Scotts

Last edited by crocodyl on April 22, 2008 - 3:35pm
Company Snapshot: 

The Scotts Company is the world's leading supplier and marketer of consumer products for do-it-yourself lawn and garden care. It also supplies a range of products for professional horticulture. Scotts owns the leading brands in every major category in virtually all of the countries where it has a significant presence.

Scotts enjoys a de facto monopoly on lawn care and garden products in the US. In the year ending September 2002, the company enjoyed a market share of 52%, controlling 62% of the consumer market for lawn fertilisers, 59% of the market for growing media/plant food, 43% of the market for grass seed and 41% of the market for controls (i.e. herbicides and pesticides). In addition, Scotts LawnService has now become the 2nd largest competitor in the American lawn service industry.

In 2002 the company's market share, for lawn care and garden products, in Europe was approximately 25 percent. The company also has a presence in Australia, the Far East, Latin America and South America.

Scotts relies heavily on advertising to create demand for its products. According to the company's annual report, Scotts' brands are supported by an annual investment of approximately $100 million in advertising. In the US nearly 4 out of 5 advertising messages in the lawn and garden industry come from Scotts. For 2003, Scotts plans to increase its media spending by another 20%.

Corporate accountability
Labor: 

In the financial year 2002, Scotts laid off approximately 340 administrative, production, selling and other employees in North America and Europe due to “reduction in force initiatives and facility closures and consolidations.” In the financial year 2001, the company closed its Swinefleet factory in Yorkshire and its manufacturing plant in Bramford, England in 2003. Scotts has a dismal health and safety record, with its prolonged exposure of its employees to contaminated vermiculite.

Environment and product safety: 

In April 2001, 20 years after Scotts told employees it was researching alternatives to vermiculite, the company finally announced plans to phase out the use of vermiculite in its products. The company had known that the product could potentially be contaminated with asbestos since 1971. At least five Scotts workers have died and dozens more have become ill due to asbestos fibers that they inhaled while handling vermiculite, which the company used in potting soil and in fertilizers. The company initially denied that the ore caused any health problems but now acknowledges the deaths and illnesses. In 1981, two of Scotts' employees attempted to sue Scotts for $5.9 million. Scotts could not be held liable however, since it is covered by the Ohio's Workers' Compensation System which shields companies from lawsuits in exchange for payments into a fund that supports injured workers.

Despite Scotts learning in 1971 that the vermiculite it was obtaining from W.R. Grace Co.'s mine in Montana was contaminated with asbestos, the company failed to inform its workers until 1976. Even then Scotts downplayed the risks. Very small trace amounts of asbestos exist in the vermiculite ore used in our Trionized Process” stated a memo sent to the workers. Ongoing testing by Scotts has shown that the levels of asbestos found in our plant are well within levels which the government has established as acceptable. However, information the company submitted to federal and state regulators in the 1970s and '80s showed that workers were exposed to short-term asbestos levels well above 10 fibres per cm3 of air - more than five times the level allowed under Occupational Safety & Health Administration (OSHA) regulations at the time.

Scotts waited until 1980, to stop accepting vermiculite from the Montana mine. For the past two decades, the company has used vermiculite from a mine in Virginia and two in South Carolina. According to the US Geological Survey, asbestos has been found to be a contaminant in all three mines.

In 1986, the US Environmental Protection Agency (EPA) concluded that asbestos exposure at any level has the potential to cause cancer and in 1989 prohibited the manufacturing, importation, processing and distribution of most products containing asbestos. This ban was overturned in 1991, after a three-judge panel of the 5th US Circuit Court of Appeals ruled that the agency did not adequately consider the economic effects of the ban.

In April 2001, Scotts officials claimed that the company's sources of vermiculite were asbestos free. However, they later clarified their definition of the term and said that any asbestos contaminating the ore was well below regulatory limits. Scotts still denies that vermiculite poses any health risks.

In November 2002, The New York State Department of Environmental Conservation (DEC) took Scotts to court for failing to register two pesticides before selling and distributing them in New York State. The unregistered pesticides included a new formulation of Grubex that contained the active ingredient halofenizide. This product was subsequently denied registration, because of concerns about groundwater contamination, particularly in Long Island, which relies on a sole source aquifer for drinking water. During the course of the registration review, it was discovered that Scotts had sold Grubex to retail stores throughout the state, including stores on Long Island. Scotts was fined $300,000 and was required to pay $900,000 towards an Environmental Benefit Project for the disposable of old, unregistered, unusable or unwanted pesticide products. Carbaryl Carbaryl is an insecticide used in a variety of Scotts' products, including Ortho Bug-Geta Plus - which the company claims is safe to use around fruit and vegetables; Ortho Bug-B-Gon Garden & Landscape Insect Killer Granules; Ortho Bug-B-Gon Lawn & Soil Insect Killer with Grub Control; and, in Australia, Defender Home Garden Grasshopper Caterpillar Carbaryl Insecticide. According to the US Environmental Protection Agency, headaches, memory loss, muscle weakness and cramps, and anorexia are caused by prolonged low-level exposure to carbaryl resulting from cholinesterase inhibition. The chemical is also a suspected carcinogen and has been implicated in a variety of other health problems.

Malathion

Malathion is another insecticide used in several of Scotts' products, including Ortho® Mosquito-B-Gon Tree & Shrub Spray, Ortho Malathion Plus Insect Spray Concentrate and in Australia, Defender Home Garden Scale Plus Insect Spray. According to the US Agency for Toxic Substances, malathion interferes with the normal function of the nervous system. Exposure to high amounts of malathion in the air, water, or food will cause difficulty breathing, chest tightness, vomiting, cramps, diarrhea, watery eyes, blurred vision, salivation, sweating, headaches, dizziness, loss of consciousness, and death.

Benomyl

All pesticides sold or distributed in the United States must be registered by EPA, based on scientific studies showing that they can be used without posing unreasonable risks to people or the environment. The law requires that pesticides which were first registered before November 1, 1984, be re-registered. Benomyl was scheduled for re-registration in 2002; however, during 2001, the registrants of Benomyl, which included Scotts, requested voluntary cancellation. Scotts used benomyl in some of its lawn fungicide products. Because of the voluntary cancellation decision, EPA did not complete risk assessments for Benomyl.

Benomyl is a recognized endocrine disruptor and developmental and reproductive toxicant. Effects associated with Benomyl include liver toxicity, developmental toxicity (such as fetal eye and brain malformations and increased mortality), and reproductive (testicular) effects. It is also considered a possible human carcinogen. The chemical achieved notoriety in 2001 when a string of lawsuits were brought against DuPont (which marketed the chemical under the trade name Benlate) by parents whose children were born without eyes, after their mothers were exposed to the fungicide during pregnancy. EPA expects that use of any remaining Benomyl products will end in 2003, given that production ceased in 2001, and the sale and distribution of Benomyl products will end on December 31, 2002.

Below are just a few of the chemicals used in Scotts' pesticide products:

  • Triforine – recognised developmental toxicant and suspected immunotoxicant.
  • Resmethrin - recognised developmental toxicant and suspected neurotoxicant.
  • Permetrin – suspected carcinogen and endocrine, gastrointestinal and reproductive toxicant.
  • Esfenvalerate – suspected endocrine toxicant.
  • Metaldehyde – suspected neurotoxicant.
  • Diazinon - suspected developmental and reproductive toxicant and neurotoxicant.
  • Bifenthrin – suspected carcinogen and neurotoxicant.
  • Phenothrin - suspected endocrine and kidney toxicant and neurotoxicant.
  • Tetramethrin – suspected carcinogen and neurotoxicant.
  • Acephate - suspected carcinogen and neurotoxicant.
  • Fenbutatin Oxide – suspected developmental toxicant.
  • Propoxur – suspected carcinogen, reproductive toxicant and neurotoxicant.


The Marysville factory

The Marysville factory was opened in 1957, and from then until the mid-1990s the company dumped fertilizers, herbicides and pesticides that didn't meet quality control criteria into landfills, lagoons and fields surrounding the site. The chemicals stored in this way included DDT and chlordane, both known carcinogens suspected of a variety of other toxic effects.

Over the years these toxic chemicals have leached from the landfill sites surrounding the factory, been sprayed onto nearby fields and been spilled or discharged into nearby rivers. The US Environmental Protection Agency (EPA) didn't start investigating the pollution until 1987, when Scotts released 35,000 of wastewater into Crosses Run, a stream that meanders through the company's property. The chemicals killed fish 10 miles downstream in O'Shaughnessy Reservoir, a source of drinking water for the nearby city of Columbus. Scotts was ordered to pay a $35,000 fine, however it took another decade before the company eliminated most of the waste lagoons and dismantled waste treatment plants that had discharged pollution into the stream.

Another serious pollution incident occurred in 1993, when nitrogen-laden wastewater was sprayed on nearby farm fields, resulting in the death of 1,800 fish. In 1998, a neighbor reported to EPA that the company had been “pulling dead fish from their pond all day”. According to state inspectors, by the time they arrived on the scene, Scotts had already taken 1,000 to 2,000 dead fish to a landfill, making it impossible to determine what had killed them. Water samples collected the same day revealed levels of ammonia and several pesticides dangerous to humans in Crosses Run. The chemicals included dieldrin, endosulphan and heptachlor. The same year, the city of Columbus sent EPA a letter expressing concerns regarding high levels of nitrate and phosphorous contamination in the Scioto River. Water sampling traced the contamination back to the Scotts plant.

In 2001, following four years of deliberations, the company finally came to agreement with the Ohio EPA, who had initiated an enforcement action against Scotts in 1997 regarding pollution from the site. The company agreed to pay a $275,000 fine and to undertake remediation activities on site.

Biotechnology

The Scotts Company is the world leader in non-agricultural biotechnology. Through alliances with Sanford Scientific Inc., Rutgers University and Monsanto, Scotts has exclusive rights to commercialize transgenic turfgrasses. Industry officials claim that, if licensed, GM lawn and garden products could have sales reaching $10 billion annually.

Scotts' alliance with Monsanto has focussed on trying to produce turfgrass that requires less mowing and water, ornamental plants that last longer and produce larger and more plentiful blooms, and plants that will allow for more efficient weed control. Scotts has been working since 1997 on Roundup Ready turfgrass, which is tolerant to Monsanto's Roundup, under a research agreement with Monsanto. In 1998 the relationship was expanded to cover new applications for Roundup Ready technology, as well as other 'improvements' to ornamental plants, including annuals, perennials, roses and woody ornaments.

Dangers of GM Grass

According to Scotts' 'Give Back to Grow' report it is developing grasses that allow weeds to be controlled with less toxic chemicals”. However, glyphosphate (the active ingredient in Roundup) kills anything with which it comes into contact, and serious concerns have been raised regarding Roundup Ready turfgrass. Because of its broad-spectrum properties, the use of Roundup in lawns is currently limited to spot treatments. However, if Roundup Ready lawns were to be installed, gardeners would then be able to apply Roundup over the entire lawn area. The use of this herbicide would be likely to increase dramatically on home lawns, school grounds, athletic fields and golf courses all over the world – no doubt leaving Monsanto and Scotts rubbing their hands with glee at the associated rise in profits.

Currently GM grasses in the US are regulated by the US Department of Agriculture (USDA). Recently the International Centre for Technology Assessment (ICTA), along with the Center for Food Safety, brought a lawsuit against USDA, regarding its failure to evaluate GM grasses as “noxious weeds”. The group wants USDA to label the grasses as such, to avoid their future commercialization. The group is seeking a court order to end field trials until the lawsuit is settled.

Although Scotts and Monsanto have now withdrawn a recent petition to USDA to deregulate GM grass, Peter Jenkins from ICTA believes that they are likely to resubmit.

Peat Extraction

Scotts makes much of its recycling record, pointing out that recycled by-products such as bark, manure and garden waste account for about 70% of the raw material used to produce its various growing media products. However, the company fails to mention that the remaining 30% includes products such as peat, which is gathered using completely unsustainable harvesting techniques.

Scotts' agreement with English Nature

According to Scotts 'Give Back to Grow' report it has recently: “entered into a ground-breaking agreement with the English government and environmental groups to restore three peat bogs operated by the company to maintain a unique wildlife habitat”. The company also claims to have “won praise for its environmental commitments.

The agreement to which the company is referring is one reached with English Nature to halt peat extraction at Thorne and Hatfield Moors in Yorkshire and Wedhome Flow in Cumbria. These are England's largest remaining lowland peatbogs and represent one of the most important wildlife habitats in the UK, being of international conservation importance. The sites were all designated by the UK government as top wildlife sites and parts of them are proposed as Special Areas of Conservation under the EU Habitats Directive. Scotts continued to damage them, in the face of widespread public condemnation, by exploiting legal loopholes that are a hang-over from the end of World War II.

In response to criticisms of its practices, Scotts' managers and spin doctors released a series of deeply misleading public statements. For example, in the industry journal Horticultural Week, Operations Director at Scott's substrate division, Nick Templeheald, claimed that“we extract from places of no wildlife interest - adjacent to designated SSSIs, but entirely separate from them”. This was despite Scotts' operations on Thorne Moors SSSI, Hatfield Moors SSSI and Wedholme Flow SSSI being within the boundaries of the respective Sites of Special Scientific Interest. The areas were selected by the UK Government's conservation advisers because of their wildlife value, and the designation put them in the top 8% of UK land area in wildlife terms. The agreement with English Nature followed a long period of delaying tactics by the company - in order to allow it a “last-ditch mega-grab of peat” before it agreed to end extraction. This is not the first time that Scotts has used such tactics and it seems that the corporation is now adept at using delaying tactics to slow down legal proceedings. For example, in 1990 the US government filed a suit against Scotts, seeking a permanent injunction against peat extraction at a site in New Jersey. However, the company's lawyers held the suit in 'administrative suspension' for 12 whole years, and peat extraction did not cease at the site until 2002.

Under the deal, which was reached in April 2002, following extreme pressure from environmental groups,[138] Scotts agreed to end extraction immediately at Thorne Moors and Wedholme Flow and to phase out extraction on Hatfield Moors within the next three years. The deal will cost the British taxpayer a cool £21.1 million. Despite Scotts being compensated for a huge loss of earnings at the taxpayers expense, the company still states it “has access to adequate supplies of growing media to ensure demand is met for company products for the foreseeable future”. Scotts will continue to extract peat from its other peatbog sites in the UK such as Carnwath Moss in Scotland, which is a designated Site of Special Scientific Interest (SSSI).

The company has agreed to undertake restoration work on the three sites, for which it will receive additional compensation from English Nature. Activists are extremely doubtful of Scotts' ability to satisfactorily undertake this work, given its track record of environmental destruction. With the closure of UK peat mines, the problem may also just be shifted overseas. Imported peat will form a greater proportion of the market, with new bogs being destroyed in Ireland or the Baltic States.

Faulty products in June 2000 the United States Environmental Protection Agency announced that The Scotts Company would voluntarily recall its Ortho Ready-to-Use Home Defense Indoor and Outdoor Insect Killer after it was reported that the products' containers had a mechanical malfunction that caused exposure to people using them.

History

O.M. Scott & Sons – the early years The Scotts Company was founded in 1868 by the Civil War veteran Orlando McLean Scott, who moved to Marysville, Ohio in 1866. Scott worked at a seed elevator for several years before purchasing his own business, a hardware shop, in 1870.

Scott started a seed-processing sideline, sorting weed seeds from crop seeds for local farmers and selling on his 99.71% weed-free farm seed at a premium. In 1870 Scott added grass seed to his range of products, however this segment didn't become an important part of the business until the early 20th century. Scott's sons Dwight and Hubert joined the company in the first decade of the 20th century and Dwight has been credited with launching O.M. Scott & Sons mail-order grass seed business in 1906. The mail-order business spread the company's business reputation throughout the region to Pennsylvania, Virginia, Kentucky and West Virginia. In 1916, the company made its first commercial sale to Brentwood golf course in Long Island, New York. By 1921, O.M. Scott & Sons was responsible for seeding one fifth of America's golf courses.

In 1928 the company launched Turf Builder, the first fertilizer formulated specifically for grass. 1928 also saw the company launch its own promotional magazine 'Lawn Care'. The post-war gardening boom The development of major suburban areas in the US really gained momentum in the 1950s, creating larger garden areas for domestic properties, on a wide scale. Lush, green lawns became a hallmark of suburbia and the company saw its Lawn Care magazine become the most widely read turf bulletin in print” with millions of subscribers by the post-World War II era. Sales of chemical fertilizers, herbicides and pesticides also rocketed during this period. O.M. Scotts & Sons invested heavily in research at this time, placing a particular emphasis on weed killers.

In 1945 the company launched 4-XD broadleaf herbicide, followed by Scutl, Clout and Halts for crabgrass in the 1950s. In 1956 O.M Scott & Sons used new chemical products and processes to create a new 'improved' Turf Builder formulation. The company also developed the first lawn spreader, the first patented Kentucky Bluegrass, and various other innovations for home and commercial lawns. A change of ownership Following the war O.M. Scott & Sons ownership structure evolved from full family control to a closely held company. Then, in 1971 the company was snapped up by the global engineering and manufacturing giant ITT. O.M. Scott & Sons remained within the conglomerate until 1986, when the company's then president and CEO, Tadd C Seitz led many of the company's senior executives in a highly leveraged buyout of the company. In order to buy the company, Scotts' managers borrowed $190 million (about 90%) of the $211 million price tag from the investment banking firm of Clayton Dubilier Inc. O.M. Scott & Sons became the primary subsidiary of CDS Holding Corp., a private company 61% owned by Clayton Dublier. Many of Scotts' senior executives took out second mortgages and personal loans in order to buy into the deal.

Scotts saw a marked jump in profits under Seitz's leadership, who was able to quadruple the company's sales during his tenure. Seitz sought expansion through a combination of strategic acquisitions and new product introductions. Burgeoning environmentalism in the 1990s spurred the company's interest in the development of new organic fertilizers such as Iron Bull (iron-enriched steer manure). In 1990, the company formed a partnership to research and develop supposedly environmentally friendly biological pesticides using insect viruses, bacteria, protozoa and plant extracts.

By Autumn 1988, the company had reduced its debt to $125 million, when a restructuring allowed the $111 million acquisition of Hyponex Corp. In 1992, Scotts decided to go public as The Scotts Company, selling 12.5 million shares at $19 each in order to cut its debts to $32 million. The company's sales increased dramatically in the years following its stock flotation, from $413.6 million in 1992 to over $750 million in 1996. Some of this growth came from acquisitions such as Republic Tool and Manufacturing in 1992, and Grace-Sierra Horticultural Products Co. In 1993.

The Miracle-Gro Merger Scotts' most important acquisition came in 1995, when it bought Stern's Miracle-Gro Products though an exchange of $195 million worth of equity. Stern's Miracle-Gro was founded in 1951 by Horace Hagedorn, an advertising executive, and his partner Otto Stern. Despite the company's name it was Hagedorn and his family who eventually controlled the business. By 1995, Miracle-Gro had become America's leading brand name in gardening, with the company supplying a range of fertilisers and tools designed to make the application of fertiliser easier.

Though Miracle-Gro had less than half the sales of Scotts, the Hagedorn family emerged from the 1995 transaction as Scotts' leading shareholders, holding over one-third of the stock. The family's influence became increasingly evident in the months and years to come. In early 1996, barely 11 months after he had taken office and following a rather disastrous marketing strategy that lost the company $2.5 million in revenues, Scotts' CEO Theodore Host was ousted by Horace Hagedorn and the Scotts' board of directors. Host was replaced by Charles M. Berger, a former Miracle-Gro director, who was also simultaneously made president and chairman of the board of Scotts.

Other former Miracle-Gro Directors that crept into the upper management of Scotts that year included Jim Rogula who became leader of the Consumer Lawns segment and former Miracle-Gro president John Kenlon, who took charge of the Consumer Gardens Group. Perhaps most significantly, Horace Hagedorn's son, James, was also promoted to the head of all US business. Given that it was co-founded by an advertising executive, Miracle-Gro had a long established strategy of creating a high demand for its products through extensive advertising. This enabled the company to command a high profit margin from retailers. Scotts' new CEO Berger sought to adopt the same strategy for Scotts to create what Horace Hagedorn called “the Proctor and Gamble of lawn and garden.”

The late 1990s – Scotts embraces biotechnology, pesticides and Europe In 1997 Scotts further expanded its empire by purchasing the remaining interest in the UK company Miracle Garden Care Ltd, which had been one-third owned by Miracle-Gro when Scotts bought the company in 1995. 1997 also saw Scotts purchase UK-based Levingtons, thereby obtaining the rights to peat extraction at a number of sites in the UK. Scotts also acquired a majority interest in US-based Emerald Green Lawn Services, providing the company with a base for establishing the new Scotts Lawn Service in 1998.

In 1998 Scotts continued its aggressive expansion by purchasing Rhône-Poulenc Jardin, continental Europe's largest consumer and garden products company. This opened up the markets of most of continental Europe to the company. Scotts also acquired the Shamrock brand of UK and Irish peat products from Bord na Mona, Ireland. This gave the company “preferential access to Bord na Mona's extensive peat reserves and an option to supply the shamrock brand in the leading continental European markets”.

1998 also saw Scotts branch out into GM technology, through the acquisition of 80% of Sanford Scientific Inc, “allowing researchers to create desirable varieties of plants with value-added traits far beyond the capabilities of conventional plant breeding techniques”. Scotts also entered into a collaboration with the Monsanto company to “bring the benefits of biotechnology to the multi-billion dollar turfgrass and ornamental plants business. Under the agreement, Scotts and Monsanto agreed to share technologies, including Monsanto's extensive genetic library of plant traits and Scotts' proprietary gene gun technology to produce 'improved' transgenic turfgrass and ornamental plants. Other acquisitions in 1998 included the US company EarthGro Inc. and the continental lawn and garden products company ASEF.

Scotts relationship with Monsanto became even cosier in 1999, when Scotts completed agreements with the company for exclusive US, Canada, UK, France, Germany and Austria agency and marketing rights to its consumer Roundup herbicide products. Scotts also purchased the remainder of Monsanto's lawn and garden business, which included the pesticide brand Ortho. 2000 and beyond To pay homage to its guru (who retired from the company in 1997), in 2000 Scotts renamed its North American headquarters the Horace Hagedorn building. In the new millennium the Hagedorn family have continued to increase their firm grip over the company with Horace's son James being appointed CEO of the company in 2001 and chairman of the board in 2003.

The turn of the century also saw the company continue its expansion into Europe through the acquisition of Substral, the leading consumer fertiliser brand in many European countries, including Germany, Austria, Belgium, France and Scandinavia. In 2000 Scotts also divested its North American Professional Turf business to The Andersons, Inc. and Nu-Gro Corporation, in order to focus its resources on more profitable markets.

In 2002, the company increased its investment in GM technology, by signing a research and commercialization agreement with New Zealand's Crop & Food Research that could lay the groundwork for the production of flowering ornamental plants 'enhanced' by biotechnology. The company announced that the research will initially focus on 'improved' geraniums, although these are unlikely to be available commercially for several years.

Financial information
Major lines of business/segments: 
  • North American Consumer: Specializes in lawn fertilizers and lawn control products; grass seed spreaders; garden and indoor plant feeds; plant care products and potting soils; barks, mulches and other growing media products and pesticide products. Products are marketed to mass merchandisers, home improvement centers, large hardware chains, nurseries and garden centers.
  • Scotts LawnService: This US-based sector provides lawn, tree and shrub fertilization; disease and insect control; and other related services such as core aeration - primarily to residential customers through company -owned branches and franchises.
  • Global Professional: Provides a full range of horticultural products including fertilizers, plant protection products, grass seed, spreaders, customer application services and growing media. Products are sold to lawn and landscape service companies; commercial nurseries and greenhouses and speciality crop growers. The company's branded plants business and biotechnology operations are part of this sector.
  • International Consumer: Provides similar products to those in the North American Consumer segment to countries other than the US and Canada.