Monday, September 10, 2007

Big Business Beaten by the little Guy?

It’s another case of David vs. Goliath … and it’s looking like another victory for David.

Tiny Trenton, NJ-based TerraCycle, the manufacturer of all-natural, all-organic liquid plant food made from waste (worm poop) and packaged in waste (recycled soda bottles), is being sued by Scotts Miracle-Gro , the $2.7 billion giant that currently dominates the market. According to the Wall Street Journal, the four-year-old TerraCycle had revenue of $1.5 million in 2006 and it's not yet profitable.

Scotts claims that the two companies' products look similar and will confuse customers and, further, objects to TerraCycle’s claims that its plant food is as good as or better than “a leading synthetic plant food.” Denying the allegation, TerraCycle says that the market is flooded with plant food products, which are, predominantly, packaged in green and yellow.

But TerraCycle is not just relying on legal counsel. The company — dubbed the “Coolest Little Start-Up in America,” by Inc. magazine — is harnessing the power of the Internet to generate public support, boost sales and raise legal funds through a blog called “Sued by Scotts”.

During the four weeks following the launch of TerraCycle’s online campaign, company sales surged 122% from the previous four weeks. (Last year, the company's sales increased 31% in the same period.)

The publicity surrounding this case has helped TerraCycle to create massive awareness about its products, which they could never afford if they were to advertise. The next challenge for TerraCycle will surely be finding ways to sustain their new-found awareness, perhaps through an ongoing visibility campaign.

And what about Scotts?

Goliath definitely needs a more effective strategy than standing on a hill and shouting at the enemy.

I believe that an out of court settlement is in the interest of Scotts Miracle-Gro. Even for a company with deep pockets like Scotts, the legal fees could be considerable and it might be easier and less costly for Scotts to settle this matter and move on; a protracted court fight and its attendant publicity can only help TerraCycle.

For TerraCycle there is limited downside here, even if it settles the suit and has to change its packaging. TerraCycle can say that it had to settle because the company couldn't afford to continue to fight. TerraCycle will still have won because of all the publicity which has boosted its sales and generated lots of awareness about the firm's products. And my bet is that TerraCycle will win more customer loyalty as a result of all this.

But for Scotts, there might be more competitive challenges down the road as more companies get a sense that there is a business with products like TerraCycle’s; some of these may be well-heeled competitors who can afford to spend marketing dollars on developing the category beyond a niche market. Scotts may also want to examine the strategy of going increasingly “green.”

Technorati Tags: TerraCycle, Scotts Miracle-Gro, Wall Street Journal, plant food, Inc. Magazine, Sued by Scotts, publicity, going green, business, communications, public relations


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