) INC(AERO AEROGROW INTL
Growing fresh food and flowers lifts the spirit and nurtures the soul. But for most people, the nurturing ends when winter begins. AeroGrow founder Michael Bissonnette said, "Wouldn't it be great to have fresh herbs, flowers and veggies growing in your home, any time of year?
So he and a group of like-minded innovators married that notion to aeroponics, a highly efficient gardening technology in which plants grow in water, nutrients and air.
After four years, dozens of prototypes, and hundreds of seed evaluations, the AeroGarden was born and today there are over , enthusiastic AeroGarden customers. Michael is awed by the response. AeroGrow is the creator, manufacturer, and marketer of the AeroGarden line of indoor gardens for consumer markets worldwide. The AeroGarden line is sold primarily through our direct-to-the-consumer efforts via our own catalog, the web, and through TV commercials and infomercials.
All of our gardening products feature our proprietary technology which allows consumers to garden indoors, year round, with no dirt, no weeds, and no green thumb needed.
AeroGardens are complete indoor gardening systems with built-in, full spectrum grow lights, custom time-release nutrients, auto-feed, water and lighting systems, and "smart garden" consumer alerts for guaranteed success.
Since launching our first product in March we have sold almost 1 million AeroGardens and have expanded our product line to include multiple gardens with different form factors, price points, and consumer benefits. AeroGrow also develops, manufactures and markets a variety of consumable products for use in its gardens. These seed kits, lights, nutrients and accessory products provide ongoing, repeat sales to the Company and generate continued engagement and interest from our user base.
AeroGrow was founded in July and became a publicly-traded company on February 24, AeroGrow is headquartered in Boulder, Colorado and employs approximately 45 people. Wolfe oversaw the launch, development and operation of seven independent catalogs along with associated e-commerce sites including the highly successful Colorful Images, Snoopy, Etc. The company's major catalog assets were later sold to the Taylor Corporation.
Prior to this, Mr. Wiland was sold and became a division of EDS in He has also served as a consultant and as a Board member both to corporations as well as non-profit organizations. MacGregor Greg Clarke is a high-performance, hands-on business leader with an exceptional record of achievement, impact, and success in senior executive roles at large multinational and middle market companies.
Clarke brings to AeroGrow an extensive background in finance, operations, and strategy, as well as consumer product experience, having served as President, CEO and CFO at a number of high-growth companies during his career. Clarke worked at Ankmar, LLC, a private equity-owned, nationwide garage door manufacturer, distributor, and installer, first as CFO and later as CEO, where he successfully restructured the company's operations and managed the sale of Ankmar to strategic buyers.
Prior to Ankmar, Mr. Clarke also worked for nine years at PepsiCo, Inc. Thompson was involved in all aspects of fund raising, product development, marketing and sales in the early days of the company. Thompson brings AeroGrow over 20 years of experience in management, direct marketing, sales management, and advertising.
Prior to AeroGrow, Mr. Prior to PPI, Mr. For ten years Mr. Thompson was the founder and President of Innovative Marketing Solutions, a marketing consulting agency to entrepreneurial and high-tech companies.
Aero Grow International, Inc. AeroGrow is the creator, manufacturer and marketer of the Miracle-Gro AeroGarden line of indoor gardens for consumer markets worldwide. Agree on catalysts too. You are Guest on WEB7.
Free - Posts Today: As for my interest, first and foremost the AeroGarden is a terrific product that has always been well-received by consumers. I saw huge upside in the company with such a great product and loyal base of customers. The challenge was, the company had such significant liquidity concerns; we had to deal with a very difficult balance sheet and a situation whereby we had to go into a little bit of a salvation mode. So back then we changed the company's business model to focus on selling direct to the consumer -- much higher margins and much greater ability to control the inventory.
All of these actions attracted the interest of the Scotts Miracle-Gro Company. What this company needs more than anything else is distribution - sales growth - and we have access to that through Scotts. Can you give a few examples of how you've been working with Scotts?
How is AeroGrow benefiting from Scotts' resources and know-how? In marketing, they have millions of names in their databases, and they have given us access to those names to email our promotions, mail catalogs, things like that. From a distribution standpoint, as an example, they have a business development team that calls on and supports Home Depot.
And that team has been made fully available to us in gaining access and distribution and sell-through at Home Depot stores. Scotts has similar teams in place working with Lowe's, Wal-Mart, Costco, and others. On the supply chain front, an example would be: AeroGrow might ship over 35 or 40 containers of goods from Asia a year.
Scotts ships thousands of containers a year, so they obviously have much better pricing. So a lot of things like that.
Have you disclosed any kind of commentary with regard to what Scotts is expecting sales-wise from this relationship or what would be meaningful to them? I will tell you that Scotts believes the indoor gardening market, through their evaluation, is a burgeoning, multi-billion dollar market. And they want to have access to that. They have a lot of ways to drive indoor gardening. What is it about the indoor gardening market that they see it as a burgeoning market? I think there are a lot of trends that are on the right side of indoor gardening.
It's healthy food, it's safe food, it's pesticide-free. You know, there's a huge movement of people wanting to know where your food is from, where it's grown.
Well, if it's on your countertop, you're pretty much in control of your food at all times. So they see a lot of those emerging trends. They see 80 million gardeners out there in the country. They see 50 million cooks. And I think they see a movement, maybe, away from the suburbs and toward urbanization.
A huge emerging trend is urban development. And the AeroGarden speaks to all of those trends, and I think that is what led them to believe that an investment in this company and supporting this company might have a big payback for them.
Can you give us a feel for the kind of due diligence that Scotts did before getting involved? They did a lot. I think they did a lot of work with respect to, first of all, understanding the market. But then with respect to our company, they did a lot of work with the technology, they did a lot of work with understanding our supply chain, with understanding our database and how our marketing works.
I will tell you, the deal culminated with their strategist and myself going over to China for about 10 days, and we called on each of our manufacturers, and they really kicked the tires hard to make sure they knew what they were getting into. And I think they were pretty impressed. What's the early customer feedback from having the Miracle-Gro brand on your packaging?
We're only two months into it but we are very pleased with the reception that we've received from our customers. Our latest catalog is the best one we've ever mailed.
So there are some indications to suggest that the Miracle-Gro brand is helping us, but it's impossible to know how much of that is really attributable to Scotts specifically. We're hopeful that the presence of the highly recognized and trusted Miracle-Gro logo on our packaging will be a big assist to us as we re-enter the retail market.
Image from the landing page at scotts. How should investors interpret recently reported sales figures in light of the very recent rebirth of the company with the Scotts partnership? Well, we concluded the deal with Scotts in April, late April of this year - just after our fiscal year began on April 1. The deal requires that we rebrand the entire product line as the Miracle-Gro AeroGarden. So immediately upon completion of the transaction, we went to work on changing tools, changing packaging, changing everything about our product line--the colors of the brand, everything.
This was a process that we knew would take about six months. And, frankly, it made no sense to bring inventory in over the course of these last six months, only to have to liquidate it when the new merchandise began showing up. So that was our focus. We brought no inventory in from the period of April--really, before April, in anticipation of the deal--through about October 1.
So we simply didn't have much inventory to sell. As a result, the first two quarters of this year had very low revenue and income. But that's simply because we didn't have inventory to sell. That has changed beginning with the December quarter. We're selling now, and we're selling well. Not only should sales grow as a result of added retail distribution, but they will be comping in off of depressed numbers which should make for even better headlines.
AeroGrow is now returning to the retail channel after a hiatus. Would you mind summarizing the history there and what the opportunity is in the retail channel?
If AeroGrow is going to truly become a sizable company, we're going to do it largely through retail. That's how American consumers ultimately buy - whether it's in-store or on line. We consider our retail business to be both brick-and-mortar as well as dot-com.
It's important to know that the product always sold well at retail. We had to exit that channel, simply because the company didn't have the balance sheet strength to support the inventory demands of a retail model.
So now that we have a much stronger balance sheet, having eliminated the substantial debt that was weighing on the company, we're in a position to have inventory levels that are sufficient to support retail. It makes a lot of sense for us to go back to that - but to do it in a highly strategic and focused manner with partners that will really help us in growing the brand.
We look for a balance of a direct-to-consumer model in concert with a retail model. A high-margin direct-to-consumer business really helps us keep a one-to-one relationship with the consumer; allows us to have our entire array of products available to consumers.
But a retail strategy, while the margins aren't quite as high as direct-to-consumer, allows us to have big distribution and lets us reach millions upon millions of consumers. I think the combination of those two is the right way for us to grow this business and grow it profitably. How would you respond to investor criticism that entering the retail channel would be adding lower-margin sales versus the higher-margin, direct-to-consumer channel where the company had focused in recent history?
I think that you have to look at this as a blend. Clearly, retail does not have the margins that we have in our direct response business. But I would make two points: Number one, we can drive trial through retail and we can still make money at retail. I want to add that we have really improved our margins over the last couple of years.
We've driven a lot of cost out of our business and we have an overhead structure now that I think can support quite a bit of growth. As we start to grow, we should see a lot of our incremental sales - either from our direct business or our retail business - drop to our bottom line. The second point I would make here is a critical one: Well, we've focused on four retail partnerships as we have re-entered the retail space this fall--Amazon, which we began working with late last year, has been going extremely well.
Our relationship with Amazon is exceptional and they do a great job in promoting our products. We've also launched on Amazon in Canada and we are doing very well there. We have just begun working with Costco and Costco. It's showing a lot of strength as well. Home Depot is the third key partner, where we have just begun testing at seven stores in the New York area, and we'll be conducting about a to store test in the calendar first quarter.
I think Home Depot could become a very meaningful partner for us. And we have just begun working with the Home Shopping Network. We have a long way to go, as we've just begun testing there, and I'm anxious to see what HSN does as a brand building channel for us. Are there any specific anecdotes you can share on these relationships? We can tell you that on Cyber Monday, Amazon featured us as a flash deal, and I'm told we sold nearly 2, of our AeroGarden 3 units in just a little over an hour and a half.
They also sold out of about Ultra's in just a few hours, and they were really pleased with those numbers.
So we have seen some terrific sell-through. Amazon also plans to run us as a last minute "Deal of the Day" on December 23rd - with guaranteed last minute Christmas delivery. I don't have detailed numbers for you, but I can tell you Costco has also been clipping nicely ahead of their projections.
The AeroGarden featured prominently in a costco. The subject line was: Save on Miracle-Gro AeroGarden, garage storage and a new fan! I imagine that this is a big gift item. How are you feeling about this holiday season? It is a big gift item. We traditionally do very well during the holiday selling season.
We don't make forecasts or projections, and we're not going to do that here. But I will tell you that we've been delighted with what we've seen from a sell-through standpoint over the course of the last couple of weeks, so we're pretty optimistic about what's unfolding this holiday season. What are the margins for both garden sales and accessory and component sales?
What are we seeing in terms of lifetime customer revenue to AeroGrow? It depends on which channel you're selling in, but gardens tend to have gross margins in the low point range. So as we go through a phase where we're selling more gardens, which is our current strategy because we want to grow the business and get more of these in the hands of consumers, I think we should anticipate that our sales of gardens will be higher but our gross margin might be a little bit deflated as a result of selling more of the lower-margin garden items - especially as we increase our sales through the retail channel.
But as we achieve a critical mass and have more people in the franchise and using our product, I would anticipate that over time, we'll begin to see more of our high-margin seed kit sales kick in. So we like to refer to that as the classic razor-razorblade strategy, and we think we have a lot of evidence that that's exactly what happens with us. Turning to the product pipeline, what are the big sellers right now, and what's coming down the road?
About a month ago, we launched our new Ultra with an LED lighting platform. I could not be happier with the sales of this new product. It looks to me like it will be the best new product launch the company's ever had. We've also sold very well with our Ultra product that we launched last year. That's at Costco and Amazon has also picked it up.
It's selling very, very well at these two retailers as well. On our drawing board for calendar are several major initiatives. Number one is a refresh of our classic products, the AeroGarden 7 and the AeroGarden 6.
We want to freshen them up, and we have some designs on taking some costs out of that so we improve those margins. We plan next year to add a wifi-enabled component to it, so you can track your garden growth on your smartphone or your iPad - and you will be able to fully monitor your garden in that fashion - including placing re-orders. We also envision a webcam being onboard with the product so you can actually have time-lapse photography of your garden growing--a lot of fun things, kind of where social media intersects with gardening.
I think you can look for us to extend our LED lighting platform as well. It has been so well received, plus the garden growth has been just phenomenal. Will all the growth you are targeting result in a need for significant expenses or capex to support these new sales levels?
AeroGrow International Inc.
The AeroGarden is a revolutionary indoor garden appliance, self-contained, automatic and % success AeroGrow International, Inc AeroGarden. AeroGrow International, Inc. engages in the development, marketing, direct- selling, and wholesale of indoor garden systems to consumers and retailers in the. AeroGrow International, Inc (OTCBB: AERO) is the manufacturer and distributor of the world's leading indoor gardening systems – the AeroGarden line of Smart.