INTL INC(AERO ) AEROGROW
AeroGarden Sprouts fit on kitchen counters, night stands and end tables. Some models include upgraded trim and designs, such as the red and blue garden targeted at all-family usage. The AeroGarden 6 series has a triangular shape that is fit for kitchen counter-top corners with energy efficient light-emitting diode LED lighting.
It has a smaller footprint than the AeroGarden 7 and as a result features over six pods for planting. The AeroGarden Harvest series has a smaller footprint and is fit for a kitchen counter-top with energy efficient LED lighting. It features a range of trim and touch screen control panels. AeroGarden 7 Series includes its original products, which feature the rainforest nutrient delivery system, automated LED lights and reminder systems.
AeroGarden Extra Series is a seven pod garden with extended lamp arms and it is used for growing vegetables. Some models also include stainless steel trim. This garden offers a model with an LED light. It also includes a redesigned lighting system featuring MaxGrow Grow Lights and aluminum reflectors, a range of Grow Light adjustment from small to tall, a trellis system, a reservoir and a QuickPlant button that walks users step-by-step through the planting process.
This garden comes with an LED light. This garden includes liquid crystal display LCD display panel that utilizes screen prompts to walk users through the planting process. The Company offers approximately 40 seed pod kits for use in its indoor gardening products. These seed pod kits include pre-seeded bio-grow seed pods and a three-to-six-month supply of nutrients, including the Company's formula for adjusting water quality.
Its seed pod kits include vegetable gardens, such as tomato, pepper and salsa garden; herb gardens, which include gourmet herbs, Italian herbs and pesto basil; flower gardens, such as cascading petunias, English cottage, scented blooms and mountain meadow, and salad gardens, which include salad greens and romaine lettuce.
Its seed pod kits are sold to consumers for use with the Company's indoor gardening products. Its individual seed pod kits are grown by consumers for 3 to 6 months and then new seed pod kits may be purchased for replanting. With its Garden Starter Systems, consumers can start approximately 60 seedlings in the Company's indoor gardens for transplant into their outdoor gardens.
With the Grow Anything Kits, consumers can grow their own seeds to maturity in the AeroGarden or transplant seeds outdoors, including plant nutrients, nutrient dispensers and other products. 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.
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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.