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“Greener Pastures”: The Launch of Sta-Green by HydroCan
Figure 1 – Sta-Green Lawn Fertilizer (6.36 kg package)
Sta-Green is a lawn fertilizer with one important difference; when applied to most types of
grasses, Sta-Green enables the root system to retain water longer, thus reducing the need for both
extra watering and frequent fertilizing. Unlike traditional chemical fertilizers, Sta-Green’s pellets
attach to the root system of a lawn to attract and retain moisture. Laboratory tests have
demonstrated that Sta-Green can reduce the need for manual watering up to 40% and extend the
time between fertilizer applications by five weeks. HydroCan, the Canadian company holding the
patent for this innovative chemical fertilizer, is ramping up production and is preparing for market
launch through local gardening retailers. Starting with the mission statement – “To produce the
best water retaining fertilizer money can buy”, StaGreen must now identify the target market,
estimate market potential, establish marketing strategies, and position a product they guarantee to
be environmentally friendly.
Secondary data confirms that gardening is among the more popular summer
activities in Canada. In 2016, households spent nearly $3.3 billion, at the retail level, on
gardening supplies. This figure includes $1.3 billion on trees, shrubs, and plants, $1.1 billion
on hand tools, pots, books, magazines, and landscaping services and $900 million on lawn
care (of which 52% was for fertilizer). In a recent census, Statistics Canada (2016)
reported that there are 13,250,000 households in Canada and that 60% of all households
have a lawn and/or garden as part of their dwelling. An industry association representing
Canada’s manufacturers, wholesalers, and retail distributors of nitrogen-based fertilizers,
reported that the average Canadian gardener spends no less than 3.5 hours per week on
lawn care and applies approximately 40 kg of chemical fertilizer each year. A publicly
funded research study confirmed that people tend to their gardens because they enjoy the
great outdoors. Almost 68 percent of the respondents said it provided good exercise and
66 percent claimed they gardened for relaxation. The study confirmed that gardening is
most popular with Boomers and early Gen-X and gaining interest with later Gen-X and
early Gen-Y as they enter the home market. The profile for active gardeners and nongardeners is presented in Appendix 1.
The study concluded that the internet was a great source for information for home
gardeners but was not a substitute for a visit to a retail centre. Quality and variety of live
plants ranked among the most important attributes when choosing a gardening supplier.
The majority of the respondents interviewed for the study preferred shopping for plants
and garden accessories at the major home improvement stores, while a small segment
found the stores overwhelming and preferred the friendliness of the local garden centers.
The consumer fertilizer market is extremely competitive. As shown in Table 1, the three
major brands (Scott’s, Miracle-Gro, & Ortho) account for 52% of annual sales. The remaining
48% (86.2 million kg) is sold by bulk distributors. Scott’s Lawn Products and Ortho
Chemicals are headquartered in the United States with divisional offices in Canada, and both
have extensive international operations. The market share leader is Scott’s with two powerful
brands – Turf Builder and Miracle-Gro. Turf Builder is a slow-release fertilizer that reduces
the number of applications required for a healthy lawn. Slow-release simply means that the
fertilizing chemicals are released gradually over a number of months. Thus, one application
of slow-release fertilizer could last the entire season.
Although the three leading brands are competitively priced (Table 1), they differ on
product attributes. Miracle-Gro is positioned as a plant-food and is not specifically targeted
at lawn care. Ortho’s Lawn and Weed combines fertilizer with a pesticide that prevents most
common lawn infestations.
Table 1 – Top Competitors
Product
Description
Scott’s Turf Builder
Scott’s Turf Builder
Scott’s Turf Builder
Miracle-Gro Lawn & Garden
Ortho Lawn & Weed
Package
Size
Package
Price
Annual
Sales ($
000,000)
Annual
Sales
(000,000
kg)
10 kg
25 kg
5 kg
10 kg
10 kg
$24.49
$58.99
$13.99
$29.45
$23.99
79.6
46.8
18.7
28.1
60.8
32.5
19.8
6.7
9.5
25.3
A conjoint study measured attribute importance for chemical-based fertilizer (Table 2) but
noted that four out of ten consumers in this market have no concrete brand preferences. They
rely heavily on in-store advertisements and sales staff for information and recommendations.
Many consumers cannot recall a brand name or a manufacturer of fertilizer. The product with the
highest brand-name awareness is Miracle-Gro; however, most associate this brand name with
plant foods rather than lawn fertilizers. The researchers reported the sampling error to be
plus/minus 2.3 percentage points, 19 times out of 20.
Table 2 – Part-Worth Utilities
Price per kg
Element Ratio
Type
$2.45
5.4 10:10:10
4.6 Natural
$2.95
3.8 16:20:00
6.4 Manufactured
Package Size
2.7 10 kg
1.9 25 kg
1.1
1.1
Lawn care products are primarily sold through discount stores such as Canadian Tire
and Walmart, local garden centers and home improvement stores. The industry association
estimates that 60% of all consumer fertilizer is purchased in discount stores, 30% in home
improvement stores and 10% in garden centers and nurseries. Garden centers and nurseries
tend to be independently owned and thus much more numerous. While the top ten discount
chains in Canada account for over 89% of all sales from discount stores, the top 50 garden stores
account for less than 28% of total retail sales. Home improvement stores are growing in numbers
and tend to be large, powerful chains such as Home Depot.
In order to build relationships with both customers and retailers, HydroCan developed
some co-branded advertisements with the home improvement store Lowe’s. Along with television
spots, Hydrocan created print advertisements that would be posted on their website and displayed
at various retailers selling the StaGreen product lines. An example of a print advertisement can be
seen in Appendix 2.
HydroCan was incorporated nearly one year ago. They have leased their production
facilities and have purchased and/or leased all equipment and machinery necessary to produce
10-kilogram bags of Sta-Green for the consumer market. The production facility has the capacity
to produce 180,000 kilograms of Sta-Green per month. Fixed production costs include $700,000
for equipment and building rental, $80,000 for general and administrative expenses, $20,650
for research and development and $12,350 for miscellaneous items. Distribution costs,
including freight, warehousing, and storage are estimated to be $426,000 per year. The
marketing budget has been set at $555,000 and each of the four owners of the company will limit
their salary to $30,000 per year. HydroCan has also hired 20 part-time students at an annual cost
of $25,000 per student to push the product through the channel.
Believing they have a superior product that will save end-users time and money, HydroCan
has set the price to wholesalers at $22.50 for a 10-kilogram bag. Variable costs for production are
52% of the sale price. On average, the large discount stores and home improvement stores add
a 25% markup on lawn maintenance products and wholesalers add a 15% markup. Because
the smaller specialty stores take a larger markup of 35%, HydroCan will not approach this
distribution channel until they have strengthened their bargaining position.
Appendix 1 – The Home Gardener
Employment status?
Active Gardener
Frequency
Valid
Percent
74.1
26
78.8
Not Working
15
25.9
7
21.2
58
100.0
33
100.0
Total
Active Gardener
Frequency
Percent
27.6
23
69.7
Married
42
72.4
10
30.3
58
100.0
33
100.0
Total
Active Gardener
Frequency
Non-Gardener
Percent
Frequency
Percent
35 and younger
14
24.1
25
75.8
Over 35
44
75.9
8
24.2
58
100.0
33
100.0
Sig. = .000
Total
You are?
Active Gardener
Frequency
Non-Gardener
Percent
Frequency
Percent
Male
24
41.4
29
87.9
Female
34
58.6
4
12.1
58
100.0
16
100.0
Sig. = .000
Total
Household income?
Active Gardener
Frequency
Non-Gardener
Percent
Frequency
Percent
Less than $75,000
25
43.1
31
51.9
At Least $75,000
33
56.9
2
48.1
58
100.0
33
100.0
Sig. = .071
Total
Highest education
completed?
Active Gardener
Frequency
Valid
Frequency
16
Age?
Valid
Non-Gardener
Percent
Not Married
Sig. = .000
Valid
Percent
43
Marital status?
Valid
Frequency
Working
Sig. = .618
Valid
Non-Gardener
Non-Gardener
Percent
Frequency
Percent
High school
13
23.0
19
57.6
Undergraduate
37
63.6
10
31.3
Graduate/Professional
8
13.3
4
12.1
58
100.0
33
100.0
Sig. = .050
Total
Appendix 2 – Sta-Green Product Advertisement
Appendix 3 – Sta Green Service Advertisement
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