Turf Magazine - December, 2013

FEATURES

What Now TruGreen?

Lawn care industry leader enters new era on its own
By Ron Hall

Image courtesy of stock.xchng/ilker .

Competitors often referred to TruGreen during its high-growth period as "that marketing company that just happens to do lawn care." What they failed to fully realize then is that all lawn care companies must also be marketing companies. That's how companies attract the attention of prospects. Then, of course, the trick is to turn those prospects into paying customers. And, of course, keep them from season to season. TruGreen in recent years has had a difficult time on both attracting and keeping customers.

TruGreen, the world's largest lawn application company with revenues approaching $980 million in 2012, is being divorced from ServiceMaster, its parent company. TruGreen is owned by Clayton, Dubilier & Rice, Inc., the leveraged buyout firm that bought ServiceMaster in March 2007 for about $4.7 billion. But it will be no longer be a division of ServiceMaster. By year's end it will be independent.

ServiceMaster's displeasure with TruGreen's performance these past few years became evident as leaders of the division came and went.

The lawn care leader suffered an 11 percent decrease in revenue from the 2011 to its 2012 season, but was able to stabilize its numbers somewhat this past season. Nevertheless, it has a long way to go to recover the loss of 250,000 customers since its heyday. This will be a tall order given that every primary and secondary market in the United States and Canada is populated with established well-run local lawn care companies. They fiercely defend their customers from poachers.

Adding to TruGreen's challenge is the anemic recovery in the housing market. Beyond that, even homeowners in the smallest communities have been canvassed for service. There are no new markets in the U.S. and Canada to open to the service.

Humble beginnings

Let's step back and take a look at how TruGreen got to where it is and how it fits into today's market.

Professional lawn care started to become a recognizable industry about 50 years ago. ChemLawn, based near Columbus, Ohio, greatly accelerated the process when it began establishing branches throughout the Midwest. By the mid-1970s chemical lawn care had become firmly established as a service that homeowners, especially those in America's rapidly expanding suburbs, desired.

Other entrepreneurs were paying attention to ChemLawn's success and to homeowners' eagerness to have green, weed-free lawns. Among these were a small group of young men in central Michigan, some of them graduates of Michigan State University. They founded TruGreen in 1973 or 1974. Sources report both dates.

Ambitious, hard-working and, also, aggressive marketers, they followed in ChemLawn's footsteps, often establishing locations in prime lawn care markets already being worked by ChemLawn. Think Burger King versus McDonalds.

Reversal of Fortunes

But, ultimately (and here's where that analogy falls apart), the surviving company didn't turn out to be industry leader, ChemLawn. The upstart lawn care company, TruGreen, emerged as the survivor. ChemLawn, the one-time lawn care giant that did so much to establish lawn care as a recognizable industry, disappeared as an independent brand.

TruGreen's Rebound Goals

A year ago, mid-December 2012, David Alexander joined ServiceMaster as president of its TruGreen subsidiary. He came to the post from serving as CEO of Citi Trends, a publicly traded urban retailer based in Savannah, Ga.

The task facing Alexander entering 2014 is the same task that he assumed a year ago: to get TruGreen back on a growth track. Only, as of year's end, he will be guiding a company that no longer has immediate ties to ServiceMaster.

In ServiceMaster's Q3 earnings conference call on Nov. 14, he explained his plan for doing that. He said that the following goals are being established to improve TruGreen's performance in 2014:

Grow its customer count through more targeted direct-mail campaigns, better execution of outbound telesales and neighborhood door-to-door sales.

1. Improve service delivery, drive down costs and improve customer retention rates.

2. Return service delivery costs to 2012 levels.

3. Key to achieving these goals will be TruGreen's ability to achieve "progress in terms of productivity," and also in upgrading its systems.

"When we began the year (2013), I thought that our systems were a liability and a competitive disadvantage," said Alexander during the call. "Today, I feel with all of the progress that's been made we are sort of competitively neutral from a system's standpoint. With the initiatives we have underway, I think that six to nine months from now we will view our systems as a sense of pride and a point of competitive advantage."

He pointed to the recovery of the loss of 300,000 customers from the time of TruGreen's high-water era as being a huge challenge. He cautioned investors and others participating in the conference call that they shouldn't expect to see a noticeable turnaround in the company into well into the 2014 season.

"We are well down from where our customer counts have been historically, and we have a lot of work to do to build back our customer count," he said.

Here is how it happened - at least the final acts.

In March 1987, the ChemLawn Corporation, fending off an unsolicited takeover bid from Chicago-based Waste Management, Inc., agreed to be acquired by Ecolab, Inc., based St. Paul, Minn. At the time, ChemLawn numbered 241 branches with sales of $353 million. EcoLab paid $36.5 a share, or a total of $360.5 million, as reported by the New York Times. It turned out to be a disastrous financial move for both parties.

Meanwhile, Waste Management, headed by entrepreneur Wayne Huizenga, was still eager to get into the lawn care business. It turned its attention to privately held TruGreen, which it acquired Sept. 17, 1987. At the time TruGreen numbered 55 branches with sales of about $43 million.

In late 1990s, Waste Management and ServiceMaster put together a partnership on lawn care, pest control and other services, reported the Chicago Tribune. Waste Management transferred TruGreen and Terminix to ServiceMaster Consumer services in return for a 22 percent equity investment in the venture. The addition of TruGreen to ServiceMaster complimented ServiceMaster's own residential lawn care division, which it had started in 1984.

Meanwhile, ChemLawn, many of its brightest and most ambitious employees now running their own lawn care operations, languished under Ecolab's ownership.

In 1992, ServiceMaster and Waste Management in partnership gobbled up ChemLawn for the bargain price of $104 million. With ChemLawn in its fold ServiceMaster renamed its industry leader TruGreen ChemLawn. Four years later TruGreen snapped up another major lawn care company, Ohio-based Barefoot Lawns. Ultimately, ServiceMaster dropped the ChemLawn from its lawn care company's name apparently because of its association with the word chemical.

TruGreen continued to grow in the 1990s by acquiring other smaller regional lawn care companies. While these acquisitions gave it greater access to coveted regional markets, the competition for customers remained keen. In many cases, the owners of these smaller regional companies re-entered the lawn care industry after their non-compete agreements with TruGreen expired and started signing up their former customers.

New competitors

The bigger threats to TruGreen's continued growth, however, came from other companies with national aspirations. These included Scotts Lawn Care, which went on a targeted acquisition spree of its own, and The Weed Man, which came at the U.S. market with a unique master franchisor/sub-franchisor model that attracted some of the brightest and most successful independent lawn care professionals in the industry. Both entered the 21st Century keen to take on TruGreen in key markets.

Of course, any discussion of TruGreen and its fortunes must also address telemarketing, specifically the implementation of the national do-not-call registry in 2004. TruGreen's reliance on and its success is acquiring customers via telemarketing are legendary. Apart from telemarketing to previous customers it can no longer rely upon the telephone to harvest large flocks of new customers.

By any measure, the professional lawn application business, at least as it's traditionally performed with a defined number of applications of traditional fertilizer and pest controls, is a mature industry. It has seen its best days.

Can the same be said of TruGreen and its long-term prospects?

Ron Hall is editor-in-chief of Turf magazine. He has been writing about and reporting on lawn care for more than 29 years. Reach him at rhall@mrpllc.com.