I get the awesome opportunity to represent the best damn sales team in the land here at Scotts Miracle-Gro, and we get to sell the best brands in lawn and garden, as John just went through, and I'll circle back to why I say we have the best damn sales team in the land here in a minute. But first, just a little background on myself here. I've been with Scotts for over 20 years. If you count part-time, 23 years. I started as a merchandiser in the stores and really worked from the ground up. So when I talk about sales and having a number of roles, I've got a ton of passion and appreciation for what our team does overall, and I think Jim and Nate both hit on it.
What makes our sales team different, and this slide starts to show it here a little bit, we are end-to-end. We have deeply rooted partnerships with our retail partners across the board, a sheer force, an army on the ground, year-round, over 300 full-time associates on the ground that work arm in arm with our retail partners every single day. And it's not just about execution. It truly is about partnership in the stores that our team has. There are relationships that go deeper than just the store itself. They help them achieve their goals. They help them with their livelihood. Heck, we have sales managers that are in the weddings of store managers, regional operators. They go to their events, their kids' birthdays. They have deeply, deeply rooted relationships. So when you say: How is this a competitive advantage? How is this a superpower? Others have tried....
to great field sales teams. They try to put people on the street. They can't get in the doors. They literally say, "No, thank you. Scott is here for me. They've been here every day." They have the relationships; we have the partnerships. And it's not just about those 300+ full-time associates. In season, we hire over 1,000 part-time associates, a lot of those returning year after year, growing their careers. It's a sales talent pipeline for the entire company. So you look at my leadership team; over half of them have come from the field sales team. They worked their way up. There's no better way to know our consumer, how they interact with our products, our retail partners across the board. It truly is really a stress relief for me, quite frankly.
When I'm feeling stressed out in the office, what do I do? I go work in the stores with our field sales team because that's where it happens, and you get that feeling of reward every time you walk out of the store. It's not just about the home centers, Home Depot and Lowe's, where we provide that end-to-end service. It's also our independent hardware, Ace being the biggest retailer within that. We service them, work hand in hand with those owners, give them suggestions, not just on orders to get them ready for the season, but also how to merchandise, how to engage with consumers, their marketing plans across the board to make sure we're giving them the service that they need. We've also expanded that team into Walmart this year and expanding that competitive advantage into that end of the retail.
So we continue to learn where do we expand this advantage, and that feeds up into what we call our business development teams. So we have teams on site in Atlanta, Charlotte, Bentonville, with those teams that are fully integrated. It's not just sales, it's supply chain, it's finance, it's ops across the board to be a full service vendor for our retail partners. So, you know, I don't like that word, vendor, either. We talk about all the time with our team, how do we become more than a vendor? And it's really working with our retail partners inside and outside the stores. And the last thing I'll mention when it comes to our field sales team is the impact they have on the community, right? You don't see it on the slide here, but they impact the communities as well.
We work in positive ways, you know, really volunteering, working with local organizations, and becoming more than a vendor every day in partnership with our retailers out there. You look at it, how does it come to life in the results? You look year to date through May, we were up 11%, through June, up 10% in POS units overall. Awesome results, and we talked about three pillars coming into the season. Listings have played a big role in that. Innovation that's fed it through [Health], the new Miracle-Gro Organics Raised Beds have added a lot to the business, but promotions have played a key role in that, too, as retailers want to drive traffic. When you talk about superpowers of our organization overall, where does it all come together? I look at that.
There's no better example than the promotional strategies that we put together with our retailers. They leverage our brands. That's the power of our brands there. They leverage our supply chain. You know, you look at some of these events, especially on what we call our so-called growing media business with soil and mulch. We can drive in a two-week period with a single retailer, over 20 million units of POS out the door.
So when you talk about a superpower of what it takes to get that product into the store from a supply chain perspective, the collaboration with our local field sales team that is working with them every day to open the doors, get the orders in the door, get it on the floor, get it signed, and then the advertising that complements what our retailers do to drive the traffic into the store, that's truly where it comes all together. The other thing I'd mention is, again, not just the home centers. We continue to diversify our business. We've seen growth in our home centers continue, but we've seen outpaced growth in other channels of trade, which includes our online business, our farm and fleet business, club, and hardware as well. And that's not by accident. That's through strategic partnerships and focused on that side of the business as well.
When you look at where we're going, technology is an enabler for us to expand this competitive advantage. So when I think of technology, there's a lot of words on this slide. This is really pertinent to our field sales team and how we create a feedback loop overall that feeds into our brands, feeds into our BDTs, feeds into everything that we do on a real-time basis to make us smarter. It also makes our field sales team smarter on an everyday basis. But this is really about, we have this awesome weapon with our field sales team. How do we aim it a little better? How do we make the impact more when we fire? So this is really what it's all about with the enabler of technology. Then you look at predictive analytics. This is, again, about making us smarter about everything that we do.
You know, I can't predict the weather better than anyone else in this room, and I don't think there's been a system created yet that can predict the weather on a day-to-day basis. But we look at other factors when it comes to more than just weather. We look at macroeconomic trends, we look at precipitation, we look at soil temperatures, we look at things beyond just, is the sun out, and what's the temperature today, and is it raining or not, right? There's other factors like money supply that play into this. So that bottom left graph is a little illustration of a new tool that our team continues to refine that helps us, both in the long and short term, better predict the business. So in the long term, it can show us general trends by category.
Where should we lean in from inventory planning, partner with our retailers to say, this category, these regions, are gonna have a bigger lift this year. So we plan in a different way for those. In the short term, we can take the week prior, look at it, and really break down what were the drivers that led to the results we saw. Was it promotion? Was it media? Was it temperature? Was it consumer sentiment? Were there other things that were involved there? And break that down and adjust in real time what we're going to do, right? We look at the week ahead and what I call anomaly spotting. So you look at a market that's gonna be up 50%+... sound the alarms. We need to get inventory in there. We shift resources. It's not just about the media that we shift.
We actually send SWAT teams with our field sales team as well. So we'll take a sales manager from Florida in the heat of the season, send them up to New York, and get some extra hands up there when things are gonna break, and make sure we're ready for the season and vice versa throughout. So that's the tip of the iceberg, where this can go in the future as we continue to refine it, is really into our forecasting, planning, and getting sharper there, having the right inventory at the right time across the board, and impact our plans across the board in a bigger way going forward. Last, I'll wrap up with, there's a lot of growth still to be had that the sales team continues to attack in partnership with the entire organization.
You know, in our core retailers, there's growth to be had, but there's a couple areas where we know there's opportunity to expand. It starts with online and our retail partners. You can read any of their reports, their earnings releases. You can see how important the online business is to them, the investments that they're making. We're gonna make sure we're in a leadership position, which we are right now, to be there arm in arm with them to drive that retailer.com. And it's not about selling one bottle of Ortho. It's not about selling one bag of fertilizer. It's about selling the project, getting those bundles, job lot quantities, the Pro side of it, that we're really starting to attack through retailer.com to create incremental opportunities through those areas of the channels.
The other areas that we want to attack are new and expanding consumer bases or new retail outlets. So Hispanic consumers, attacking that with really a multiprong approach. One, through our messaging, both at the store and through the media, but two, through getting into those regional channels. There is grocery chains out there that we're not in today that we need to be. We're working close with our partners to make that happen, making sure we're at every consumer touch point where they wanna shop and make sure our brands are represented there. And then outdoor living, as you think about outdoor lifestyles through fishing, hunting, different things out there that we wanna make sure we're in all channels of retail and expanding there. So we have teams assigned to that, a real force that we're gonna drive behind into the future.
So hope you take away here, you know, the appreciation, the passion that this team has, the real competitive advantage that, that sales is gonna continue to drive for Scotts Miracle-Gro as we go forward here. And I'm gonna hand it off to our next superpower, which is supply chain, and Kim Berry and Dave Huskinson. Thank you.
Good morning, everyone. Like Josh said, like John said, it is a privilege to spend some time with you this morning. My name is Kim Berry. I've been with Scotts for almost 15 years now, and I, along with my partner in crime here in supply chain, David Huskinson, are gonna spend a little bit of time today talking to you about the elements that are going into our 3-year strat plan from a supply chain lens. These elements are really driving a... Transformation is a, is a word we, we commonly use, but it's not just a transformation of the process and technology. It's, it's really embedded in an overarching initiative here in supply chain we call WCCO. And what that stands for is World-Class Culture and Operations.
A lot of talk here about culture, a lot of talk here about grassroots movement, and a lot of things that you will see in the supply chain elements for our three-year strat plan are gonna be presented this morning. So one of the things I'm gonna begin with the end in mind, Nate mentioned it in his lead-in, like, yes, the challenge has been accepted. We're gonna really drive $150 million in cost savings over the next three years with this strat plan. And really, the four components that are really gonna drive that begin with the bottom there, what you see in the first building block, which is what we're calling our demand planning evolution. The demand planning evolution really kinda triangulates three things. If you think about, it's the optimization equation.
It balances inventory, it balances our service promise to the customer, and it balances all of our manufacturing capabilities and capacities here at Scotts. If you take a look at the sourcing and product design, that is nothing new here. It's just continuing. You saw all of the new opportunities that Josh presented in the new pipeline. You're gonna see a lot of products today on the tour. This balances all of our product cost with the highest quality expectations and, and all of those expectations that we want to make sure the consumer has. That's met. In our WCCO operational efficiencies, we talk about the zero mindset. That is zero tolerance for things in the safety space, zero injuries, zero quality defects, zero waste, zero losses.
A lot of the culture, if you were to travel to any one of our facilities, they would really embed this in the conversation with you because it is about the culture that they're driving that performance in our operations. And lastly, David's gonna spend a little bit of time talking about our network optimization and our warehouse automation. These are two very flagship elements that are going into our strategy, that are really driving costs out through our space, our footprint, our warehouses around the country, and all of the productivity that we're gaining with new automation opportunities. So like we said, all of these are transforming both our cost and our cash flow position here at Scotts. And I think Nate mentioned it, too, in the beginning, two of these things that you're gonna see today, we weren't even doing the same way 12 months ago.
This is all completely evolutionary in our, in our teams, and we're really working smarter to, to use a lot of data and a lot of technology to make meaningful decisions. So let's go ahead and talk about demand planning... kind of step back a little bit and say, well, why would we be looking at demand planning? Why would it make the top five list in our, in our strat plan? And, and really kind of the simple answer to that is, one of the most important influencers to a more improved inventory position is strengthening your overall forecast. We need to first simplify. You heard Josh talk about the predictive analytics. Those are those external factors in our business that are really, you know, kind of out of our control.
But we need to be so close to them, we need to understand them, and we need to be able to dynamically flex to adjust to them. Those all create opportunities for us, and we need to be on top of that. Within supply chain, though, there's two things. We need to understand the power, and we need to understand the impact behind inventory at the right place, at the right volume, and at the right time. When all of those things happen, we avoid things like inventory being stranded in a region where the demand really isn't there. We can have low inventory turns. We can have high cost of moving that inventory around the country. All those things we definitely want to avoid. So what if we were to really transform and use store-level data?
We know at every Home Depot store, we know all the materials that are going to be in that store. We know all the plans of what we want to sell through and the promotional activities and the point of sale activity. What if we were to build a forecast and we were to look at our two largest customers, which is what we piloted this year, and look at building that forecast a little bit differently than the way that we've done before? And then how, the second component is, how could we precisely calculate then, based on that forecast, how we're going to move inventory from production, really into our distribution network that's going to more effectively service from those distribution points.
So one of the things I want to talk about is, this is just a visual that kind of talks about that was then, and this is now. So if we kind of very simply look at this visual on the left side, that was 12 months ago. And this is really going to be reflective of things that we've done with Home Depot and with Lowe's, and that we're going to really future scale as we talk about our 3-year roadmap here. If we look at the left, we have POS, and we have all the materials by every customer at a national level. And we used to try to let the system, based on historical averages, little bit of insights, do some algorithms for us to kind of say, okay, where should this inventory reside?
Where is it going to be the most impactful? And what we found is that we all those things we want to avoid were actually happening. We had inventory that wasn't optimized in the right place. We didn't have the right amount in the right regions when we had dynamic issues that we needed to capitalize on. So really, what we did with Home Depot and Lowe's this year is really what you see on the right.
If you take a look at all those elements that are on the right, the store-level stockings, all of our point of sale by store, all of the promotional activity that Josh talked about, all of those schedules of what we're going to actually load in and what we're going to actually execute in the season, is now aggregated at every store-level point and then rolled up into a forecast that now dynamically overrides our system and tells us where the inventory should go and where we should have it at what time. Superpower. We're taking a lot of technology with the AWS, with Python.
These are superpower systems that can crunch a lot of data and really take those millions of data fields now that we're trying to extract and build this from the bottoms up into an overall summarized number that we're dynamically overriding our system and moving our inventory. So when we started this like 10 months ago. It was a pilot, like I said, with Home Depot and Lowe's. It was slow to start. It was very detailed. We told Nate, give us a few months here to get a crank of the wheel and kind of see what this tells us. By December, the teams, my teams were really off to a great start. You're going to see some really good things in terms of what we wanted to measure.
We wanted to look at – we were challenged. We had to reduce our overall inventory levels. You heard, you heard Jim talk about it. You heard Nate talk about it. We were just at a too high of a position. We needed to understand really what influences our inventory turns, and we needed to understand how we can ultimately increase that forecast accuracy. If you think about every customer, every material, every month, every shipment plan, there's a lot of variables that go into making that forecast accuracy number high, and you got to be doing a lot of right things with the data to, to say, hey, that's a really, that's a really solid performance. So the question there is: Is it working?
What I'll leave you with here is a slide around four metrics that we have been measuring, and every month, we've had success with these measurements. There hasn't been one month that we haven't seen significant gains on a year-over-year basis. Our overall forecast accuracy, if you talk about our forecast accuracy across the entire business, is up 11 percentage points. That is statistically significant when we talk about all those variables of every material at every customer. Really solid performance. Our ending inventory here measures the total ending inventory. This is all of our raw WIP pack. This is all of our finished goods. If you look at the significance of $781 million a year ago in May, and now we're down to $590 million as we close the month of May. Warehouse inventory moves.
Talk about what we were mentioning a little bit in the first part about stranded inventory. We wanted inventory in the right place at the right time to avoid a lot of inventory moves around. We're very seasonal, right? So we have very specific production requirements, and we don't want to necessarily have to go back into production sometimes, so we will move inventory to capitalize on service. Those rebalances of that inventory is down 61%, which clearly tells you the inventory is going right into the distribution network the first time. And then lastly, all this comes to the bottom of the funnel with inventory terms. And when you look at all of our finished goods, on a year-over-year basis, we're up 28%.
So when we're moving that needle significantly, we want this to not only be a significant improvement that we're gonna continue to do, we also want this to be a sustainable component. We're gonna make significant changes to our network. This has to be sustainable, and a lot of the pilot that we have 10 months of data on has shown us really, really good results that we're gonna begin to scale with other customers and other customers' data as we go into the next few years. Super, super exciting. So with that, I'm gonna leave you with this. Like, transitioning with David, he's gonna talk about a lot of changes that are happening in our distribution network and what is to come in that space over the next year. David?
Appreciate it.
You got it.
So I am not one of the good-looking ones that Jim referenced, but I am a passionate one, so we'll, we'll go from there. So my name's David Huskinson. I lead our distribution group for the LIGOR side of the business. So not the GM side, so soils and mulch, I will not be referencing that. This is all on the lawns, gardens, Ortho, and Roundup side. So network optimization. So Kim kind of alluded to it, right? We've had significant improvement in our inventory position overall. That is a key enabler to what I'm gonna talk to you all about when it comes to our network. The other thing I'm gonna end with is just some cool stuff, right? The fun stuff, the automation portion of that. So we'll have a few things to share there.
So this first chart you're seeing is our evolution of our warehouse square footage. All right? So what you can see is in our peak, we got up to 7.5 million sq ft. If you look at where we're going, all right, so at the end of FY 2025, we're gonna be at roughly 4.6 million sq ft. All right? So to note, that is slightly below where we were in 2019. One call-out on this, too, as you expect, right, costs come down when your space comes down. So we're very excited. If you take out our e-commerce portion of this, right, our cost is gonna be almost flat to where we were in 2019 for warehousing.
Now, what's impressive about that, I think everybody knows the inflationary pressures that we've seen on rent and labor, so to maintain almost flat is a huge accomplishment. The reason I call out that we have to pull out the Direct-to-Consumer e-commerce portion of that, in 2019, we had next to no Direct-to-Consumer shipments. This year, we're gonna do over 6 million units, so significant growth that we've seen there in that business. So when you make these type of network adjustments that drive cost out, you also have to keep the customer in mind, right? So this chart on the left, Josh talked to a little bit earlier, this is where our key retailers are, the accounts that we're servicing. If you look at the chart on the right, ultimately, you see where our network's gonna end up.
It overlays very nicely with where our customers are. We're gonna be able to service 91% of our customers within two days and 98% of our customers within three days. This is a marginal change from where it was overall. Now, at one point in time, we had 18 shipment locations that we shipped from to the customer. We're gonna be around six this year, okay? Oftentimes, people say, "Well, when you cut, you know, warehouses, that means you're probably shipping it longer, it means the cost is going up on freight." If you net it out, so just this year alone, all right, if you net it out between warehousing and freight, we're gonna save a little over $30 million in our supply chain. So huge accomplishment there.
All right, so up next, I'm gonna show a video here, and this is a pretty exciting facility that we have. So this is our Central Ohio Regional DC, okay? So last year, we consolidated five warehouses in Ohio into this one facility that's 1.3 million sq ft. In doing that, we cut down 230,000 mi of transportation that was happening here in Ohio. If there's any science nerds out there, that is the distance from Earth to the Moon, okay? So put that one in the fun facts to take home with you today. Now, where this video kind of ended, if you look up at the ceilings of it, what you'll notice is pretty high ceilings, yet you don't see any racking in there. Guess what? We're doing that right now as we speak.
So, over the next couple of months, we're doing a really significant investment in this facility. We're gonna be racking one third of that facility. That's ultimately driving a 30% improvement in the density of that. Why is that important? That's important because as we continue to consolidate the network in, right, we have to be able to have space to, to store that. So that's what's gonna happen here. The other thing that I would call out is this facility is gonna be an absolute powerhouse for us, okay? This facility is gonna serve us about 35%-40% of our total LIGOR volume next year, so it's gonna be a significant importance. All right, so we've talked about cutting costs, you know, by reducing the network. Obviously, we got to, you know, save on some labor, too. So let's talk about the fun stuff.
Let's talk about automation. All right, so this video that's playing here is something that we're looking to pilot here at the start of this upcoming fiscal year. Ultimately, what's cool about it is it's semi-autonomous, all right? So one operator can operate five forklifts at one time. So obviously, you have labor savings that comes with that, but also we're gonna be able to operate more 24/7 without being that labor intensive in those off-shift hours. We're really excited about this. You know, hopefully, the pilot goes well. We anticipate that it will. We think that this is very scalable, okay? So we believe this is something that we're gonna be able to do across our network, you know, barring no issues arrive in that pilot. I mentioned the DTC growth a minute ago.
So we're gonna do over 6 million units in direct to consumer, and that's through our retailers' websites, and that's also through our website, right? So one of the things that we got to continue to do is drive cost out of that overall business, right? How do we continue to drive profitability in DTC? So this video that's playing here now is our StealthWrap machine. It's a pretty cool name because it's a pretty cool little project, okay? Ultimately, what it does is it reduces the amount of expensive corrugate that goes into a shipment, and it also helps reduce the amount of labor. The great thing about this, also very scalable. So similar to the, you know, forklifts that we just discussed, we're gonna be expanding this. This is in our Chicago facility today.
We're gonna be putting this in our Memphis facility later next fiscal year. So really excited about that. Happy to say, too, our cost per unit on the DTC front is the lowest it's been in company history. So huge shout-out there. All right. So in closing, you know, kind of the key takeaways here, right? We are ultimately very excited about the building blocks that we have. We feel very confident in these, and we feel that these are going to be the backbone to where we need to go. There's one thing that you all need to take away today is we are extremely excited about our plans that are going to ultimately lead to $150 million of cost out over the next three years. So with that, I'm going to hand it off to Mr. Tom Crabtree.
I know he's got some exciting stuff to talk about with Hawthorne.
All right. Good morning, everybody. As Jim mentioned earlier, I'm Tom Crabtree. I have the privilege of leading the Hawthorne Gardening Company. Let me start by saying today is absolutely the perfect time for us to talk about our business at Hawthorne. We're actually completing one of the biggest transformations in our business, as Jim alluded to earlier. Let me just give you some perspective. I came over from the Scotts side three years ago to join Hawthorne, and I know, Andrew, you know the industry really well. You think about where this thing was at three years ago, we were at the highest of highs. Even though I was on the Scotts side at the time, I could see what was going on, and it was like, really cool. I mean, they were kicking ass over there. It was exciting.
We're doing great things on the Scotts side, but wow, this is cool, too. So I had the privilege to come over, lead the sales team, three years ago, highest of highs. And wouldn't you know? What happened to this industry three years ago? Just the timing that I had come over. So I'm pretty sure, and this is just to give some perspective here, I'm the only Scotts sales leader in the room, probably the history with the company, that has never beat a prior year sales number in 3 years. It's amazing that Jim and Chris let me stand up here and talk to you guys today.
But in all seriousness, I say that because it's the swift, decisive action in the past three years that our team's taken that has me super excited about our opportunities with where we're going in this, in this business, in this industry. Nobody made the changes, nobody stood up and did the kind of things, and I'm talking about our competition, that we have done, and we are now better positioned, better set to succeed and drive this company into the future than anybody else out there. So while I came in at a really wonky time in the business, it actually was the perfect time to come in and be faced with challenges that you're going to see over the next several slides have made our team faster, nimbler, I think better thinkers, more creative, and nobody's more poised to come back.
As the industry may or may not give us a little bit as we go forward, but we're running the best Hawthorne business we ever have right now. So it's a really exciting, transformative time as we go forward. So, what did we do? First of all, we focused on our brands. On the left-hand side, we're blessed to have and have built this company with the best brands in the industry, some of which you guys probably know. Gavita Lighting, absolutely the premier LED lighting in the industry that's out there today. General Hydroponics, the best nutrition brand that's out there today. Our soils, led by Mother Earth, Botanicare. We got the best brands to work with.
So one of the first transformative changes we've made is, let's move away from all of the me-too, third-party distribution side of the business that we've been in, that had a lot of fixed costs that went along with it, a lot of challenges that didn't allow us to be as nimble in times of crisis as we were able to. So as we've moved out of survival mode and into growth mode, it's a focus on what Jim and Chris built here is the best brands in the business, and it's our team's ability to get focused and get rallied behind those, but maybe more importantly, start to invest and put a little bit more back into those brands as we go forward. That's exactly what we're gonna do, and you'll see that here in a few slides.
The other one I want to call out when we talk about what we did, you heard earlier, 1,300 employees. If you go back to my original start three years ago, when we were on top of the world and kicking ass, 1,300 folks out there. Today, less than 300. And you, you could look at that and go, "Man, you know, that's all you got left is less than 300 people?" Here's the really cool thing: like, we got the best 275 people left in this industry today. We've got the people. We have a beautiful blend of the culture that's needed in this industry because it is a much different industry than the consumer side of the Scotts business. It's grassroots, it's people that get out back and, you know, have grows in secret places and backyards and that.
We've got that kind of culture, that kind of industry folks on our team. And then you got a lot of us others who are sort of Scotts CPG, consumer business people. It's a beautiful blend that nobody else in our industry has got out there. So while we were at 1,300 folks at one time, we're at a wonderful mix of the right kind of leadership, the right kind of grassroots folks that we need in the business today. The other piece of what we did that I want to call out, you kind of look at, I guess, the one o'clock position of the slide. Distribution, as I mentioned, a lot of heavy fixed cost. Three years ago, we had 7,000 SKUs out there. Today, we're less than 1,000 because it's our stuff.
It's the brands and the SKUs and the products and the solutions that we've put the innovation, the R&D research behind, that you guys will get to see here in just a little bit. We've partnered up with people who are core on the distribution side. It's given us actually better service, better scale, better reach. So that long tail of customers in the hydro industry, 1,300 customers. A lot of these folks, as you guys know, they're, they're hydro shops. They are tough in tough areas to service. They're tough locations, they're smaller, all of those kind of things. That tail of 1,300 customers was 1,000 long, and we needed folks that have got the better tentacles to be able to get into there. So we partnered up on the distribution side. That's helped, again, to make us more nimbler as we go forward.
You talk about protecting what matters, what we're all here for today, R&D, research. We're the only company out there that's got the best blend of the brands that you need in this space, but the science, the real science that you're gonna see today, to be able to innovate those solutions for growers who are more challenged today than they ever have been before. This industry's, you know, it's consolidated so much. Flower prices, you know, down $1,000 a pound. They've got to get more efficient. How do they do that? How do they get more productive? They do that through the science and the research that we do here at Scotts, that translates over to Hawthorne. We're gonna do more of that as we go forward. So what does this start to look like?
As we focused on our brands, the sales run rate that we see, much more stable today. You say, well, you know, why is that? Is that the end of... We're focused on those 20 brands. No longer focused on 100, or trying to be focused on 120 brands. We're focused on 20. The 20 that we know are the best, the 20 that we control, the 20 that we can put the promotions behind, the pricing and programs, the marketing, the innovation behind. That starts to give us more confidence in what our numbers can look like, not only tomorrow, but a month in the future as well. That's something I haven't been able to say for a long time. So much volatility within this industry. We're starting to see some stability. That's a really good thing for us.
Signature brands are what we call, again, those that we own, those that we're focused on. When I first joined this side of the business, that was about a 60/40 relationship because we were a broad distributor at that point in time. Today, it's 84%. I'm gonna show you later on, that's gonna naturally evolve to a 100% of what we do. Again, those are our higher margin brands. They're the ones that we invest behind, all those things that you guys understand. The other one I wanna call out is the consumable side of the business. We've got an opportunity here to continue to increase the recurring revenue stream, which is so important that the consumable side provides for us.
If you listen to some of my competition calls in the past in that, they'd say, "Yeah, Hawthorne, heavily invested on the durable side of the business." Yes, CapEx, when things started to turn down, it crashed faster than anything. Because we have been strong and core on the lighting side, it was an opportunity for them to say, "Yeah, glad we're not those guys." You know what? We've got the best consumable brands as well. Again, Mother Earth, Botanicare, General Hydroponics. The consumable side of our business was about 40% three years ago, so it was a 40-60 relationship. Already, we're above 50%, and I'll show you a little bit. As I start to think about our models for FY 2025, the consumable side of the business goes up to 55%, maybe 60%.
That's really good, but what I also want to make sure you guys remember is take nothing away from Gavita Lighting that's out there right now. We're still the best lighting innovator, manufacturer, and marketer out there, and we've got absolutely the best brand. So as the industry starts to give us a little bit back, maybe some things happen on the regulatory, governmental side that starts to put some investment dollars back in, we'll be there with CapEx lighting as well. Nobody else in the business, in the industry, has got that really nice balance and capabilities of consumables as well as durables like we have. So again, it's been a interesting ride, really poised for profitability at this point in time.
As I said, you know, while we haven't beat a sales number over the past three years, we just, for the completion of this quarter, we actually hit a profit target for the business. So it's, it's been rocky. I think everybody understands that. It gives me confidence that the changes we're making in the business, the things that we're doing, are driving the right behaviors, the right solutions, and quite frankly, the right results for the organization. So let me shift now with where the business is going. So we got some stability in it. Starting to get profitability back into the business. So where are we headed? We talked about having the best brands. That's what we've rallied around. We've got the best field sales force.
So when you think about that 275 folks, we really protected the areas in the business that truly matter. Technical sales is a key resource for us. We're the only company out there in the business today that's still got folks that can go into the grows, help growers continue to find ways to optimize, optimize their grows, help them to, you know, reformulate, help them to problem solve. That's been something that we've worked hard to protect. It was something we built up that was important, quite frankly, before the downturn in the market. It's still important today, and it's gonna continue to be a competitive advantage for us as we go forward. The other piece I wanna talk about, these brands, and I'll use Mother Earth as a key example, and you'll see it here in a few slides.
Our brands can work even harder for us beyond hydro. We love the hydro space. I love the culture, I love the industry, but there's another consumer out there in the independent garden center channel, that's looking for an edgier, earthier product, something they don't find in the big boxes. Our brands can also work harder for us beyond Hawthorne. More growth opportunities coming. So where are we gonna invest? We're gonna invest behind the key brands, the signature brands that I've called out. Don't, don't take what I'm saying about our brands and, and take what growers are saying. And I think this is a great example if you look at the kind of the upper right-hand side of the slide. We work closely from a social standpoint with all of our growers, trialing, testing. There's nothing more compelling in this industry than word of mouth.
Growers who are using your products, if they like your products, it goes like wildfire across the industry. One of the things I like about this particular call-out is it talks about that unique combination of not just a product and a price, but quite frankly, a growing solution, a nutrients formulation from General Hydroponics, as well as Gavita Lighting. That gets back to the science that we're putting into the business and how those come together, the technical resources, again, that we put into the field, into growers to help them find that optimal kind of tweaking, 'cause every grower out there, quite frankly, thinks their recipe is the best. And they're right, quite frankly, theirs is the best. It's up to us to help to find that sweet spot for them, help them find that sweet spot.
Just a key example, some of the marketing that we put out online. General Hydroponics, 25 million plants a year is what our volume supports. I think this is again, where we are uniquely different than our competition and positioned to grow for the future. We're able to leverage... You saw John Sass earlier today in his presentation, showing all the things that they do on the Scotts side from the marketing perspective. We're able to leverage, lean into some of those resources, some of those capabilities to drive high-class information in a social format here that leverages the media capabilities that we've got across the organization. Very different. You know, we a lot of times at Hawthorne, call Scotts our big brother.
It's absolutely our big brother, and a key competitive, competitive advantage that only we've got to be able to lean in to big brother, get that advice, get those resources. I mentioned it earlier, when you talk about what are the advantages that are gonna allow us to start to grow back, get out of this survive mode, really comes down to people, right? The technical resources that we put in the grows. We put people into the retail locations every single day of the week. They're doing things like supporting shows, merchandising, supporting promotions, helping to, helping to drive consumer engagement, trialing, testing.
Again, areas that we protected through the downturn, investments in people across the board, especially investments in what we know matters because we've seen it on the Scotts side, those people in the stores every single day, those people in the field, it's the heartbeat of what's going on in our industry. Nobody else has protected, again, that to the same degree that we have. Supply chain, again, another unique opportunity to us, for us to capitalize on some of the capabilities and skill sets that come over from Scotts as well. Couple of primary facilities, just a quick video on. So on the left, you've got our lighting facility. This is a lighting assembly facility in Temecula, California. We share this facility with Scotts, which is also a plastics durable spreader manufacturing facility.
So it allows us to flex workforce and work kind of across the enterprise. You go up to Santa Rosa, California, we manufacture all of our nutrient products here, so the brands that I mentioned earlier, General Hydroponics, Botanicare, Cyco, Mother Earth Nutrients, all coming out of this facility. As I mentioned earlier, our brands can work harder for us. We're gonna extend them beyond hydro. Opportunities with partners we're working with right now, as I said, there is a different consumer out there looking for something they won't find in the big boxes. It's an opportunity for us to bring them a solution that's, again, different, edgier, and that's what we're working for right now. There's also the Pro side, a greenhouse side as well, where our brands can win in addition to what they're doing on the hydro side.
So we got the business stable. Looking ahead, we feel really confident. Near term, we're gonna be able to drive single-digit % growth. So finally getting from three years of not beating a prior year number to beating a prior year number is where we're headed at this point in time. Signature sales, our brands going to 100% at this point in time. And that nice mix of consumables moving up, recurring revenue, 55% of our sales is achievable, as we look to FY 2025 planning right now. So everything I've just mentioned, I won't belabor the point. Survival mode, we've got stability. We're ready to grow, baby. So with that, before I introduce Chris, I think, the only thing I would add is we are in a great business. End-use consumption continues to increase.
There's been a ton of wonkiness over the past three years in this business. That's okay. I think they've been great learning opportunities for us. They've been leadership opportunities for us. We've reinvented the business. Nobody's in the position that we're in right now to be able to bounce back and grow. And quite frankly, I am more excited today with where we are in the Hawthorne business than I ever have been. So thank you for the time. With that, I'll turn it over to Chris.
Hey, guys. Chris Hagedorn. Thank you, Tom. I'm not gonna really walk through a ton of content here. I'm gonna just speak to you guys, a little bit more from the hip. So first, I just wanna thank Tom, who has the day-to-day at Hawthorne covered, I think, far better than I ever did, frankly, and the work that he's done over the past couple of years, just dragging this business, out of 2022 and 2023, just the depths that we were in to where it's at today, is... You know, I don't wanna use the word heroic sort of inappropriately. You know, what we sit in cubicles and offices all day and just make decisions. But the work that he's done has been, I think, in the business context, pretty heroic.
And where we're at now is, look, it's a business that, as Tom said, it's right-sized for where the industry is. I think we've reset our assortment, both in terms of moving from a distributor model to a signature model, which is a lot more profitable for us, adjusting the types of products we make in that signature offering to fit with what our customers need, what cultivators are using. Because Tom referenced it, you know, when we started this business, you regularly saw a flower priced at, you know, $3,000-$4,000 a pound. Now, good growers are lucky to get maybe $1,300-$1,400 a pound. So the input costs need to change dramatically, and the businesses respond to that. So again, I'm not gonna focus too much on sort of the tactical stuff.
I'm gonna speak a little bit more to the strategic. And look, I know based off of things that we've said, based off of just, I think, the logic in the assumptions, and conversations I had this morning before we started, look, I know you guys are expecting us at some point to talk to you about a strategic solution for Hawthorne. And again, we've, we've told you to expect that. Now, look, I'm not gonna, I'm not gonna have that for you right now. And I, I think Matt talked a little bit about this last night with some of you folks. It's not for lack of looking. Jim, Matt, a lot of people here, Amy and the whole team, we've done a huge amount of work looking for the right strategic solution, and we've kicked over every rock there is.
And there's a number of them. There are deals to do. So I don't wanna act like there's nothing that we could do, but I don't think there's anything out there that we could do that would leave both the Hawthorne business, which is dear to me, and our shareholders, of which my family is the single biggest, in a better position. That's the reality of this. We've looked at every strategic avenue for this business to move it out of Scotts, and there are not better possibilities today than leaving it in place and continuing to see the business improve. So again, I feel somewhat frustrated because I felt like there had to have been that right deal out there. We've looked at them. The deals that are out there are not good deals for us, not where we're at today.
Not better than leaving it internal, continuing to make progress. And this is where... Look, you'll see progress. We'll talk about it next week. Matt will talk about it when he goes through the financials. The business is getting back to a respectable place. We're not gonna be a burden on Scotts any longer. And that's the work it's taken to get from losing $40 million to not losing anything to making money. That's a long journey. I know it doesn't feel like a huge accomplishment, but it is for us. So we're gonna, you know, we'll go through that stuff in the future, over the next few minutes and the next few weeks. Like I said, we're gonna get back to making money.
The multiple we'll see on those earnings within Scotts is gonna mean that we're a respectable tenant of this house. You know, we talk about big brother is... Look, I'm living in my father's house in a very literal sense here. But we're gonna get back to chipping in on rent and buying groceries and doing those things. It's kind of the analogy we use internally. And we've really been kind of put to two mandates that we are gonna abide by because they're completely non-negotiable, which is we're not gonna invest more in this business, and we're not gonna lose money. And those are mandates we're meeting today, and we're gonna exceed those as we move forward.
You'll see, moving into 2025, the real benefits of the work that Tom and the team have done to cut costs, those are gonna start to come home to us and roost over 2025 into 2026, when you'll start to see much more substantial profitability flow into the business. And not profitability that's really dependent on market growth, 'cause we all know we just shouldn't count on that. Do I expect some tailwinds based off regulatory catalysts that I assume a lot of you are aware of in terms of rescheduling other things? I do expect that, but we can't count on it. So we're counting on pretty much flat growth, again, breeding profitability back into the business through that. But what I wanna focus on more since we've... Look, we've talked about Hawthorne.
Again, I don't have a strategic solution to provide to you guys right now because I don't think it's the right, the right path for us today with the options we have in front of us. What I do wanna talk about is on the other side of our cannabis strategies, our plant-touching investments, which is where we see the real opportunity here. So, and just, again, one last note on Hawthorne. Tom talked about this a little bit. This is an industry that is, it's bigger than the American beer industry, it's bigger than the dairy industry, it's bigger than the U.S. auto industry. And if we can't carve a respectable, profitable business out of that gigantic pie, then shame on us. And I, I have every confidence that we can, in spite of the last couple of years' experience.
What I do wanna focus on a little bit is on the plant-touching side of the business, and this is something I'll have to be somewhat careful here because I'm, you know, I'm wearing my Scotts lanyard and in my Hawthorne shirt, and obviously, here on the campus, talking to a bunch of analysts that cover Scotts, and maybe some of you cover plant-touching businesses, but I bet not many. So I'm gonna be cautious because I'm gonna be talking about multiple other independent public companies and private companies here. So I don't wanna overextend myself, but when we look at the plant-touching opportunity, that's an investment we made back in 2021 when everything was going gangbusters, and this is back when we initially made the offer to Tom to join this exciting, ascending team.
And we looked around and said, "Man, we should continue to invest in cannabis because every dollar we spend there is just tremendous upside for the company." And we looked at the whole kind of constellation, the whole value chain in cannabis, and we said... And I don't think it's a controversial statement to say, ultimately, consumer-facing cannabis brands are gonna be the single biggest value creator in that value chain. And we felt with our experience, our relationships, that we could invest wisely on that side. And look, I'm not gonna get into the New York investment. It's timing. Look, we're in the state. Did we pay a lot for it? We did, but we're there. So this is through our RIV business for anyone who doesn't have that background.
So RIV has got about $70 million on its balance sheet. RIV has one of, I'll call it, functionally less than, less than a dozen New York licenses right now to attack that state from an adult use cannabis perspective. We recently announced, about a month ago, a merger with a company called Cansortium. So Cansortium is a... It's a small, multi-state operator. They're in Florida, they're in Pennsylvania. They've also got operations, small, just because the states are in their infancy, in Texas and Alabama. So we're excited about that business, the combination that we put together there. And look, that's—it's a business that you got Florida about to kick, hopefully, to adult use, the same with Pennsylvania, and we'll see, we'll see how that goes. It's a 60% polling threshold to pass in November, which is a high threshold.
The polling looks encouraging, and we've seen even here in our home state of Ohio, when the polling numbers have looked marginal, that, that when the day came for the vote, it passed. And it's attached in Florida to an abortion vote, which I think will bring a lot more people out and hopefully should be positive for us. But we see Florida about to turn over adult use, the same with Pennsylvania. New York is adult use now, but the market's in its, in its infancy. So a ton of runway there, and that's before you get into states like Texas, which is a monster. And there are three licenses in Texas, one of which we own. Alabama, five licenses. Now, you might not get excited about Alabama, but there's five licenses to hit 5 million people.
So again, we see optionality there, and it costs us effectively nothing to hold those licenses. When those states will turn on and be meaningful to us is, is anyone's guess, but it costs us tens of thousands of dollars a year to hold that, not hundreds or millions. So we're excited about the business that we've got, but much... I mean, this is, I think it's endemic to Scotts, is we are in a perpetual state of evolution, so we're not just sitting on our hands there. And again, this is the tricky part that I don't wanna get out over my skis too much on. We're not content with just the map that we've got, just the business that we've got.
So we're looking at other deals on the cannabis side because we believe looking at some of the larger MSOs, almost all of whom are customers of ours, and, you know, Tom didn't reference some of these particular deals, but, you know, we got questions on our lighting business. That's a business that we're talking to major top three MSOs right now, selling 15-20,000 light projects in one shot. So people are investing in the industry, and this is where I, I, again, I do feel that there is, there is tailwind behind this. These are, these are projects that we plan out over the course of the rest of the summer and into the fall. But people are spending money. The large MSOs are doing well, and they are valued respectably, but I don't think where they should be.
If you look at their growth profiles, their opportunity, and a lot of it's because of 280E and banking restrictions and other things. But when we look at those top five MSOs, you look at people like, whether it's Verano or GTI or Curaleaf, I don't think building what they have is so hard. And when we look at the opportunities we have with RIV and Cansortium, we're looking at a lot of things now. And again, that deal doesn't close until probably November of this year. This is just state regulatory approvals we have to wait on. But when it does, we want to have fully baked in the hopper, a sequence of subsequent deals. And we're talking to people actively.
We'll have people on site here a week from yesterday to have serious strategic conversations, and some of those deals would be large, transformational deals like the RIV and Cansortium deal was, that would bring in people with... whether it's large MSOs. Again, a lot of geographies, a lot of scale, a lot of revenue and earnings coming in. There's other deals that would bring us really strong brands. Because, and, and again, this is something I do want to touch on briefly. I think MSOs, I think the industry, writ large, has completely misunderstood and undervalued brands in cannabis right now. You have a lot of states like Florida or Illinois, where you just... you build stores, you build grows, and you will sell everything you grow. It's like Field of Dreams. Just build it, and they will come.
And I think people, people misunderstand what that means, because, again, this is not something you can count on, and, and that's when you have to zoom out and look at places like California, like Michigan, more mature cannabis markets, much more competitive, where brands and differentiated products are winning the day. So we're looking at deals again that, that fulfill different strategic pillars for us, whether it's scale in geographies and in earnings, or it's brand power and differentiated cultivation expertise. So we're going to have those folks on site. And then there's other deals. There's much smaller, more tactical deals. I'd love to be in Ohio. Ohio is an exciting market for us. It's not just biased because we, we are based here. It's just it's a good, profitable, relatively limited market with a lot of people.
So there's those smaller single state deals that we could bolt into RIV and Cansortium. Just get bigger, take it more cautiously, but we, again, we like to make bigger, more aggressive moves. So we're exploring all of that. And this is work, and again, it's the source of I wish I could put up on a screen, but I think it would be premature. With some of these moves that we can make, we believe that there's the opportunity to create a business that's worth... Again, there's, I mean, two deals I have in mind specifically that we are actively engaged on beyond RIV and Cansortium, that we think could turn that business into a billion-plus dollar business, just based on how peers are valued.
That's without attacking synergies, that's without applying specific expertise these partners would bring to states we already own. That's just out of the box. You put these businesses together, what is it worth? So we're really excited about it. And look, the bottom line is, as much as I think people have looked at Hawthorne and said it's a distraction for the management team, it's, you know, an inventory you had that didn't turn out well, and you should move on. The way that I look at this is, and I've been watching a lot of these, just indulge me on this digression here. A lot of these sleight of hand card trick videos recently, so I've had poker in my mind.
I'm not a poker player at all, but we, we got dealt a hand that initially looked really great. And on that flop, we got a shitty flop, and it felt really bad, and that's kind of where we're at today, and we could, we could fold our hand before those river cards come, and we see what the hand actually is going to turn into. But I don't see any reason for that, because again, you go back to those mandates. Don't lose money, don't invest anymore. So we've taken our medicine, we've taken our write-down, we are where we are, and we intend to play the hand out, because I believe with the whole cards we got, that we're gonna—it's gonna turn out pretty well. So we've got a lot to talk about.
We've got a board meeting coming up here in a couple of weeks. We're gonna run all of this, you know, past the board, and hopefully, they sign off on it too. I expect they will. But look, we're in spite of everything that we've been through, I think we're at a really exciting place. Again, Tom and the team have done heroic, really hard work taking this business from where it was to where it is now, where it needs to be poised for profitability, poised for growth as the industry returns in whatever fashion it does. On the plant touching side, that is, it is all upside there. We've got good partners now.
We've got more partners in the hopper, and I'm excited for you guys to see it, because I hope it, I hope it shows you guys a little bit of why we remain dedicated to the space. But with that, I'll hand it back to the deck.
Ladies, gentlemen, fellow dirt nerds, I am so happy to be in front of you guys today to talk a little about our vision for gardening. What we're gonna talk about today, and what we're gonna show you a little later, is truly gonna revolutionize the way we think about, the way we interact with, and the way we cherish our gardens. We have a very simple but bold mission ahead of us, and that's really to empower gardeners of every skill level to create their own beautiful space that is sustainable and productive and brings joy to their home and their life. So we don't think gardens are just plots of land. Like, we really believe they are canvases for creation. We know they are sanctuaries of wellness.
We know that they are essential to building communities and to protecting our Earth's ecosystem, and we can't wait to start touting that message a little bit more with everyone. And lucky enough for us, we've got a great partner in our corner. And where's my clicker? And so we're gonna continue to use Martha's expertise as a lifestyle expert, as a designer, as an influencer, and as a gardener guru and dirt nerd herself. So this is our commercial.
You know, I spend a lot of time thinking about dirt.
At 3:00 A.M.
Any time of day. What people don't know is that not all dirt is the same. You need dirt with the right kind of nutrients. Look at this new organic soil from Miracle-Gro.
Everybody should have it. It worked great for us.
This is as good as gold in any garden. If people only knew that it really is about the dirt.
You're a dirt nerd.
Huge dirt nerd. I'm proud of it.
I have to say, this, this commercial has gotten more engagement than we've seen in a very, very long time. People are stopping us in the street, calling us dirt nerds, and we're super lucky today to have the dirt nerd herself with us. I'm gonna bring out Martha Stewart. She has-
Look at her.
Our very own.
Hi.
She is going to be our first ever Chief Gardening Officer, and so Martha and I are gonna go on some wild adventures together. But what we really wanna do is make gardens more accessible. We wanna give more sustainable gardening practices to all of our fans, and we wanna make sure that everyone engages in this amazing category. And so, without further ado-
Thank you.
Martha-
Thank you.
I will turn it to you.
Well, I'm sorry, this is not Kim Kardashian style. If you've been seeing the Indian wedding with all the bosoms and the diamonds, but this is my style. It's been kind of a fun year working with Miracle-Gro and the people here because I am a dirt nerd. I have been gardening since I was three years old, and I know what good dirt is. My dad would take me fishing down in the Jersey Shore. We lived in a little on a little street, Elm Place, in Milton, New Jersey, and we actually went deep-sea fishing on the party boats and caught bluefish or mackerel, depending on what was running, and would bring them home and clean them right into the garden.
So all the guts went right into the garden, all the scales, and we grew four-pound tomatoes. And my dad said, "It's all about the dirt." And so my whole life has been composting and, and reusing, all the, the waste material from the horses and the shit and the, whatever. I had some sheep once, but I don't have them now. Donkeys, the chickens, the geese, the peacocks, all of that goes into my compost. And then I found, the new soil, the Raised Bed Organic Soil here at, at Scotts, and I thought, "I'm gonna have this tested." And I tested it at NASA. I have a friend, Pablo Sobron, he's, working at NASA right now. He is a doctor of soil and ecol-- and ecology, a very handsome Spanish guy. Did you ever meet him yet? Oh, he's very handsome, very tall.
...
We went to Iceland and New Zealand with him, and he was really fun to travel with because he could tell you all the geology and everything. So he tested both soils, and they were almost identical. So I knew I was on something that I didn't have to compost, that other people didn't have to have chickens and horses and geese to get the same kind of compost. It was really amazingly... And now I do testing like that anyway. That's my independent kind of nature. And that it was really impeccably close, I was so happy. So we got a giant load of the Miracle-Gro Organic Raised Bed Soil last year. I transformed a donkey paddock with raised beds. I stripped the soil.
You're gonna see all of this in a story sometime. But we stripped the turf off the beds. I measured it all out. There's 50 beds of varying lengths and widths, and we then rolled up the sod, cultivated that soil with the Troy-Bilt, then fertilized that with Scotts, different, different Scotts fertilizers. Then we rolled the turf back down, upside down, because I read that in an English book, that you should put it back and let it be in there, and so it composts itself. Then 10 in in these 2x10 white oak boxes that we made on the perimeter of all these, these raised beds, and filled them with the Scotts Miracle-Gro Organic Raised Bed Soil.
We planted everything all at once, and I must tell you, 50 beds of varying sizes, the largest bed is the pea bed, which is peas and squash. That's, I think, 55 fet long by 10 ft wide. Everything grew at once. We had dozens of 10 lbs cauliflowers and 8 lbs broccolis, and so many. In 4 weeks, we had so many artichokes, we couldn't eat them. From seedling plants! These are seedling. And by the way, we used a lot of Bonnie Plants, too, which I was pretty happy about. I grow a lot of seedlings myself, but we used the Bonnie Plants. They were fabulous, and I've never had a vegetable garden like that. No one could believe what they saw.
I even had our boss man over here, Jim, come to see, and you were impressed, right?
I was impressed.
Yeah, he was impressed.
I love that Jim said, "What did you do?" And she said, "You did it, Jim!
I asked the question of Martha and said, "Because it's Martha, and Martha's got a fabulous scheme on her end of her place." I said, "This, it really is not, is it?" She said, "Are you kidding me? It's completely us. It's, it's the soil." And-
...So the Dirt Nerd commercial turned out to be very successful, and because of—I have a very authentic background in doing all these things. Like, you know, my magazine, it was one of the prize-winning magazines of all time, lasted for 30 years before the media changed, and we're now doing online editions of the magazine, but also six special issues. We just did a gardening issue, which sold very well at—Is it $17.95? $17.95 for the gardening issue, where we used to, you know, sell them for $1.50, now they're $17.95, and they're doing extremely well. Anyway, so the authentic nature of my knowledge, and people know that I know what I'm talking about, they're listening.
And because of that, Scotts and I have gotten together, and Jim and I are creating this new position called Chief Gardening Officer. I still have my other job and still doing all the other things I do.
You guys agree?
Oh, yeah.
But I think really pursuing my hobby, gardening is my hobby. Cooking and lifestyle and everything else was my job, but gardening is my hobby. Now, and living on my farm, I live an hour outside of New York, a 150-acre farm in Bedford, New York, and people are coming to see the garden. I have transformed so many of my friends into serious gardeners now when they see what's happening. And the big question is: What do you do with all this stuff? Because really, it's prolific and fabulous. And this year, the garden is even better than last year. Even with this hideous weather that we are experiencing, the garden has been... It grew even faster, which is a little frightening because I don't-- I really... It's too much, too much heat.
So I'm gonna, I'm gonna plant fewer of everything and, and really spread it out. I have to do successive plantings. I figured that one out. But the next, the next batch of commercials after Dirt Nerd is, I Told You So, and I'm gonna hold up these things. Can we show the broccoli?
Yeah.
So we're taking a lot of time-lapse photography on single plants. So this is a broccoli growing in the raised bed. And this is over a period of, I think, three weeks.
Yep. This is, this is a three-week period, and it's not edited whatsoever. Hopefully, we'll have some fun music to go with it.
Yeah, we're gonna, we're gonna get it more smooth when we do the final edit, but-
In fact, the broccoli got so greedy, it took over the camera.
But there, there's the broccoli, and that weighed in at about 7.5 lbs. And it is so tasty because I eat everything I grow, and I probably don't go to the grocery store very much. I really do grow almost everything I eat, but unbelievably fabulous, so.
I would say that kind of the best part about working with Martha, not only is kind of a thought-provoking idea starter, but she tells us these real-life examples, and they turn into commercials. I'll remind you again, that broccoli commercial, which was our most engaging commercial ever, was because Martha told us about her 12-pound broccoli.
Organic soil from Miracle-Gro has grown me the best garden I have ever had.
Good soil, and you get good results.
Look at that!
The broccoli was fantastic.
That broccoli, I think some of them were 6-7 lbs.
Now you can tell people, "You saw that broccoli." I mean, that is truly a real story that we're telling.
Yeah, and I weigh everything. Everything that's picked, I, it comes in the kitchen, and I put it right on the digital scale, and it is. And we photograph it with the weight on it, so it's real. We're not faking it. Nobody's hand is on it, like at the grocery store, you know?
Well, Martha, one thing we love about you is you're just, you're super attuned to how dynamics are changing and what people care about. What do you see as kind of the most important things for the future of gardening?
Well, I deal with a lot of young homeowners in Bedford. I belong to the garden club, the Bedford Garden Club. It's the oldest garden club in America, and I also am an honorary member of the Garden Club of America. And what they're interested in, first of all, is sustainability. They're very interested in organic. They are very interested in diversity, biodiversity, and they are especially interested in having their own gardens that work. And they don't want to waste time. They don't have time. They have kids, they have jobs, they don't want to spend time trying to grow stuff. I think you saw earlier the soil, those other bags of soil.
Yeah.
When I saw those pictures, that tells the story. You use the wrong kind of soil, you're not gonna get the right kind of results. And you think that you just dig up your backyard, and it's gonna be the perfect soil. When I bought my farm, the first thing I did, 'cause I'm smart, or at least I knew what to do, I dug up plugs of soil from all over the 150 acres and sent them to Cornell, to the agriculture school there, and they tested it. It all came back really good. It had been a cattle farm, so I knew the soil... I was starting with good stuff, but with amendments and with the top dressing and the other things that we do, it is just phenomenal. So, so I think sustainability is very important.
Also, they want results. They really require results because they have to show flowers at the garden club meetings. They have to show their vegetables at the fair. They want results, and their kids want results, too. So many children are getting into gardening. I'm just so pleased about it. I have a 13-year-old granddaughter, this beautiful girl who's mostly a dancer and a student, but she has plants, so many plants, and she grows them herself, and she comes and works in the garden, and she's really interested in all of that.
I mean, speaking of future Dirt Nerds, I mean, she's showing pictures of the root structure. Like, they understand the biology.
At 12 and 13, she's drawing biology-
Exactly.
-and botany.
It's fascinating. We've got to capitalize that and make sure that they stay engaged, and they understand all the aspects of gardening that bring so much joy.
They also want ease of stuff. They want ease. So to create a raised bed garden, you have to get the soil someplace. Why not get it from a, from a very reputable source? And I can help them find that soil, and they are finding it, and they're buying it because, obviously, I mean, I go and circle around the big mass marketers up in around Bedford, Mount Kisco, and I see what's being sold, and it's very impressive. So it's kind of fun to be working with people who are interested in the kinds of things I'm interested in.
I think that Miracle-Gro is really doing a good job in revisiting their mission, revisiting everything that they have done in the past, and looking forward into the future. Gardening—My first gardening book I wrote, called Martha's Gardening, was the motto was Pour l'avenir, which means for the future. And that's what we have to think about, the future, and we have to fix stuff really fast before it's too late. And this kind of soil helps fix. It really does.
Anything else you want to share with us? I know, obviously, the personal usage, I love that story so much.
Yeah.
Is there a part of your property that brings you the most joy?
I'll throw a comment and see how both of you respond to this. Again, I called Martha, and we were thinking really hard about the marketing talent that we had for what Nate and I want to do with the business. And I asked Martha's opinion, and she didn't just say, "I don't think you have the right people." She said, "The right people are really, really hard to find." And she said, "Fortunately, Sadie's getting treatment, and so I—she'd be the one that I would say, 'What do you like about Sadie, and how do you think you guys are going to work together?'" Because this Chief Gardening Officer is no joke. This is like Shaq being the president of basketball, you know? Or honorable.
Yeah, well, it's extremely important to work with the right people, and she's the best, and better than all-
You're the best. Come on.
So then I started to say, we got, we also got into the, into the Tina Turner song, It's the Best, Simply the Best, and my... They haven't used that one yet. You have to buy that song. Tina would, would like it if I sang that song.
I still remember your joke about Tina.
I know.
How do you think it will work?
I mean, honestly, I think she's gonna challenge us in ways that we've probably been challenged before. We've got to take a really hard look at our packaging. We've got to take a really hard look about how we communicate our system, our footprint and how we are already doing so much good. We got to be more outward about promoting that and to get people, new people, into our categories and enable our success. I mean, I picture a world where, you know, social media, that Martha can directly help our people. She can answer questions. She can be a trusted resource. Like, it needs to be more one-to-one.
And I'm very good at writing recipes. I mean, I have written probably 30,000, maybe 35,000 recipes in my life, and I'm very good at writing directions. And my whole business was founded on information and inspiration. And I think that adding that to the Miracle-Gro family here, in terms of how do you do it, is very important. The packaging can be simpler. The directions for how to grow a broccoli can be very clear. It's a recipe. Everything is a recipe in gardening, and we can transform an easy instruction for people. It's just, it's necessary and very important.
Yeah, and I'd say you're also very masterful at, advertising and again, connecting with people. And that is another thing that I'm going to definitely lean on you hard for advice on, and how can we be more involved in the communities, and how can we again, sort of relate better to our customers and our future gardeners?
Yep. Any other questions, Jim?
When we started talking about this opportunity, this role for, for Martha, one of the things she said is, "You know, I, I've never really had a chance to have a legacy in one garden. Like, in food and home and women's issues," I think. And what she said is, "The one thing I do just for me is gardening.
Mm-hmm.
This is a really neat opportunity. You know, I am a major fan of someone who has maintained a relevance image, and is just a powerful person who understands home, garden, family, food.
And now horse competition. Should I mention? I'm going to the Paris Olympics with Snoop Dogg. He's afraid of horses, and I, I have horses, and I tried to get him to pet my horses. He wouldn't even pet them. And so I'm going to comment on the dressage events at Versailles with Snoop, and we're doing some other things. He's there for the whole month to do his comedy shtick about the sports. So I'll be doing only a few of the equestrian events, but it'll be fun, so watch that. But it's... And it's a good opportunity for me to see more gardens-
Yeah.
You know, and see what the French are doing.
How much opportunity do you think there is to stretch, improve the brand of Miracle-Gro?
I think it's immense. Immense. They just have to know what you're doing, and that's about promotion and advertising, but it's also about making sure that the product is 100% right. And so far, that's what I found. I mean, I have other little, little, sayings that I say every single day. If I see a guy, you know, not watering a plant. If I see a wilted plant, I get so... You know, I want to strangle, first of all, I want to strangle them. But, you drank today? Guess what? The plant's gonna drink today, too. Or you ate today? The plant's gonna eat. We feed our plants a lot. It's necessary, it's essential. You water the plants. And you have to say that out loud.
If you say it out loud, people start to think, "Oh, yeah, plants really need food." I get letters every day about, "My, my house plants look miserable." You know, if you ... How, "When, when was the last time you fed them?" "Fed them? What?" You know? That's what it is. It's all about education, and you have to tell them ... because they want to learn.
I agree. And while you have a large property and kind of a grander personality, you're just like every other grower, feeding them, sticking your hands in the dirt, making things happen, and I think that's special.
If you spend time with Martha, she's incredibly cheap.
Right.
So she, "Guess we'll just turn the lights off." She-
Oh, you noticed?
If you look at how she gardens, she doesn't start out with tiny plants. She starts off with $0.99 plants.
Yep.
I think it's-
I've grown, I've grown most of the trees. Where's that big picture of the farm? Put that back up. I've grown thousands of trees on my property from $1 cuttings. See, this is my property. This is just a part of it. But the raised bed is on the very top center. That's just part of the raised bed soil. Everything's kind of nice rectilinear pastures, but in the middle is a maze that I'm growing. It's much further along now. It's all the way down to that rectangle, a maze of every kind of tree and shrub. Each line is a different. So it's very fun, and the orchard is below. All those little dots, those little round things are...
That's my pool in the middle. There are trees, orchard trees, that I've also grown just from small, little trees, and they're loaded with peaches right now, and apples, and plums, and medlars, and all kinds of stuff. I grow everything. I try. I'm a gardener. I really want to see how things grow. I'm not like a middle-aged man that has to buy the biggest tree. I watch those guys. Oh, God! When the men start to feel a little paunchy and stuff, they're going to the nursery. They're looking for the big trees, you know? And I'm looking for the little sticks that you can stick in the ground with roots and watch it grow, and they grow faster. The smaller grow faster than bigger.
I think big tree energy is now gonna be a thing.
Does anybody have any questions for Martha?
Yes.
Why do you prefer the raised bed, as opposed to traditional?
Well, I think I've been growing in the ground in the French intensive raised bed method, which is you take a couple days to stomp down the ground on the pads and raise the beds with a rake. It takes a long time, and if you have the raised bed, you can just keep refurbishing the soil every year, 'cause adding to it, digging it up, it's easy to cultivate. You have grass pads, easy to pick. You can wear your regular shoes. You don't have to put on the garden shoes to go into the garden to pick an artichoke. It's a very neat way of gardening. Very neat.
When you see the next pictures that we're doing for Miracle-Gro, you'll understand it's a very orderly garden, and the plants love it. They just love it. They have plenty of root space and plenty of air space above, and they're protected. Any other questions? You have to get the right wood for the frames. I used white oak. It should have been a little older than it was, so it's a little warping, but I'm screwing it all back together again. It's hard.
How hard is Ryan's job, your gardener?
Oh, Ryan, the gardener? Oh, Ryan. Ryan has never worked on a weekend. I work seven days a week. Ryan will only work five days. I, no matter what, I... Last week, I said, "You know, we really have to get ready for the next commercial." "Well, I'll be here next week." His-
Steve-
You have a shoot coming up.
Yeah. So, so next week, next Monday and mostly Tuesday, we'll be in Bedford because it is stunning, and we, we're affectionately calling the shoot Bedford in Bloom, because what's more authentic and real than actually watching Martha harvest real vegetables and fruit that she-
Harvest and groom the vegetable-
Vegetable.
the vegetable boxes, right.
Yeah.
And then, in September, we'll do-
In September is kind of the campaign-
Right
So that'll be a bigger scale, and then we're gonna look about the benefits of seeding, because now Miracle-Gro Organics has the full collection.
Yeah.
We've got the soil, the container soils, the plant foods.
Oh, and-
I'm excited.
Is your granddaughter in the commercial or no?
Yes, we are in the fall. She is definitely gonna get in there. She's, she's ready to do it.
Okay. Future dirt nerds.
Yep.
Well, thank you, Martha, for being here.
Thank you, and thank you, everybody.
We love being part of it.
I don't know anything.
I don't, I don't need a clicker. Maybe Mark does. Okay, Mark is a board member, and my fantasy of what he'd be saying is, we were looking to add some new faces and ideas and thoughts to the board. And I had established a relationship with the chief operator of TED Talks, and he just had a bunch of commitments and, you know, I think Adam and him sort of said, "There's this dude, and you should meet him." And my fantasy is that we didn't choose him, he chose us. So...
All right. Thank you, Jim. Thank you very much. Listen, that's a hard act to follow. Martha is the goddess of gardening, and here I am following her, so it's an honor. I hope she's still here so I can get a selfie, because it's not real if it's not on Instagram, right? So speaking of Instagram, if you looked on Instagram, there are literally 1 billion posts that are tagged gardening, flowers, plants, and nature. It's a part of our life, it's a part of who we are, and it's a part of who I am. I started later than Martha in gardening. I started actually as a kindergartner, working with my grandmother. She had a beautiful garden, and I'd go over every Saturday, and my job was to take the blue powder, mix it with water and feed the garden.
The blue powder, of course, being Miracle-Gro. And I did that, and I said what I was doing was creating Kool-Aid for the garden, and that's what I did. And so that's how I started gardening, and I've been gardening ever since. Smaller scale than Martha, probably by 1/100th, okay? But I try hard, and these are pictures of my garden, which you'll be able to see. When Jim asked me to join the board, I was thrilled because it filled really. It scratched two itches. One, it allowed me to use my profession because I have a deep background as kind of a tech and consumer guy, but it also allowed me to enjoy my passion in a business context. And gardening is my number one hobby. Number one.
I looked at my telephone, and it turns out I have 16,515 photographs of my garden, plants, and flowers, and I have one-tenth of that of my kids and dog. Don't tell them. They don't know. So gardening is my, my number 1 passion, and I spend a lot of time doing it, and I'm very precious about it, as Martha is. The thing that really excited me about the company and the opportunity is that we have 4 pillars that you heard of today that make this a super powerful brand moving forward. And the first thing is, as Nate talked about, we're in an amazing category. We're in a category that brings people joy, excitement, anticipation, sometimes disappointment. It's an amazing category. It's an amazing lifestyle.
It's been proven that if you have gardening in your lifestyle, you're gonna be healthier. There was a great New York Times article about it this spring. They talked about a number of studies, and in those studies, it's been proven that if you are an active gardener, you have a lower rate of heart attack, a lower rate of diabetes, a lower rate of stress, a lower rate of anxiety and depression. It's an incredible medicine, gardening. So that's the first thing. We're in an amazing and robust category. The second thing is, and Martha demonstrated that beautifully with her raised beds. You saw it outside in the demonstration. Our products work. They absolutely work. And I use Miracle-Gro quite extensively in my garden, and I'll give you an example. I collect...
And there's one of them on the right. I'm so glad that picture's up there. On the right, it may mean nothing to you. It's a small palm tree. There are 293 of those palm trees in nature in Cuba, and the communists do not care about conservation. I have four myself, and there are only two botanical gardens in the United States that have borhidiana. That's my big flex, my garden flex, okay? Now, one of those plants got sickly. Okay, that's a big deal. There are 293 in nature, okay? And so I had a palm specialist that used to come from New Orleans to my house every quarter to take care of all my palm trees, 'cause that's my specialty, palms and cycads. And he died. He died!
There's only one of this guy that can do these kinds of things. So I took a deep breath, and I bought Miracle-Gro Shake 'n Feed Palm, and I shook some feed out on my palm, and I waited. And you know what? It recovered. So it saved a life of an endangered species. It was very exciting. So the products work, and that's important, and you heard that because that's a key part of our brand promise. Not only do they work, but our consumers know that they work, and they love and trust our brands. And you heard some statistics about brand preference, awareness, and brand preference. I won't repeat them, but consumers love our products because they know they work.
The last thing that you heard about was our supply chain and sales capability, and that's a very key part of our platform because we're in 20,000 retail stores. Amazing. We're online with our retail partners, and we are online with our own retail sites. So you put those four elements of our platform together, and we have an incredible opportunity for growth in the future. And I'm really excited to be along with Jim and the team for that growth journey. And one of the tasks I've set for myself is helping the company understand emerging consumers and how and where to reach them. And if I can't do that, I won't feel that I've been a successful board member. So it's an incredible opportunity for growth for the future. It's also an incredible opportunity for me.
I was just asked what it's like working with Jim and the board. Someone asked me just a moment ago, and the question was: Does Jim take feedback and invite conversation? And the amazing thing is, is Jim is WYSIWYG. What you see is what you get, and he demands participation from the board. If you don't speak up in a board meeting, you get called on. "What, what's your opinion? What are you thinking about this?" So he's very open kimono about the company. He personally delivered to me my security badge, and I think it goes everywhere that his does. And that's the level of transparency that he not only offers the board but asks them to enjoy. And so we meet regularly with the management team and teams below. And I've been on boards for 20 years.
I've been a CEO of two companies with boards, and I've never seen this level of interaction, engagement, and transparency. That's a big credit to you, Jim.
If I want you to be critical of marketing or where we are in the journey, what would you say? Be truthful.
Okay. What I would say is, we're not punching at our weight currently, because we have products that. That, you heard Martha, you saw the demonstration. They're incredible. They work better than anything else on the market, or they wouldn't go to market. And I don't think we're telling that story as well as we can, and we have an opportunity there. The other thing that I think we can talk more about is the inspiration. Martha talked about inspiration and information. I think both are important. Inspiration is going to be really important for the emerging consumer, so that's it. Hit harder.
Are we 15 minutes behind? Maybe. Can we make up time here? I don't know. Here's why. I think all day long, I think the last couple of quarters, the question is, how do you grow from here? What are we growing? Margin. So if I'm reading the headline off of Carter's note, it's gonna be Jim, you know, said the F word 31 times, and that's indicative of a down year. I, I'm just-
It's the fuck barometer.
Okay, 32x . So 32x . Oh, unplanned. Eric's gonna write, "Same old Scotts." But it's not, right? I mean, look, we dragged you out here to not punish you, not try and sales pitch you, to give you insight on what the future holds. What does the future holds? And it's not young, good-looking R&D people. It is a... Okay, to Jim, it is. For the rest of us, it is a hyper-focused organization that is driving share gains with appropriate products that grow our market. See, this is the challenge that I don't think maybe it's appreciated. When you have shares that we do, growing this business requires growing the market, requires redefining for the consumer what lawn and garden is, and to do that on a continual basis. And we've admitted, hey, the past couple of years, a bit tough.
We've traded on the value of our brands. We know that. Everything Nate's doing, everything Paul is doing, everything Niels is doing, everything Sass is doing, all the R&D folk, all the marketing folk that you've listened to, all of that is driving and creating value. Creating value for the consumer, which create value on the bottom line, and go back to what Jim said, what are we? We are lawn and garden. That costs a lot of money. It costs innovation, it costs a sales force that no one can compete with, and it costs a production and distribution network that is unparalleled. Those are massive strategic moats. Does that yield a 35% gross margin? It absolutely does. Does that yield the ability to price? It absolutely does. Do we know what we need to do to grow back margin? Yes.
2019 to 2023, 1,000 basis points is what we say. We lost 1,000 basis points. Retailer margins went up 1,000 basis points. That can't happen. They are our partners, they are best friends, but they can't take out of our back pocket when we're bringing so much value to them. Can we price? Eric's gonna tell me, "No, Matt, you can't price. You can't rely on pricing." Guess what? We're gonna get price. We're gonna innovate, we are going to grow, and we are going to get positions that we have not had based on the work that you saw today. The future is robust. That value drops to bottom line value. That value drops to EBITDA. That EBITDA drops to cash flow. Now, we know, next 3 years, pay down debt, guys. I got a bunch of slides. We'll go through the slides.
I just need you to know the takeaway points from today. We get it. The future for us is robust. The financial model is fixed, and we get to have a whole bunch of fun, the more profitability and cash that we deliver. The faster we deliver that, the faster we get back to direct shareholder returns. and yes, Jeff, we can debate whether that's through higher dividends, through share repurchase, which... or just making more money and making investments that pay off at rates that are higher than what we have today. Okay, what did we show you today? A superior team. Look, Jim, F-bombs included, is captain, and it, it is a fun ship to be on. There's no one here who doesn't have fun. Now, it may drive you crazy, but it is fun, and you learn every day because our markets change every day.
You need a superior team. Nate has holes in his organization. He said it. We'll fix those holes. We'll get the talent in. You saw a bunch of talent today that's gonna lead this company. 5 years, 10 years, someone, I'm sure, are ready to take my job, Nate's job now. Matty. The assets. I just talked about our strategic moats. They're, they're real, and they are deepening every single quarter. We have competition, we know that. The dynamic is changing. It's not central, it's not spec. Frankly, we'll compete well against them. The definition of the market's changing a little bit. P&G coming into the marketplace, having mosquito killers, having bug killers. That, that's, that's interesting.... Be smart, be capable, leverage your brands, and get positions in place to defend and to grow and to define. That's what our assets allow us to do.
That's what this building allows us to do better than anybody else. And actionable goals. Okay, so I am very thankful that you all, for the most part, have had very long relationships with Scotts Miracle-Gro. Why am I thankful? Because when I joined the company, you said, "Matt, we're gonna give you a, a year to learn this business, and then let's talk." And, and we talked last night, and I think Chris Carey said, "Okay, a year plus, almost two years, Matt, like, this is unacceptable. You are just a gross margin story." We are not just a gross margin story. It's important to get the gross margin back. Absolutely, that's firepower. But we are also defining the market. The market leader will define the market. Those goals, these three-year goals that I'm gonna talk to you about, growth, getting margin back, that covers my thousand basis points.
We're gonna deliver $250 this year, and we're gonna get $750 over the next 3 years. Let's dig into it a little bit. Paula talked about it a little bit earlier, the Grow More Good component of what we do, who we are. Look, a little bit of some of this has taken a backseat. You're gonna see more about what Scotts represents to connect to that emerging consumer, to let them know that we are a company of substance, and that the people here actually care about what it is they experience, what they're thinking, and especially, you saw it with the new products that are coming out, all kinds of interests along sustainability, along environmental impact. I talked about this, very cool. Like I, I... We're data people, right? More data, the better. But you can get overwhelmed with data.
What Nate and his team have done, having a technologist in the company, in Nate, has allowed us to bifurcate a lot of data to focus on what matters. That helps you support the brands more effectively. It helps you leverage what we have innately, and leverage those assets, again, to deliver value. Now, some of the discussion last night at dinner, some of you weren't there, some of you were, was, and I think [Sakalka ]said it: "Hey, CFOs don't really know how to do anything." Right? I think that's kinda like word for word.
When it comes to share repurchases.
Oh, when it comes to share repurchases. Okay, I, I thought it was more open-ended.
You run with it, Nate.
Yeah, exactly. This is not a complex model. This is not a model that says we have to be smarter than the next guy. No, no, no. Frankly, to be clear, Nate and the team need to be smarter than the next guy. There are competitors out there who are coming. We need to sustain and grow. Getting the margin back, I'm gonna talk about it in a little bit. That's sensible, that's logical. So driving profitable growth, improving the fundamentals, this is where you guys have been very good to us. Stop over-promising. Underpromise and overdeliver. I mean, not that I'm gonna go on record saying you should expect zero growth in 2025, and then we'll blow it out of the water, but okay. We're gonna give you an achievable goal for next year. And then maximizing the power of this franchise.
What is the power of the franchise? It's free cash flow. And then using that free cash flow, per Jeff Zekauskas, in manners that best deliver value to shareholders, I 100% agree. That doesn't necessarily mean share repurchases. It can mean dividends, or it can mean other investments. Net sales growth. We are targeting a 3% CAGR. And by the way, this is on the website now. So John, you can take pictures of it, but probably better just to take pictures of me. How does that come? Like, what, what—how do you break that down? Well, it's kinda 1% across three areas that we've challenged ourselves with. 1% underlying pricing on our portfolio, 1% from innovation, and over the near to long term, 1% coming through M&A.
But if I'm calling back my 250 basis points a year, I just pointed to 1% across the portfolio net pricing, which is 100 basis points. Okay, let's start there. Just got 100 basis points just through pricing. We've already talked about Hawthorne. I, I mean, frankly, Tom, you may not like this. A lot of this room thinks it's a distraction. We spent 30 minutes out of I don't know how many hours, oh, plus the tour, so 45 minutes. Probably appropriate, but we've made significant changes there. What does that mean? It means taking a business that did $50 million in EBITDA loss last year, moving it to profitability, well, near profitability this year and to profitability next year. Powerful. That's why when Chris says, "I don't have a next best option," no one else is on that trajectory.
No one else can do that. But that is also going to help a little bit on sales growth. But as we move into kinda margin, Nate and the team today outlined, what? $150 million in supply chain savings over three years.... Now you can step back and say, "My goodness, you guys have delivered $300 million of savings over the last two years. How can you get another $150 out?" Go back to that bridge, that 1,000 basis points from 2019. The amount of inflationary factors that we have running through our gross margin, including warehousing inflation, logistics inflation, it's probably near 700 basis points. Now, we're gonna get some of that naturally as prices come down. Things like warehousing, that, that's harder to get.
You take some long-term positions, you got to go get price, and then you have to get price on top of that to get your margin back, and you have to optimize, and you have to make cuts, and if you can't get it there, you get it someplace else. But the team's gonna get it. Supply chain savings is something we've not had a problem eking out of this company. We will deliver that. But let's do the math. $50 million a year, that's, that's, that's 1.5%. So just between the pricing and the supply chain savings, you have 250 basis points. Now, those of you who have been around the company for 30 years are gonna tell me, there's a whole bunch of other stuff you don't know. Absolutely.
But I'm gonna ruthlessly hold us accountable to deliver what's in our control. That's what you pay us for. That's what we're gonna do. If I move to... Oh, wait a minute. This is a really good slide that I just stepped over, I didn't realize. Operating margin. A lot of the questions that have come over the past, I'd say 24 hours, we've now said since I got here, we're gonna hold SG&A at around 15%-16%. But how do you do that in a company where your peers are spending far above that, and we just said you're a premium operator?
Guys, we have scale to leverage all of our cost areas to be able to deliver the efficiencies that allow cost out as we grow, that can get delivered into Nate and his team for marketing, innovation, and keeping that sales moat deep and strong. That's where we invest. So this math isn't hard for me. You cut everything and invest in the things that drive value. Now, cut everything. My organization, everyone's gonna have two jobs. That's not a newsflash to them. Job stack, create efficiencies, make the best use of people and expense. EBITDA greater than $600 million in EBITDA. Jim and I talked about on that storied phone call that lasted for 10 minutes, and he hired me within 2 seconds. I didn't see it that way. We talked about what do you need?
You need a business that's delivering $600 million in EBITDA. $600 million in EBITDA clears our net leverage hurdles, clears a whole bunch of really difficult factors quickly for us in terms of dealing with debt, but it also delivers ongoing cash flow. Now, on the right-hand side, and again, you guys are gonna get this, and you can read through it, and I'm trying to make up a little bit of time, so... But, but this all comes from those gross margin efforts. It all comes from the optimizations, and it all comes from holding that SG&A tight. And if Nate needs more money, we find it elsewhere. Strengthening the balance sheet. Really good conversation last night, Jim, that you and I can talk about. We have talked about having a long-term net leverage target between 2.5 and 3.5.
Here on this slide, it's written between 3 and 3.5. Look, we're gonna be under 5 by the end of this year, under 4 by the end of 2026. Haven't gone out yet with something for 2027, but we're gonna make advances in 2027 as well. Getting down to this target as quickly as possible, that is the pressure on the margin, it's the pressure on the pricing, it's the pressure on delivering as much as we can. And by the way, paying down debt doesn't really help us. It helps, but it doesn't get you there quickly. So we gotta continue to grow that EBITDA. That's why the focus is there. A few more points, and again, we'll talk about this more offline. Free cash flow yield in this company needs to be high. It can be high.
We have everything in place to continue to deliver $300 million in annual cash flow, around. CapEx, and I said this last night at dinner: Look, we're gonna have some years where we spend 75, 80. We're gonna have some years where we spend 100. We're gonna have some years where we spend 130. That's just the cycle of the business. So if you're doing a long-term model, 2.5%-3.5%, great, but that's $75 million-$130 million. The only reason I'm saying that is 'cause as we look out the next couple of years, we'll do $75 million-$130 million. So don't be surprised.
But that just means we need to be able to pull other cash flow levers to deliver the level of free cash flow that this business should. I was at a conference and the William Blair conference, sorry. Although I think I do almost everybody's conference. Anyway, this slide, so I went through a bunch of pictures, and I talked about my unique experience in lawn and garden, kinda like Mark did, kinda like Martha did, and what it means to me. I chose to come here. I think we have a unassailable, amazing company that has a interim-type period, which we are managing through. And I think between Jim, Nate, myself, the rest of the team, we have the solutions, and we have the answers, and we're working on them, and we're trying to be very transparent with you on how we deliver those.
And I think over the next three years, you, you'll see us deliver those. But this picture, in particular, while it's not my family, this is what me and my family do. This is what—I mean, this is the greatest moment that you can share, sitting in your backyard, late afternoon, having a drink, laughing with your family. But look at that grass, look at those bushes, look at everything that's going on there. That is beautiful. That is beauty. That is the definition of Scotts Miracle-Gro. That is the emotional connection that you need, that you should have, that you should want. We talked about the consumer and how the consumer has changed. There's my dad and me. My son doesn't know a lot about this. I try. But you heard Matt and the rest of the team, we are engaging the emerging consumer.
We are doing things differently. It's gonna be important for them to view this as a destination for their dream, for their American dream. Getting back to what's important here, this company has a long history of delivering outsized shareholder returns. We have a robust dividend that we kept in place. You heard Jim said, self-help. We chose self-help. We kept shareholders whole. We're paying down debt. We're going to get to a place where these... Oh, there you go. These types of peaky, nice, outsized returns are going to be part of the long-term model of the company. I think you've all seen this before. It's been articulated today. It's been demonstrated today.
We feel the future, and I think Adam said inflection point, and I don't know if he left already, but maybe the inflection point was kinda two years ago when we took out $400 million in cost, added back $100 million in marketing, innovation, and other places. Now driving that to help create what the next decade is, get through this next three years, pay down the debt, get our financial flexibility back, but all through that period, maintain the focus on the future, maintain defining the market. Start where I ended, although this picture is much better. Superior team, powerful assets, and actionable goals. I think we're gonna be really articulate in how we lay out our expectations for 2025.
I think the presentations today show you we have in hand the long-term view, and within this presentation, as you digest into it, you'll see the key levers, but put on the table today, 1% of pricing, 1.5% of supply chain takeout, that's your $250 a year.