Consumer Trends in Organics & Naturals Gardening Media Web Conference

1. Consumer Trends in Organics & Naturals Gardening Media Web Conference Wednesday, March 7, 20071:30 p.m. – 2:30 p.m. Eastern

2. Speakers • Joe Lamp’l, Scripps Howard Writer, Founder of joegardener.com, Host on the DIY Network and of PBS’ “GardenSMART,” Garden Writers Association Member • Danielle Treadwell, PhD, Assistant Professor and State Extension Specialist, University of Florida (Insights presented by Joe Lamp’l) • Bruce Butterfield, Research Director, National Gardening Association • Keith Baeder, Vice President of Marketing, Growing Media Team, The Scotts Miracle-Gro Company • A.J. Petitti, Vice President of Petitti Garden Centers, Cleveland, Ohio, and Host of “Dig This,” FOX 8 Television Morning News • Peter Seabrook, Garden Editor, The Sun of London

3. Academic Expert Danielle Treadwell, PhD, Assistant Professor and State Extension Specialist, University of Florida Presented by Joe Lamp’l

4. “Natural” and “Organic” Defined • “Natural” = A truthful claim that is not regulated by the United States Department of Agriculture (USDA) • Therefore, this claim is one made by a manufacturer who anticipates that consumers will accept this claim in good faith • “Certified Organic” = Regulated claim • Producers who want to become certified organic must do so by contacting any one of the USDA accredited agencies to initiate the process

5. The Real Difference Between Organic and Conventional Gardening Products • The differenceis in how they are derived • Both formulations are equally as effective when used as labeled: the difference is that the natural extract is more expensive • Whether using organic or conventional products, it’s critical to use them according to directions specified on the label Found in bothorganic and conventional products NitrogenPotassiumPhosphorus Critical Elements

6. Bruce Butterfield Research Director, National Gardening Association

7. Consumer Demand:All-Natural/Organic Lawn and Garden Care Products The types of fertilizers, insect and weed controls consumers use on their lawns and gardens is a good way to measure how “organic” they are

8. Garden Fertilizers

9. Insect Controls

10. Weed Controls

11. Types of U.S. Gardeners(Based on Fertilizer, Insect Control and Weed Controls Used) • Conventional Gardeners – use only conventional fertilizer and synthetic pest controls • Hybrid Gardeners – use both conventional and all-natural fertilizer and pest controls • Organic Gardeners – use only all-natural fertilizer and pest controls • Do-Nothing Gardeners – use no fertilizer or pest controls

12. Conventional Gardeners • 39% (35 million) of U.S. gardeners are considered conventional gardeners • Use only conventional fertilizer and/or • Use only synthetic insect controls and/or • Use only synthetic weed controls

13. Hybrid Gardeners • 35% (31 million) of U.S. gardeners are considered hybrid gardeners • Use both conventional and all-natural/organic fertilizers • Use both synthetic and all-natural/organic insect controls • Use both synthetic and all-natural/organic weed controls

14. Organic Gardeners • 5% (5 million) of U.S. gardeners are considered organic gardeners • Use only all-natural/organic fertilizers • Use only all-natural/organic insect controls • Use only all-natural/organic weed controls

15. Do Nothing Gardeners • 13% (12 million) of U.S. gardeners are considered “do nothing” gardeners • Use no fertilizers • Use no insect controls • Use no weed controls

16. Fertilizers, Insect and Weed Control: Market Size and Segmentation

17. Outdoor Fertilizers Purchased in 2006

18. Insect and Weed Controls Purchased in 2006

19. Reasons for Using or Not UsingOrganic/Natural Methods

20. How likely is it that you will use all-natural/organic gardening methods in the future?

21. Who is most likely to use all-natural/organic gardening methods in the future?

22. Keith Baeder Vice President of Marketing for Growing Media, The Scotts Miracle-Gro Company

23. ScottsMiracle-Gro & Organics • One of the largest U.S. providers of organic garden products and users of organic materials in production process • Currently recycles 3.2 billion pounds of organic material annually • Partners with Perdue Agricycle to recycle and pasteurize chicken manure for use in organic products • Committed to reducing phosphorous content of fertilizers by 50 percent in 2007 • Recently acquired Whitney Farms brand of all natural, premium organic soils, fertilizers and mulches to broaden product portfolio

24. Organic/Natural Market Overview

25. Organic Lawn & Garden Market Overview Organic/Natural Segment: Estimated Size Approximately 7 percent of Total L&G Sales • Source: Vista 11/06 (total category); *excludes durables, repellents, rodenticides and Grocery & Drug control sales, 2002 Freedonia(Organics)

26. Organic/Natural Market Growth Potential Organic/Natural Products Are Becoming More Mainstream, Providing Opportunity in Lawn & Garden: • 58 percent of households purchased a food item labeled organic • 32 percent said it was important or somewhat important that their food was organic • 67 percent indicated that organic food would become more common in the future • Source: eBrain Market research • In 2004, 66 percent of U.S. consumers report they use organic products at least occasionally • Up from 55 percent in 2000 • Source: Organic Food and Beverage Trends • U.S. Organic Food sales were about $14 billion in 2005 • Represents about 2.5 percent of all retail food sales • Expected to increase to $16 billion by end of 2006 • Source: Organic Trade Association • Over 35 million households use both natural and conventional L&G products or natural products only • Source: NGA Survey 2004

27. Organic/Natural Consumer Insights

28. Organic/Natural Consumer Segments Lawn & Garden Spectrum Has Distinct Attitudes: Use Only Organic L&G Products Use Both Conventional & Organic L&G Products Use Only Conventional L&G Products 5% 35% 39% “PASSIONATE” “FASHIONABLE” “CONVENTIONAL” Niche, Natural Lifestyle Involved, Concern About Earth, Composts Mainstream, Interested In Healthy Lifestyle/Kids/ Pets, Trend Followers Happy With Current Results, Doesn’t Think About Product Growth Area • Source: 2004 NGA Survey (13% Do Nothing; 8% Don’t Know)

29. Organic/Natural Consumer Insights Insights about the consumer: • More of a lifestyle and distinct consumer attitudinal segment • No clear demographic of consumers interested in organic products, although may skew somewhat female, slightly higher in income and education • Technical definition of organic/natural differs dramatically from consumer perspective • Interest may be linked as much to family/pet safety and health as it is to environmental responsibility/stewardship • Potential demand for organic products may be higher in some categories vs. others • There are still many barriers to consistent consumer use. Confusion about the meaning of different terms used for products (e.g., lack of clarity around definitions of organic and natural), higher price points, and concerns about product performance and benefits remain

30. Organic/Naturals for Today and Tomorrow

31. Organics/Naturals for Today and Tomorrow ScottsMiracle-Gro’s Organic/Natural Product Offerings Include:

32. Extremely Interested Very Interested 25-30 percent of consumers have some interest in organic plant food; increased interest if organic plant food offered by Miracle-Gro Our Brands Confer Trust and Stimulate Interest in Organics/Naturals

33. Why ScottsMiracle-Gro for Organics/Naturals? • World's leading lawn and garden company that owns and markets the most powerful brands in the worldwide consumer lawn and garden industry • Intense dedication to R&D produces the most effective and safest products • Products and in-store support widely available through the world’s leading home improvement retail companies, mass merchandisers, hardware chains and garden centers • Marketing that can attract new participants to the category

34. Organics/Naturals for Today and Tomorrow ScottsMiracle-Gro’s Organic Vision: To Become The Undisputed Leader In Organic / Natural Gardening Products The Organic ‘Gold Standard’ in Lawn & Garden

35. A.J. Petitti Vice President, Petitti Garden Centers, Host of “Dig This,” FOX 8 Cleveland

36. Observations of Consumer Trends • Customers are becoming much more aware of choices when it comes to the way they care for their lawns and gardens • We are seeing consumers’ interest in non-conventional options slowly increasing

37. Knowledgeable Customers • Customers who are more up-to-speed with the organic movement will often automatically ask whether there’s an organic solution for their problem • This type of customer is in the minority in the Ohio region • Organic gardening has not yet gone “mainstream” in the Midwest as it has in the Pacific Northwest and Northeast

38. Inventory and Customer Service Approach • Petitti Garden Centers structures its inventory and customer service approach to meet the needs of customers • Because the demand for organic gardening products is not yet very strong, more conventional solutions tend to be offered • Organic and natural products are still available to customers who are looking for options • Biggest category within the organics category is in fertilizers and soils

39. Consumer Purchase Decisions • Customers tend to base their purchases on several things: • Effectiveness • Price • Packaging • Organic products will likely have to be priced comparably with conventional products and prove to be just as effective and easy to use to gain mainstream momentum • Pricing of organic products is now beginning to come into line with their conventional counterparts as larger players like ScottsMiracle-Gro start to flex their muscle in this space

40. Peter Seabrook Garden Editor, The Sun of London

41. Confusion for English Gardeners Surrounding Organics/Naturals • Disconnect between media and reality • Differing opinions from government bodies • Distraction of UK-specific trends within lawn and garden category

42. Media-Perpetuated Confusion • Organic gardening gets most of the editorial press coverage, while 80 percent of gardening is conventional • Amount of editorial dedicated to organic gardening does not correlate with the sales volume of organic products • Suppliers are increasing the non-peat and organic products in an effort to answer pressures from the lobby groups • Increased volume of organic products is not translating into spikes in sales volume proportionate with that of conventional products • Skewed coverage due in part to unique restrictions by the BBC, which does not allow use of brand names but solely names of basic ingredients • Because names of basic ingredients are complicated, it makes things difficult for reporters and consumers alike • Consumers then don’t know what to ask from when they get to the retail stores

43. Differing Political Agendas • Government regulatory bodies and farmers don’t see eye to eye • Recent coverage in UK media demonstrates the political confusion surrounding the debate regarding organic and conventional-produced food

44. Differing Political Agendas • Soil Association Point-of-View • Argues that food produced without pesticides and without additives are likely to be healthier • Food Standards Agency (FSA), Environment Secretary for the UK and the National Farmers’ Union Point-of-View • Only 4 percent of total farm produce is grown organically; the other 96 percent of farm produce grown conventionally should not automatically be considered inferior • No scientific evidence to prove organic food is healthier than conventional food

45. Differing Political Agendas • Conflicting sentiments are confusing UK consumers and gardeners, leaving them wondering which governmental body to believe • Encouraging more people to grow their own produce • Vegetable seeds sales are increasing at the expense of flowers • This demonstrates the need for thorough, credible and unbiased research to help settle the matter in people’s minds

46. The Rise of Container Gardening • The urge for UK gardeners to simplify their gardening practices is trumping the conversation of whether or not to go organic

47. The Rise of Container Gardening • Container gardening is gaining popularity for several reasons: • Space Constraints • Since England is a densely populated island with a shortage of available space in urban and suburban centers, there’s an increasing shortage of prime gardening space • Container gardens require less care than traditional English gardens • They lend themselves to spot treatment instead of broadcast, which lessens the question of environmental impacts in the mind of the gardener • UK residents often fly out of the country for long weekends • Looking for a low-maintenance form of gardening

48. What’s to Come • It’s great to see the gardening industry keeping up with and responding to consumers’ demands • Given the confusion over organics and naturals, don’t expect to see a huge shift among conventional gardeners • Lack of clear consensus on the topic, the rise in container gardening and desire for simple, effective solutions will continue to rule the day • The companies that provide such solutions will be the winners in the category

49. Consumer Trends in Organics & Naturals Gardening Media Web Conference Wednesday, March 7, 20071:30 p.m. – 2:30 p.m. Eastern

50. Q & A • To get in queue to ask a question, you can type your question into the rectangular box located in the bottom right of the screen and click the “send” button • We ask that you limit yourself to one question and one follow-up question to ensure that the greatest number of people have the opportunity to ask their questions