Management Consulting Case Study-Downtown Lawn and Gardening

Case scenario-  Downtown Lawn and Gardening (L&G) is a consumer packaged goods company that specializes in lawn and garden consumable products such as lawn and plant fertilizers, grass seeds, and weed and insect control products. This accounts for a majority of their business and is $1.9 billion of their $2.7 billion annual sales. They also have other divisions in the outdoor living category such as professional lawn services and retail stores with outdoor furniture, garden tools, and accessories, which earn the remaining revenue.

Recently, L&G has seen their profitability in the CPG business decline and has approached you as a consultant to find out why and recommend a solution. Additionally, as a publicly traded company, L&G has promised top-line growth in the near term to its Wall Street investors, and as a consultant, you need to come up with a solution for achieving this.
Industry Landscape:

• The lawn and garden product category is mature with a growth of 4% per year.
• L&G is the market leader, with about 61% market share on average across their categories
• The other two major players in the market are Midtown L&G and Uptown L&G.
• Some additional smaller players also exist.

Competition:

• Midtown L&G: Annual Sales of $800 million, market share of approximately 26%, known for producing private label or exclusive lines for Home Depot, Lowe’s and Wal-Mart, lower-cost producer of value products.
• Uptown L&G: Annual Sales of $500 million, market share of approximately 16%, strong in grass seed segment, primarily in the South.

Retail Distribution Channels:

• 75% of CPG sales are through Home Depot, Walmart, and Lowe’s
• The remaining 25% of sales are through independent stores: hardware stores, nursery centres, regional chain mass merchant stores, and grocery and drug stores.
• Retail sales continue to be up slightly at Home Depot, but wholesale sales have been flat to declining because they had built up excessive inventory and are now unloading that before purchasing more. This is expected to continue in 2008.
• Sales are increasing quickly at Lowe’s, mostly following their store expansion and also due to more of L&G's products being sold there.
• Sales at Wal-Mart are growing, but slower than the growth estimated for the overall market.
• Sales at independent retailers are growing slightly, even though these outlets are losing market share to Home Depot, Lowe’s, and Wal-Mart overall. This growth is due to the optimization of the go-to-market approach (selling direct to bigger accounts and going to distributors in others, with a pay-for-performance incentive for distributors).

Product Customer:

• Consumers who buy L&G's products are traditionally male but increasingly female or the purchases are influenced by females.
• They are predominantly homeowners.

Company: Downtown L&G

• Annual Sales: $1.9 billion
• Market Share: 61%
• Revenue: This has been increasing over the past few years.
• Price: Increased for the first time in a few years on the premium product segment.
• Volume: Total product sales have increased.
• Costs:

                     i. Variable Costs: Have increased due to increases in raw material costs and freight. L&G has been able to pass these along to the Premium product.

                     ii. Fixed Costs: Have stayed constant.

• Distribution Regions: Stronger in the Northeast and Midwest because their core products align with the climate and growing conditions in this region. L&G has been expanding their

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By Vandana Gaur