3697 Mt. Diablo Boulevard
Central--which supplies more than 45,000 products to over 10,000 retail stores each week--continues to demonstrate its unique capabilities which go beyond the scope of traditional distribution services. In addition to providing order taking, shipping, and billing services, Central also offers customers a wide array of value-added services designed to increase the sales and profitability of manu-facturers and retailers alike. For example, Central offers just-in-time inventory management, in-store shelf design and display building support, advertising and promotional programs, weekly store sales calls, training, merchandising, and Electronic Data Interchange (EDI) for paperless, cost-saving transactions with our customers.
The largest distributor of lawn and garden and pet supplies in the United States, Central Garden & Pet Company stocks approximately 45,000 products made by 1,000 manufacturers and distributes the merchandise to high-volume retailers such as Kmart, Wal-Mart, and Costco. Central Garden recorded explosive growth during the 1990s as it took advantage of consolidation in its industry by acquiring competitors. From $25 million in sales in 1987, the company's sales volume mushroomed to $841 million a decade later. During the late 1990s, the company operated 41 distribution centers, using these facilities as warehouses to service much of the United States. In addition to its distribution centers, Central Garden also operated eight manufacturing facilities. These production sites were used to manufacture the company's line of lawn and garden and pet supply products, which were sold under the Four Paws, Zodiac, and Grant's brand names.
Central Garden was originally incorporated in 1955, beginning as a small distributor of lawn and garden supplies based in California. Regional in scope, the company recorded measured growth for more than three decades. It was not until the late 1980s that Central Garden began its meteoric rise.
During the late 1980s, distributors in the lawn and garden industry were entering a consolidation phase. As aggressive distributors swallowed up competing firms to increase their stature, a form of corporate Darwinism decided survival: it was either jump on the acquisition bandwagon or be acquired by a competitor. As this industry trend became pervasive, Central Garden sat poised as a $25-million-in-sales company, respectably sized, to be sure, but not nearly large enough to effectively compete once consolidation had progressed to the point where companies of its stature would be dwarfed by industry giants. Accordingly, Central Garden began acquiring competitors to insure its long-term survival.
Given its financial limitations, Central Garden could not become too ambitious in its acquisition campaign. The company concentrated on purchasing small, "mom-and-pop" distributors and gradually added retail customers to its fold. This incremental strategy worked well, as the company inherited the strong client relationships developed by its local and regional acquisitions. At the beginning of the 1990s, however, the company made one enormous acquisition that proved instrumental in its transformation.
1990 Acquisition of Weyerhaeuser Garden Supply
In the late 1980s, one of the nation's largest companies was implementing a corporate strategy that would provide Central Garden with the opportunity to realize phenomenal growth in one bold move. Late in the decade, forest-products behemoth Weyerhaeuser Company was reeling from the weight and sprawl of its multifarious operations. Diversification into a host of businesses had carried the corporation into insurance, home building, mortgage banking, and as far afield as disposable diaper production, creating an incongruous whole capable of generating more than $10 billion in annual revenue but hindered by depressingly low profits. New management put into place in 1988 was determined to arrest the downward slide of profits and decided to divest all businesses that did not fit with the corporation's core forest products business. One subsidiary after another was put on the auction block as the 1980s concluded, including Weyerhaeuser's lawn and garden supplies business, Weyerhaeuser Garden Supply Co.
Central Garden acquired Weyerhaeuser Garden Supply in 1990, paying $32 million for the distributor. "It's definitely a case of the shark swallowing the whale," a Central Garden executive noted in reference to the deal that, overnight, made the company a major, national player. By the end of 1991, the first full year that Central Garden and Weyerhaeuser Garden Supply operated as one entity, sales reached $280 million, with the former Weyerhaeuser operations accounting for $190 million, or nearly 70 percent, of the total. Bolstered by the network of clients inherited through the deal, Central Garden entered the early 1990s with 25 distribution centers that enabled it to serve retail clients in 37 states.
In the wake of the acquisition, Central Garden derived roughly half its revenue volume from ten customers, the high-volume retailers that included mass merchants, warehouse clubs, regional and national chains of drug and grocery stores, and large nurseries. These customers relied on Central Garden as the source for selected merchandise because of the efficiency of dealing with one supplier rather than numerous manufacturers. For their part, manufacturers turned to Central Garden for distribution help because many, either purposely or because of financial constraints, eschewed the heavy costs associated with operating their own direct-sales distribution operations. Central Garden helped retailers organize and schedule inventories, provided quick, reliable delivery of a broad assortment of merchandise unavailable from one manufacturer, and made the process of obtaining merchandise more cost-effective.
Early 1990s Expansion
Poised as one of the nation's largest distributors in an industry whose annual volume exceeded $20 billion, Central Garden sought to make itself the distributor of choice for all manufacturers and high-volume retailers of lawn and garden supplies. To accomplish this goal, the company focused on further expansion through acquisition.
Intent not only on expanding its lawn and garden distributing network, Central Garden also was looking to diversify its business and thereby reduce its dependence on the seasonal lawn and garden business. In 1991 the company acquired a pet supplies distributor, and pet supplies soon became Central Garden's fastest-growing business segment. With this promising venture beginning to develop, Central Garden next moved to consolidate its acquisitions and pay off mounting debt by selling shares in the company in a mid-1992 public offering. The investing public considered Central Garden an attractive opportunity, wooed by its position as the principal distributor to major retail chains Kmart, Costco, Home Base, and Payless Cashways. The company by this point also ranked as a major supplier to Wal-Mart, Home Depot, and Price Club, and figured to strengthen and increase its portfolio of clientele given the expansion-oriented mindset of the company's management. The public offering raised roughly $13 million, and from there the company resumed its acquisitive activities, building its distributor network thread by thread.
Between January 1993 and January 1994, Central Garden acquired six small garden and pet distributors, purchases that added $70 million to the company's sales volume. By the end of 1993, sales had swelled to $330 million, and the company showed no signs of slowing its growth. With more than 18,000 gardening, pet, and pool supplies in its 30 distribution warehouses, the company's influence in manufacturing and retailing sectors was increasing with each acquisition. Sales rose to $421 million in 1994 and to $437 million in 1995. By the time 1995's financial totals were tallied, Central Garden held sway in the lawn and garden supplies industry, ranking as the largest distributor in the country. In terms of the pet supplies industry, Central Garden was rapidly gaining ground on its competition. The company figured as the dominant distributor on the West Coast and its national presence was building steadily. Acquisitions--12 had been completed during the previous three years--had catapulted the company to the top. Industry consolidation, which had been invigorated by the concurrent consolidation of sales in the retail sector, had forced distributors to consolidate their operations. In this endeavor, Central Garden came out as the winner, drawing praise from industry observers and gaining significant business from large national retailers. "Central Garden," one analyst remarked, "has been able to lead the pet supply and lawn and garden product industry consolidation and has emerged as the preeminent distributor." Although much had been achieved, with annual sales increasing more than 15-fold in a seven-year span, the company exited the mid-1990s prepared to increase its stature further.
One important development that greatly increased Central Garden's revenue-generating capabilities was an agreement signed with The Solaris Group in 1995. Solaris manufactured lawn and garden products sold under the Ortho, Round-Up, and Green Sweep brand names, which historically had been major contributors to Central Garden's sales volume. Before 1995, Central Garden had served as the non-exclusive distributor for Solaris, but during the mid-1990s Solaris increasingly pursued direct sales to retailers and, consequently, took substantial business away from Central Garden. The agreement signed in 1995 named Central Garden as the exclusive distributor for Solaris. The benefits of the agreement were substantial in both the long and the short term, adding nearly $100 million to Central Garden's sales volume in 1996.
Late 1990s Growth
Acquisitions continued to be the prevailing theme describing Central Garden's development in 1996. Two pet supply distributors, Kenlin Pet Supply and Longhorn Pet Supply, were purchased in 1996, extending the company's national distributorship coverage. Following these two acquisitions, Central Garden ranked as the leading distributor of pet supplies in the country, having parlayed its dominant position in the West to secure many of the nation's markets. In December 1996, the company further strengthened its pet-supply business by acquiring Sandoz Agro for $41 million. The addition of Sandoz Agro added $43 million in sales, gave Central Garden ownership of products marketed to pet and veterinary industries, and ceded production rights to Methoprene, an insect growth regulator that served as the active ingredient in flea and pest control sprays, shampoos, collars, powders, foggers, and aerosols.
By the end of the company's 1996 fiscal year, sales rose to $619.6 million, which represented a more than 40 percent increase over the previous year's total. The increase recorded in 1997 was nearly as large, as the acquisitions completed after 1995 began to deliver their full influence on the company's financial stature.
In 1997 several key acquisitions promised to boost sales for the remainder of the decade. Early in the year, before the Sandoz Agro transaction was finalized, Central Garden acquired Four Paws Products, Ltd., Inc., a manufacturer of branded pet supply products. One of the nation's largest manufacturers of dog, cat, reptile, and small animal products, Four Paws sold its products under the Magic Coat and Four Paws brand names and distributed them throughout the United States, Canada, Europe, and Asia. On the heels of this deal, Central Garden acquired the pet supply business of Country Pet Supply, a distributor of pet supply and pet food products in the southeastern United States. Next, Central Garden strengthened its lawn and garden holdings, acquiring southern California-based Ezell Nursery Supply, Inc., a distributor of lawn and garden, barbecue, and patio products. At roughly the same time the Ezell Nursery deal was completed, Central Garden acquired a one-third equity interest in Commerce LLC, the leading distributor of lawn and garden products on the East Coast.
The bustling activity in 1997 lifted Central Garden's total sales by more than 35 percent. Ten years after recording $25 million in sales, Central Garden comprised operations that generated $841 million in sales. Although the company entered the late 1990s as an enterprise nearing its 50th anniversary, nearly all that constituted the company had been developed during the previous decade. Viewed from this perspective, Central Garden's management hoped the company's second decade of existence as a national distributor would be as successful as the first.
Principal Subsidiaries: Grant Laboratories, Inc.; Matthews Redwood and Nursery Supply Co.; Wellmark International; Four Paws Products, Ltd.; Ezell Nursery Supply, Inc.
Principal Divisions: Lawn & Garden Group; Pet Group; Proprietary Brands Group.