US: Should Scotts Miracle-Gro stop selling Roundup?
Although Scotts generates some 5.5% of its $2.8 billion in total sales from the Monsanto weedkiller, about $154 million, it is losing sales and may be doing more harm to its reputation by maintaining the agreement. While it is hard to quantify how much revenue it is losing, the Scotts Miracle-Gro name is getting besmirched by its association, and that, too, is tough to put a price tag on.
Under the extension of the agreement between the two companies signed in 2015, Scotts paid $300 million to be able to sell the herbicide in more markets, such as China and Latin American, and use it in other areas, such as its lawn care business that it previously wasn't able to. At the time of the extension, Scotts said, "a significant percentage of our current profitability is related to the existing Roundup business," and its most-recent annual report said it would "lose a substantial source of future earnings" if Monsanto terminated the deal. It reportedly generates some $70 million in net profits annually from Roundup.
With the pending merger between Monsanto and Bayer, that is a possibility, though Scotts negotiated enhancements of its rights under a change of control, including a $200 million termination fee and the right to continue selling Roundup for five years after any change of control in Monsanto's business.
Still, does Scotts do more harm than good by this agreement? Scotts' other brands obviously contribute more toward Scotts' total revenues than does Roundup, and the lawn-care specialist is hurting its potential for additional sales through them.
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