Central Garden & Pet is happy to help with both pets and pests. The company is among the largest US producers and distributors of lawn, garden, and pet supplies, providing its products to pet supplies retailers, home improvement centers, nurseries, and mass merchandisers (Wal-Mart is its largest customer). It operates 31 manufacturing plants and about 30 distribution centers throughout the US; it also has sales offices in the UK. Central Garden & Pet's proprietary brand lines include AMDRO fire ant bait, Four Paws animal products, Kaytee bird seed, Nylabone dog chews, Norcal pottery, Pennington grass seed and bird seed products, and TFH pet books. Chairman William Brown controls the company.
The company operates through two reportable segments: Pet and Garden.
The Pet segment (54% of Central Garden & Pet's total revenue in 2015) consists of Four Paws Products, TFH Publications, Kaytee, Aquatics, Interpet, IMS, Pets International, Breeder's Choice and Life Sciences. It engages in the manufacturing, purchase, sale and delivery of pet supplies, books and food.
The Garden segment (46%) consists of Pennington Seed, Matthews Four Seasons, Grant's, AMBRANDS, Lilly Miller, the Pottery Group, Gulfstream and GKI/Bethlehem Lighting.
The company makes the majority of branded products at 31 manufacturing facilities, primarily in the US.
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, accounted for 16% of total net sales, and about 30% of sales for the Garden segment. The Home Depot and Lowe's accounted for 7% and 8% of annual sales, respectively. PetSmart accounted for 8% of the Pet segment's net sales. PETCO is also a big customer.
The company relies on a domestic sales network to promote its proprietary brands to some 6,000 independent specialty stores. Central Garden & Pet also operates a sales and logistic facility in the UK.
In 2015 the company incurred $25 million in advertising expenses.
Central Garden & Pet's net revenue rose by 3% to $1.65 billion in 2015 due to an increase in Pet segment sales.
The Pet segment increased due to higher branded product sales (including products produced under Central brand names and products under third-party brands and sales of other manufacturers' products).
In fiscal 2015, the company's net income increased by 263% to $31.97 million, mainly due to higher net revenue and a drop in interest expense. Lower interest expense due to lower average debt outstanding also helped boost net income.
Central Garden & Pet's operating cash inflow decreased by 31% to $87.45 million due to a change in working capital as a result of changes in accounts receivable.
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.
To boost sales and profits, Central Garden & Pet is in the midst of a transformation from a portfolio of separately managed businesses into a unified structure, more akin to those of multibrand packaged goods companies. Actions taken to improve the pet business included expense reductions, selective price increases, organizational changes to improve cross-functional communication, and closer collaboration with its retail customers, among other initiatives. Similar actions are being taken to improve the performance of Central Garden & Pet's garden business.
In late 2014, Central Garden & Pet rebuffed a takeover offer by the Harbinger Group to acquire the company's Pet segment for $750 million.
Mergers and Acquisitions
In 2015 the company acquired the pet bedding business and certain other assets of National Consumers Outdoors Corp., formerly known as Dallas Manufacturing Company, for $61 million. The acquisition complements Central Garden & Pet's broad portfolio of pet products.
In 2014 Central Garden & Pet acquired certain assets of Envincio LLC, a wholly-owned subsidiary of SantoLubes LLC. The assets acquired include established brands, EPA registration assets, inventory, and trade receivables. This acquisition enables the acquiring company to be a key supplier and product innovator in the growing natural insecticides product market, often characterized as EPA-exempt products, as well as expanding its offerings in traditional pesticides.