About Kaytee Products Incorporated

Central Garden & Pet tends to all things pets & pests. It is among the largest US producers and distributors of lawn, garden, and pet supplies, providing its products to retailers, home improvement centers, nurseries, and mass merchandisers, among them Wal-Mart. The company operates some 35 manufacturing plants and about 15 distribution centers throughout the US. Central Garden & Pet's sells private label and also branded lines such as AMDRO fire ant bait, Four Paws animal products, Kaytee bird seed, Nylabone dog chews, Norcal pottery, and TFH pet books.

Operations

The company operates two businesses, Pet and Garden. The Pet segment generates a little more than 50% of total revenue by producing, distributing, marketing, and selling a wide variety of pet-related products for the US. The company mainly targets the pet supplies market, which includes edible bones, chew toys, rawhide, pet beds & carriers, grooming supplies, animal health products, aquariums, water conditioners, and other items. Recognizable brands include Four Paws, Coralife, Kaytee, Breeder’s Choice, and Life Sciences. The US pet market is highly fragmented with about 1,400 manufacturers. Central Garden & Pet has a competitive advantage in that it operates its own sales and logistics network.

The Garden segment accounts for a little less than 50% of total revenue. It markets and produces grass seed, wild bird feed, insect control products, lawn and garden care items, fertilizers, and outdoor patio products. Notable brands include Pennington Seed, Matthews Four Seasons, Grant's, Amdro, Lilly Miller, the Pottery Group, Gulfstream and GKI/Bethlehem Lighting.

Geographic Reach

Walnut Creek, CA-headquartered Central Garden & Pet operates 35 manufacturing facilities totaling approximately 4.0 million square feet and 40 sales and logistics facilities totaling approximately 4.4 million square feet. Most sales and logistics centers are comprised of office and warehouse space, and several large bays for loading and unloading. Each sales and logistics center provides warehouse, distribution, sales and support functions for its geographic area.

Although most operations and facilities are in the US, the company has a presence in Canada, China, Mexico, and the U.K.

Sales and Marketing

Central Garden & Pet relies heavily on just a few national retailer chains for much of its sales. In 2015 the company's largest customer, Wal-Mart, accounts for roughly 15% of total net sales, and about 30% of sales for the company's Garden segment. The Home Depot, Lowe's, Costco, PetSmart, along with Wal-Mart, generate nearly 45% of overall revenue. PETCO is also a big customer.

The company relies on a domestic sales network to promote its proprietary brands to thousands of independent specialty stores.

Financial Performance

Central Garden & Pet runs a steady financial organization. For over a decade its revenue remained in a tight range between $1.6 billion and $1.7 billion, breaking above it FY2016 (ended September 30, 2016). Net income fluctuates a bit more and highlights the competitive nature of the business, as annual results typically held below $35 million until just recently.

In FY2017 (ended September 30, 2017), Central Garden & Pet's built on the previous year’s positive results. Revenue jumped 12% to $2.1 billion on higher sales of pet products (up 15%) and garden products (up 8%). Acquisitions helped the pet segment to the tune of $110 million. Sales were also aided by inclusion of an additional week in FY2017.

Net income for the year leaped 77% higher, to $79 million; its best result in over a decade. Lower costs of goods sold and tight expense controls kept profit margins intact, allowing the higher revenue to flow to the bottom line. Lower interest expense resulting from reissued debt lowered costs as well.

Cash at the end of FY2017 was $32 million, down $60 million from the prior year. Cash from operations was $114 million, mostly from net income. Investing activities used an unusually large amount of cash in the year, $165 million, primarily to acquire businesses. Financing activities also used cash, $10 million, largely from the repurchase of the company’s own stock.

Strategy

The company focuses on building leading brand names by introducing innovative products and packaging, extending existing product lines and entering new product categories. It also continues to make selected strategic acquisitions of companies that complement existing brands and product offerings.

Central Garden & Pet is no stranger to acquisitions having purchased more than 40 companies over its lifespan. It purchased Segrest Inc., a wholesaler of aquarium fish and small animals, in 2016. It followed up in 2017 with the acquisition of K&H Manufacturing which produces pet and hobby farming products. It appears poised to continue the streak should the right opportunity arise. The company also exits business that don’t see their way to profitability. Recent divestitures include Bethlehem Lights and Veterinary Products Laboratories.

Because a significant portion of its revenue comes from a handful of retailers, the company views customer relationships as a key performance indicator. In 2017 it received multiple supplier award from Walmart: Supplier of the year, Innovation Award, and the H3 Award (Humble, Hungry, & Hustle). It also is willing to create private label products for its large customers, including its garden amendments for Lowe’s, a retailer for whom the company also received a Supplier of the Year award in 2016.

Another differentiator for the company is its broad sales and distribution network. In FY2017 and FY2018 it is looking for ways to optimize its supply chain, particularly around its Four Paws and Nylabone product lines.

Mergers and Acquisitions

In mid 2017, Central Garden & Pet purchased K&H Manufacturing, a producer of premium pet supplies and the largest marketer of heated pet products in the US, for $48 million.

In late 2016, the company acquired Segrest, Inc., a wholesaler of aquarium fish and small live animals, for $60 million.

In late 2015, it made two acquisitions. It bought Hydro-Organics Wholesale, Inc., an organic fertilizer business, for roughly $10 million, including contingent future payments. It also acquired the pet bedding business and certain other assets from National Consumers Outdoors, Corp. (formerly Dallas Manufacturing Company) for $61 million.

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Kaytee Products Incorporated

521 Clay St
Chilton, WI 53014-1477
Phone: 1 (920) 849-2321
Fax: 1 (920) 849-7756

Stats

  • Employer Type: Public
  • Vice President Sales National Accounts: Glenn Darney
  • Vice President Manufacturing and Plant Manager: Steve Parker
  • Human Resources Manager: Lori Pethan
  • Employees: 500

Major Office Locations

  • Chilton, WI

Other Locations

  • Cressona, PA