All right, welcome to a new episode of

Power Players. Really excited to welcome

in my next guest cuz I'm a big fan of

taking care of my lawn. That is Scott's

Miracle-Gro CEO Nate Baxter. Good to see

you here.

>> Great to be here. Thanks for

>> Um I I really just invited you here so I

could ask you about like lawn tips, man.

>> [laughter]

>> You know, I don't want to ask about

profit margins or the free cash flow. I

just want to talk about like

>> Sounds great.

>> What am I not doing with my lawn that I

should be doing?

>> Are you feeding it four times a year?

>> Uh no, I'm not. But your product is so

good that I've been only I've been using

it once a year. And then maybe in the

fall, so twice a year. Like it works.

>> All right, that's a start. I mean,

you're you're actually

you embody the challenge we have right

now, which is when when when we talk to

our scientists in R&D and we say, "Hey,

what do you do to take care of your

lawn?"

They say, "Oh, it's simple. We feed it

four times a year. If you do that, you

crowd out weeds. You You can avoid

insect problems." And And that actually

has a benefit where you're not putting

down insecticides and herbicides as

much, right? To control those problems.

Um and it's a healthy lawn. So, we just

need to get you feeding four times a

year.

>> You do. [laughter]

Oh, I promise you I'm going to get into

the business. How do you take care of

your lawn? I mean, as a CEO of a very

large company, I mean, do you have time

to take care of your lawn?

>> it or not, I I obviously I have somebody

who mows it cuz I don't have time to do

that. Um I do all my own applications

with my own spreader. Um I'm pretty

maniacal about it. It's actually part of

the culture. We We really want people

who work at the company to live the

culture. Um and even younger folks who

aren't homeowners, um as long as they're

eager to learn about the products to

use. Um but no, I I do a spring

application in March or April, sort of

depending on when the weather

cooperates. Um usually it halts with our

pre-emergent, right? To avoid crabgrass.

And

um I just did my third application.

>> Third?

>> Yep. Last week.

>> You're way ahead of me.

>> I probably do five or six cuz I'll do

the last one in November, which is as we

were talking earlier, you pointed out

actually the fall. If you're only going

to do it once a year, the fall is the

best time. But I recommend four times.

>> What What are people You know, I'm Ahead

of this interview, I was thinking back

to how my dad used to take care of the

lawn. He used to put on the fertilizer.

Um, but I think like lime is lawn, his

pants would be all dirty. Like, what are

people not doing with their lawns today

that they should be doing?

>> You know, it's funny you say that. One

of the things we are talking about now

in the innovation space is soil health.

It's something we we haven't

traditionally talked about. The lime is

really a soil amendment, and we're

actually working on a line of products

that will make it easy for consumers who

don't understand whether they need to

lime or not. I'll be honest, I've never

done it. Probably my lawn care provider

in the past has done it.

Um, but it it, you know, there's a level

of complication that the consumers just

don't have time to figure out. And so,

we're going to try to help with that in

the next couple years where not only are

you feeding your lawn three or four

times a year, you're feeding your soil

beneficial microbes, balancing the pH.

Um, so that is an important thing, but

it tends to be more in the in the power

user space, I'll say. You know, I don't

think the average consumer is thinking

about that. Um, but if you have a good

lawn care provider, they'll

>> Well, you bring up a good point because

you own a home, you know, or I think of

to my house where I where I live now,

and I don't know anything about my lawn.

It's most of my property, but it's not

like, you know, this health tracker.

It's tracking my health real time. I

don't know

I don't know if my my lawn is hurting

right now. I don't know if it needs more

feed. Like, can that ever be solved for?

>> Well, that's what we're working on. You

know, it is something, you know, we

asked ourselves, could we create a test

kit that's easy to use, right? Not

something that you have to send away. I

mean, every I think almost every county

in the country,

um, you can send in for a soil test kit,

and 6 weeks later you'll get your

results. But, you know, by the time you

think about it, it's summer time by the

time you get the results, right? So,

we're working on ways either to, um,

come up with a basic test kit, or maybe

using some of the government data maps

soil, um, type across the country, which

you can find today, and guide consumers

depending on where they live, what type

of soil amendments that they would need

to help improve the soil.

>> So like how can I prevent prevent

a weed if like from every weed

happening?

>> Well, a healthy lawn will crowd out

weeds. And I so

I would just redid my lawn 2 years ago

at my place in Massachusetts.

Started from scratch just use

>> Not sod?

>> Not sod. No. Grassy just used a standard

sun and shade grass seed. Uh

I think we did it in April. I put

another layer of seed down in late May.

And I have never treated that lawn with

a product that has both the fertilizer

and the weed control because it started

off so weed free. I just use a liquid

weed for lawns. I use our Roundup for

lawns product and walk around

>> No way you have a weed in your lawn.

>> I I walk around. Well, they pop up, you

know, I walk around. But it's it's less

than a dozen in my yard. It's

>> Who's counting, right?

>> You know, maybe you grab a beer and grab

your your bottle of Roundup for lawns

and go out and and shoot weeds. Um but

you know, I I I think what we're

preaching and and you know, this the

irony is

Scotts created, you know, the Turf

Builder lineup in the 1940s. And we

created the four-step program.

And then we got away from it. We started

creating these all-in-one solutions. And

so I think in many ways it's our fault

that we've gotten consumers to use one

bag because you have a bag that does

three different things. People think,

why do I need to use anything else? And

what we're learning in a world where

we're very sensitive to the safety of

kids and pets. We're very sensitive from

a sustainability standpoint of

well, you know, herbicides and

insecticides are there's a use for them

and they're helpful and we do include in

our products. In a perfect world you

wouldn't have to use them. So we're now

preaching if you feed your lawn

regularly, yes, you might have problems.

We have a solution for that. But if you

feed it regularly, it should be a nice

thick green lawn and it should crowd out

weeds.

>> going to get away from some of these

all-in-one products? And immediately

when you said that I'm thinking, yeah, I

mean, I have these big bags in Home

Depot or Lowe's has the grass seed and

various fertilizer, and it's made my

life easy, but is that really the best

for my lawn?

>> Right. Well, that that's a great

product. That we probably won't get away

from that, but what we will start to

deemphasize, I don't know that we'll

ever completely eliminate the skews cuz

there are customers that like them, but

we have a a skew called triple action.

And it's, you know, a weed and feed and

insecticide. You Yeah, that's that's

yours, okay.

>> I'm that guy.

>> Um well, one of the challenges, how much

did you pay for that bag? It's

>> Uh I think the last time I paid maybe

just over 100?

>> Yeah, they've gotten really expensive

because of the ingredients, um

especially the last few years with

inflation accelerating. So, one of the

things we're trying to do is bring

affordability back to the market. So,

we've released just a straight-up lawn

food. It's called Turf Builder Lawn

Food. It's 25 bucks a bag at retail.

>> Hey, that's good.

>> Yeah, and you know, if if you think

about it, you use that, and then if you

do have a weed problem, you can buy a

liquid and just do spot treatment. Um if

you have a significant weed problem, we

then have our weed and feed, uh which

does have an herbicide in it. And and

look, the country is varied, lawns are

varied, people's amount of time that

they are able to put in their lawn

varies. So, some people do like the

all-in-ones, but what we're really

trying to move towards is a higher

frequency of a lower-priced product, and

you can probably put less herbicide and

insecticide if you if you really are

diligent about doing that and building a

thick lawn.

>> I'm a I call myself an aging millennial,

and I look at my brother who's a couple

years younger, and he's he's not like

me. He's okay with the lawn just

existing, being what it is. It drives me

up the freaking wall because I know he's

never going to do the lawn like I do.

Like, is that a problem for Scotts?

>> It is. It it it well, it's a problem and

an opportunity, right? So, our core

consumer that has been with us for

decades, you know, they're homeowners

or renters who care about their lawn,

they are dedicated just like you, and

they care about weeds, they don't want

them, they want the perfect lawn,

straight. What we are seeing with the

next generation of consumer

is

a real interest in going natural. Less

of an interest, you know, they don't

mind an occasional dandelion in their

lawn. So, we are going to meet those

consumers where they are. In fact, we

have a whole new line called OM Scott.

They're in recyclable paper bags.

There's a lawn food, just a pure

straight-up all-natural lawn food. And

then we have a whole bunch of native

grass seeds, which have become popular.

Actually, I did it at my house. At my

house, right I would say immediately

around the house I have our proper sun

and shade grass seed. But as it sort of

peters off into the woods, I did the

edges with

our our sheep fescue. And I really like

it. No maintenance, you don't have to

water it, you don't have to fertilize

it. It looks great, comes back every

year. It does occasionally have weeds,

which if you if you care, you have to go

pick out by hand.

But we're finding a lot of younger

consumers are gravitating towards those

products cuz cuz good enough. It's It's

not about I would say the legacy

consumer, it's all about the aesthetics.

It's the lawn, it's the perfectly

manicured roses. If I sort of hearken

back to like our grandparents

era, the next gen consumer, they just

want a space that's fun and safe and

good enough.

>> want Sometimes they don't even want a

lawn. I mean, they're just putting rocks

down in their yard or or just paving it

or just asphalting it over.

>> Or in out west, we're seeing, which I

think is criminal, we're seeing

municipalities pay people to take their

lawn out and put in fake fake grass,

plastic.

>> You know, like the turf.

>> Yeah. So, in a world of microplastics,

it feels like putting down plastic turf,

which it also they create heat islands.

It can be dangerous for your kids.

And we are doing a lot of work out in

the Southwest with consumers to

understand because xeriscaping is a

thing. And lawns are maybe not as

sustainable out there. So, that's why

we're bringing native grass seeds into

the mix because in regions like those,

you can plant these native grasses.

Again, lower no maintenance. Um green is

good. It absorbs heat. Um it cools your

property uh and it obviously, you know,

contributes to the environment being a

living thing versus just covering your

lawn in rocks or or plastic. Covering

your space in rocks or plastic turf.

>> I promise you we're going to get into

the business now. Um I don't think a lot

of people realize this is a business

founded in 1868.

>> 1868, that's right. Almost 160 years.

>> How

how is that legacy been preserved?

>> We talked about that um during our

recent investor day and we have a really

neat video that takes us all the way

back to um 1868. We've got a picture of

our founder O.M. Scott in front of his

hardware store. By the way, we still own

that hardware store in Marysville, Ohio.

It's the company store uh and it's open

to the public. You can come in and and

and buy our products.

>> Walton 5 and Dime they still have.

>> It is exactly like that. Um you know,

part of what I talked about with

investors is we've been reinventing

ourselves for 160 years. Uh if you look

at our legacy, I mean the original

disruptor was O.M. Scott. He figured out

a way to create weed-free grass seed in

the late 1860s. Um and we try to sort of

reinvent ourselves every day. That's a

that's the attitude we have if we're

going to survive for another 160 years.

And what does that mean? It means maybe

in a world um where people are more

focused on natural and organic, we pivot

our portfolio. Um I believe we're the

only company with the the scale and the

R&D dollars to figure out how to bring

biologicals into the mix, right? So,

what I tell people internally is is

there a world where we can be mostly

free of synthetic chemicals in our

products?

The reality is they work and there's a

need for them, but the spirit is hey,

let's challenge ourselves to think

differently. Um and one of our most

successful lines of business has been

organic soils over the last couple

years. Um so, pivoting to safer

chemistries, chemistries that are easier

to use, but just as effective, that's

the challenge.

>> Yeah, like I mean, [laughter] I'm all

for organic soil. I just I'm not putting

it down there if I'm going to have a

weed come out of it. I'm just saying.

>> Now, exactly. What we we're very uh we

promise no weeds in our soils. Um it but

but but we're seeing

a tale of two consumers. We're seeing

our legacy consumer, again, who trusts

our products. They've been around for a

long time. We're continuously evolving

them to make them more effective. But

there's a next-gen consumer and to be

quite honest, I wouldn't say we know

exactly what they want. We know the

trends, organic, natural, easy to use,

don't take a lot of time, right? I think

time are is sort of the most precious

commodity right now. And so we're we're

we're trying to do both and that's a big

part of what SMG 2.0 is all about, which

is

you know, a little bit taking a step

back and asking ourselves, who are we

and what do we stand for? You know, this

was a question I posed internally about

18 to 24 months ago.

We've We've to your point, we've been

around for almost 160 years.

How do we imagine ourselves moving

forward? What should we look like as a

company? What should we care about? And

what we decided is we're really a

lifestyle company and I got a lot of

smirks when I said that.

>> I I I I I I know I I listened to the the

investor day and I'm like, wait,

lifestyle company? Like how so? But I

did get it.

>> So if if you listen to what we said, you

know, we we want to

shift away from product functionality or

talking about product functionality. I

mean, that that information is still

there, but we want to talk about the end

result, not necessarily the journey. And

I used this example during investor day.

I was sitting with my sister, she lives

just outside of Chicago in a in a

suburb. So, small lots and we were, you

know, having a glass of wine at the end

of the day and I was watching her kids

kick the soccer ball around and I was

trying to talk to her about her grass

and her flower beds, of course. And she

didn't really bite. You know, what she

wanted to talk about was how that entire

outdoor space, which included a pizza

oven, a hot tub, a little pergola,

really brought joy to our family all

year round. You know, she was telling me

how in the winter in Chicago they'll use

the hot tub and they'll still use the

pizza oven. And it just dawned on me

that what we're doing is we're creating

we're helping people take care of the

spaces that take care of them. And that

then it's one of the the that's our new

purpose that we put out there, which is,

you know, we help people take care of

the living spaces.

>> So you're not you're not in the cannabis

business anymore, right?

>> We're not in the cannabis.

>> Sold that what was it? Hawthorne?

>> We sold Hawthorne. Uh we just closed

that deal in April. Uh sold it to

Viridian Holdings. So um we're we're

eager to watch them be successful.

Uh but we're not focused on that

business anymore. Uh we have an

ownership and indirect ownership as a

result of that transaction. And we hope

they're successful, but we are now

focused purely on the consumer lawn and

garden space. Um and there's a lot of

excitement. You know, I would say that

that business um while very very

successful at its peak, uh the cannabis

industry just could not get to a point

where the regulatory environment was

friendly

>> just over supplied, too.

>> Over supply. Um and so we're we're going

to we're going to stay focused on what

we do best, which is the consumer lawn

and garden.

>> Now, you just took over officially as

CEO, but you're not from outside the

company. I mean, how

how has that been able how have you been

able to just move quicker because of it?

>> Well, the reality is

the my team and I were the architects of

SMG 2.0. We we brought that to the board

um a little over a year ago. I would

call

um this fiscal year sort of year one of

that plan for us. Um so I've been at the

company for just over 3 years. Um I

spent my whole career in tech. So for

me, this was quite a transition, but I

actually think it's been that beneficial

not only to me cuz I love learning new

things and and that's a little bit why

uh what motivated me to take the job,

but really to bring in a new

perspective, right? Uh just to to come

in and say, "Wait a minute. Have you

guys thought about doing things

differently?" And it it started with

technology. I said, "You know,

>> [snorts]

>> you guys don't know it yet, but we're a

technology company." And they looked at

me almost as side eyes as they did when

I called ourselves a lifestyle company.

But but the the point was that we have

every right to leverage the technology

that's out there, and we're living in an

unprecedented era, right? Chat GPT was

just released when I joined the company.

We're now regularly using AI all over

the company. And And not in, you know, a

big swing for the fences way, you know,

you're never going to hopefully see a

headline where we where we spent

millions of dollars on AI and and it was

a bust. We just look for little use

cases, and more importantly, training

our associates how to use it to take the

workload off of them. So, you know, for

me,

um the journey from tech uh to joining

the company 3 years ago to

becoming CEO in the last, call it, 5 or

6 weeks, it was all pretty smooth and

natural for me. Um you know, we'd been

planning this transition. I joined with

the idea that I was eventually going to

transition with Jim.

Um and when Jim and the board finally

decided now's the time, and I think the

timing of SMG 2.0 had something to do

with it. It was really

my strategy and my team's strategy. And

um so, now was the right time. So, for

me, people ask me, "Well, it's your

first investor day." I said, "Well, it's

not. It's my first investor day with the

title, but we've been running this

playbook, you know, for the better part

of a year or 18 months." And so, for me,

the transition's been smooth.

>> You're taking the baton um from really a

legendary CEO, and Jim Hagedorn. I mean,

I'm almost thinking this is kind of like

the Steve Jobs to Tim Cook type of

handoff here. I mean, how is it hard to

>> Well, I think you're giving me more

credit. I wish I wish I was as

>> like this iconic person in this this

industry really who's helped create

>> Jim created I I really think Jim created

the industry. Um if you look back to the

humble beginnings of Miracle-Gro, it was

Jim's vision to merge with Scotts. He

then consummated the Ortho deal, which

we own. And then the the partnership

with um

Monsanto on on Roundup.

Uh and, you know, it's had a string of

successful acquisitions like Tomcat,

expanding

we were the only company in the space

that has a nationwide manufacturing

footprint. You know, we don't ship a bag

of dirt or mulch more than 150 miles.

Most people don't know that. It's not

only a great sustainability story.

Actually, every bag of dirt you buy is

manufactured with local materials

because we upcycle north of 5 billion

pounds of green waste from communities.

So, while we promise the soil will

behave consistently across the country,

the reality is the soil you get in the

northeast probably has hardwood bark

fines or bark fiber or fiber in it. And

the same soil you get in the south

probably has pine bark fines in it

because we just use what's locally

available. So, Jim really deserves the

credit for for building this. And and I

said it in investor day, you know, any

CEO would be just honored to inherit uh

these iconic, you know, 100 plus year

old brands.

Um and so, what our job is A not to

screw it up. Um you know, I'll never try

to be Jim. He's he's they broke the mold

when they made him.

>> very entertaining earnings calls.

>> Yes, you got to love Jim.

But, he's passionate. You know, the guy

came in every day

for almost 40 years and really lived and

breathed this business. And so, I

learned a lot from him. I'm honored

that, you know, he and the board

handed the reins over to me. And now our

job is how to make it better. How do we

survive for the next 160 years? And it

goes back to some of the innovation we

were talking about. It's knowing your

consumer and understanding where that

consumer is headed. And and that's what

we're trying to do right now.

>> I imagine when those four in one

products or three in one, when they came

out, that was a big innovation at the

time. Is there

that type of innovation left in this

industry?

>> You know, it's a good question. It's one

that we ask ourselves and and our board

pushes us on cuz I do think innovation

is is hard to come by in this space.

Uh an area we are focused on and and I

mentioned it earlier is the soil health.

We really think there's something there.

Um you know, we have not as an industry

talked about it a lot. Um consumers are

starting

uh to to think about soil health. It's

something that big ag has thought about

for a long time. Uh and we're fortunate

enough to have We have the scale where

we have big partners. You know, we're

not going to invent a molecule, uh but

we can partner with the Cortevas, the

Syngentas, you know, the big molecule

developers out there.

Um and they're they're really focused on

biologicals. You know, if you really

follow big ag at all, they're trying to

move away from synthetic chemistry more

into biologicals. So, my belief is that

we have a a

a right, given the size and scope, um to

work with them to figure out how to

bring those to the consumer market.

Might be 10 years, to be to be honest

with you. I mean, we're We do have some

biological products that'll be coming

out next year, uh but to realize what I

see is moving away from synthetic into

full bio biologics, it could it could

take a decade. But that that that would

be building on Jim's legacy by figuring

out how to evolve the company and and

meet that new consumer where they are.

>> This this pivot to a lifestyle company,

if we're having this conversation a year

from now, how does the company look

different with that as your lens?

>> You know, the the way we look at it is

every associate has to um live and

breathe

that lifestyle. And let me sort of peel

away the onions. When we or peel peel

away the layers of the onion. When we

look at that, what do we really mean?

Cuz lifestyle is just sort of a word and

you know, quite frankly, we don't get to

choose if we're a lifestyle company, our

consumers do.

But when we look at the mental and

physical wellness benefits of gardening,

uh whether it's to grow your own food or

just um you know, maybe when you're

taking care of your lawn, it's a mental

break for you. know, you have a high

pressure job. You talk to people all

day, you know, get behind that lawnmower

or spreader,

um, and you sort of forget about things.

And and that's important. Um, creating

environment that you can feel

comfortable, your kids and pets are safe

in is important. And, um, using products

that are net good for the environment,

sustainability and packaging, that is

important. So, when we say lifestyle,

what we really mean is enabling people

to enjoy their space however they want,

you know, whether it's for the

aesthetics, whether it's for the mental

break, whether it's for growing their

own food. Um, and we just want to make

sure we're there and we're, um, using

our scale and scope to drive try to

bring that sustainable piece into play.

And it's hard, you know, our products, I

mean, they use synthetic chemistry,

they're in plastic bags, but, you know,

today what sustainability looks like is

can we use a little less plastic? Can we

work with partners to pioneer, um,

uh, curbside recyclable paper, which

we've we've now done in our OM Scott

line. Um, can we without with the rise

of ecom, and I talked a lot about that

at investor day, you know, we're seeing

challenges in certain segments of brick

and mortar.

Um, ecom is, you know, the the

competition between the Walmarts, the

Amazons, and quite frankly, our big box

retailers, um, I wouldn't count them

out, you know, Home Depot and Lowe's

and Walmart are are excellent in their

ecom programs.

>> So, is it just like when I go online,

there's now proliferation of choices on

these websites?

>> There are. So, the endless shelf is the

challenge we're facing. That's the

competitor we have online as opposed to

the one or two key competitors you see

in retail.

Um, but there's an opportunity there for

us to win if we can create

packaging.

Uh, so, the big thing now is ship in own

package, meaning instead of taking a bag

of seed or fertilizer, wrapping in

bubble wrap, putting it in a box, you

know, you lose margin every time someone

touches it. Can you put it in a in a

container that, um, is sturdy enough to

be shipped in and you essentially take

those steps out of the process. And And

we're being challenged by our retailers

to do that. Also, how do you take water

out? You know, a lot of what we ship

from the liquids, whether it's the uh

fertilizer or the Ortho we were talking

about earlier, those have liquids in

them. Can we Can we um follow the Tide

playbook and figure out a way to take

liquid out, either in concentrate

>> Ortho Ortho pods?

>> Yes. Yeah.

>> How far away from that? Like, is that

near?

>> We have plant food pods that are coming

out next year. Like an Alka-Seltzer, you

just drop it in your watering can.

>> work the same.

>> They work the same.

>> Interesting.

>> So, we're working on all those things.

And I I don't know if all of them will

be um you know, accepted by consumers.

But again, that's the beauty of the

digital world we're in today. You know,

the old world, you would have to go

convince a retailer in a line review. If

they said they were going to put it on

the shelf, well, you know, let's say

they do a third of their stores or half

their stores. You're now building

inventory for 5 6 700 stores. What if it

doesn't go well? What if the consumer

doesn't um uh take to it. So, what we're

doing now is launching most of our

products digitally. We can test them in

the market. We can get consumer

feedback. We're not putting a lot of

working capital into inventory. Um now,

it might slow the ramp, right? But it

also uh provides us um a protection on

the downside of, you know, being left

with inventory that didn't didn't go

well with the consumer.

>> I lastly, um before we run out of time.

So, I You have an iconic I mean, an

iconic brand.

Uh

great innovation. You've now sold that

Hawthorne business.

I don't understand why the market cap is

where it is because from the outside

looking in,

it doesn't make a lot of sense. I get

there was over supply with the cannabis

business, and that was some concern.

Sure. But this is a good business.

>> It's a great business, and we really

believe in it. Um I I look, I think the

fundamental thing is our leverage

remains high. Our debt Our debt load is

still high.

>> Prior acquisition?

>> From prior acquisitions associated with

Hawthorne. Um we're now in the high

threes. Uh one of the big changes we

announced yesterday in our capital

allocation strategy is we're going to

endeavor in the next couple years to get

down into the low threes, but we really

feel

that being around three or even slightly

under three in the twos, it gives us a

profile that

higher quality investors will be

interested in the equity. And we believe

if we can do that, we'll see a we'll see

an earnings

multiple or a multiple on the on the

equity.

And you know, once we paid debt down,

we'll be able to use that cash flow for

shareholder-friendly

activities. You know, we we're a big

believer in our own equity and so right

now we're we have a 500 million share

buyback that's been authorized by the

board. Obviously, we're using most of

our cash flow to pay down debt and fund

the operation. We're not going to starve

the business, but we're going to start

to make small acquisitions on the

market. You know, to initially offset

shareholder base comp,

but at the end of the day we believe in

our business and so I think a

combination of getting debt paid down,

investing in the business, bringing new

products to market, I'm comfortable that

you know, investors will will see the

value in the stock in the future.

>> Thank you for that. Thank you for all

the lawn tips.

I will now be contacting you regularly.

I've got to be that annoying. I

appreciate it. Good to see you. Good

luck on your CEO journey. Look forward

to talking again soon. That's it for

latest episode of Power Players.