How Gardens Alive! Is Digging a New Niche

Nov 01, 2010 9:30 PM  By

For nearly a quarter century Gardens Alive! flew largely under the radar as a multititle mailer of specialty horticultural catalogs. That changed in 2008, when the company bought two gifts catalogs, Bits and Pieces and The Paragon, that had been owned by defunct mailer BlueSky Brands.

Gardens Alive! acquired six more catalogs in 2009, including gifts and home decor catalogs TouchStone and Room Service Home, games merchant Spilsbury and the U.S. operations of Thompson & Morgan Seedsmen in 2009.

The company tried to add to its catalog stable this year, putting in a bid for the Park Seed and Jackson & Perkins horticultural titles in August. (The books ultimately went to private equity firm Blackstreet Capital.)

General merchandise and gifts now account for about 40% of Gardens Alive!’s overall $170 million business. And Niles Kinerk, founder/owner/chairman of the Lawrenceburg, IN-based company, is still seeking acquisitions, though he’s rather mellow in his approach to going after them.

“It’s not like we’re a financial buyer where we feel compelled, but we pursue companies when we see things that make sense,” Kinerk says. “We’re not really out there. We’ve never really needed to be.”

How does Gardens Alive! find companies to acquire? “It’s always been a vendor who calls” to tell Kinerk that a company is in trouble or up for sale, he says.

So who is this unlikely catalog mogul and where did he come from?

ROOTS IN THE SOIL

Originally from Fort Wayne, IN, Kinerk grew up on a small family farm. Homer P. Kinerk & Sons Poland China Hogs raised beef cattle, dairy cattle, chic kens, goats and rabbits on 60 acres.

Kinerk was always interested in gardening, particularly organic gardening: “I wanted my family to be able to eat good food, pesticide free,” he says.

He spent a year at seeds and plants mailer W. Atlee Burpee & Co. in the late 1970s, but Kinerk learned about direct mail working for the Josten’s Library Services Division, which had a catalog of specialty supplies for libraries.

He started his own library supplies catalog (today known as The Library Store) in 1978. By 1984, he had sold that catalog and started another: The Natural Gardening Research Center, which specialized in the biological control of garden pests. Because its name was confusing (it sounded like a nonprofit, Kinerk says), he renamed the company Gardens Alive! in 1988.

“There was a gardening catalog called Plants Alive! that had gone out of business, and I just thought it seemed like an uplifting, positive-sounding name,” he says.

The company mailed 25,000 copies of its first catalog, printed on newsprint. That first year brought 325 orders, followed by 3,000 the second year, 20,000 the third year, and 60,000 the fourth year. Early on, Kinerk recalls, “My wife, my father and I did 20,000 orders among the three of us, but then we had to start hiring people.”

In its first 17 years, Gardens Alive! grew to $15 million and included the Audubon Workshop catalog, which sells bird-friendly plants, feeders, houses and baths. Kinerk had acquired Audubon Workshop out of bankruptcy in 1997. Another bankruptcy would create a huge acquisition opportunity for Gardens Alive!.

After multititle mailer Foster & Gallagher imploded and filed for Chapter 11 in July 2001, Gardens Alive! picked up nearly all of the company’s gardening catalogs for $10.75 million at an auction that September. The titles included Breck’s, Gurney Seeds, Henry Field’s, Michigan Bulb, Spring Hill Nursery and Stark Bros.

Gardens Alive! immediately sold the Stark Bros. catalog, which specializes in fruit trees. Why? “We simply had too many businesses to integrate, and we had an interested buyer for Stark Bros.,” Kinerk explains.

So how did it integrate the rest of the F&G titles? “We had additional floors of space in our Lawrenceburg facility that we rented, and the rest was operated out of the Spring Hill facilities in Tipp City, OH,” he says.

Gardens Alive! was fairly quiet for seven years, until another major multititle mailer went belly-up. After BlueSky Brands abruptly closed down in March 2008, Gardens Alive! acquired Bits and Piece in May and The Paragon in July.

The company went on a bigger buying binge in 2009, starting with Images of Canada, a mailer of Canadian-themed apparel, gifts and novelties, and furniture marketer The Added Touch, both acquired in March. It added games and puzzles merchant Spilsbury, and gifts mailer TouchStone in early summer.

Gardens Alive! then bought gifts and home decor cataloger Room Service Home and the U.S. operations of seed cataloger Thompson & Morgan Seedsmen in the fall.

The titles Kinerk bought last year were purchased from the owners except for one, he says: Spilsbury was acquired from a fulfillment company that had received the business in exchange for unpaid services.

“Most of the businesses we have bought have been in trouble — bankruptcy or close to it,” Kinerk says about the company’s acquisitions in recent years. “We just try to get the business back on a formal footing and target how we’re going to handle fulfillment. We’ve actually got it down now.”

THE INTEGRATION PUZZLE

The first critical piece of the integration puzzle, Kinerk says, is adapting a new company to the Gardens Alive! operating system. “We change them over to our system so we’re not maintaining multiple platforms,” he says.

“It’s a pain up front, but not as painful as continuing along on parallel paths. We sort of plug them in.”

Integrating Bits and Pieces’ fulfillment was probably the hardest, he says, “because we had space available, but not enough. We had to build in mezzanines in our warehouse to handle it.” This was time consuming and put a lot of stress on existing employees to get it implemented, Kinerk notes.

But the ordeal led the cataloger to rent space for a central receiving warehouse in Fairfield, OH. “If we were to acquire another business, there is a whole bunch of space there,” Kinerk says.

In addition to the Fairfield distribution center, Gardens Alive! has a warehouse/shipping operation in Lewisburg, OH, and a facility in Tipp City, OH, that combines warehouse/receiving and marketing/merchandising. After every acquisition, Kinerk says fulfillment rates have improved “from the moment we’ve taken over.”

In fulfilling the new product lines, he admits, “we’ve had some things we’ve had to learn, but no big, major fiascoes.” What proved to be a hard-goods fulfillment challenge? “Things like gift wrapping for the gift titles, and packaging requirements for fragile products.”

With each acquisition, Kinerk says, the integration process becomes smoother. “We’ve got sort of a template where we have a team of people from different areas of the business. It seems like each one gets a bit easier.”

Gardens Alive! has a year-round staff of 400 to 450, with marketing/merchandising offices in Lawrenceburg, IN, Holland, IN, Dallas, Atlanta and Boston. There’s also an office in India with 100-120 employees; they handle IT, ecommerce, email correspondence, phone orders, and operations support. With seasonal employment, Gardens Alive! has more than 1,000 workers, Kinerk says.

Gardens Alive!’s Internet orders are about 40% to 45% of the total business, “but our catalogs are still very important,” Kinerk says. “We’ve looked at internal growth options and new catalog ideas and looked at what it would cost to do those and what it would cost to buy an existing company with a mailing list.”

Kinerk’s position on build vs. buy is clear: “It is definitely better to buy if the purchase price isn’t too high,” he says. “There is already a base of enthusiastic buyers.”

Was he disappointed in losing out to Blackstreet Capital in the bid for Park Seed and Jackson & Perkins? “Simply put, we were outworked, outmaneuvered and out-financed by a professional investment firm,” Kinerk says.

Gardens Alive! is still a small business: “We don’t have a lot of overhead and we’re pretty lean — maybe a little too lean,” Kinerk says. But with the company’s recent foray into new merchandise categories, “people have seen we’re not limited just to the gardening side of the business.”

Kinerk considers himself a merchant on the gardening side, “but some of those brands I couldn’t merchandise.”

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SHREWD OPERATOR

Industry watchers admire Kinerk’s strategy and execution in expanding Gardens Alive!’s business.

Chris Kampe, managing director with investment firm Tully & Holland, says the acquisitions have helped Gardens Alive! keep its distribution centers active. “The deals have generally been fairly small, often noncore or underperforming for the seller, and were value priced.”

Kinerk is “a smart guy, and the acquisitions he’s made have strategic logic to them,” says Eric Roth, director for investment bank Lazard Middle Market. Beginning with a spring/summer horticultural business, Kinerk sought to even out his business by acquiring companies with a fall/winter seasonality, Roth says.

“What this has done is allow him to equal out his capacity utilization, integrate and realize back-end synergies, and have a more even business,” Roth adds. Kinerk is a very disciplined buyer: “He has parameters for each transaction, and he sticks to those.”?

Gardens Alive! now has a strategy of dual portfolios: horticulture and general merchandise, with both list synergy and back-end fulfillment synergies, Roth adds. As such, the company has a big opportunity to take marketshare.

Kinerk saw around the bend in that regard. “He flies under the radar and is a shrewd, smart entrepreneur,” Roth adds.

RETAIN THE MERCHANTS

More acquisitions are definitely in the cards for Kinerk. And to enable him to spend more time on deals and on sourcing products for the horticultural titles, Kinerk in July 2009 promoted Eric Hamant, Gardens Alive!’s director of marketing, to president/CEO.

One thing that’s essential in making the acquisitions work is holding on to the merchandising talent that comes with the brand. Merchandising, Kinerk explains, is the heart of a business.

“We’ve been lucky, and we’re thrilled with the merchandisers we’ve gotten with each of these businesses,” he says. “They’re really outstanding, and we’ve been fortunate enough to keep them.”

You can’t afford to lose the merchants, he notes: “Everything else can go wrong, but if you lose merchants, you’re in trouble.”

Kinerk considers himself a merchant on the gardening side, “but some of those brands I couldn’t merchandise.”

TIMELINE:

1984 Natural Gardening Research Center founded

1988 company name changed to Gardens Alive!

1997 acquired Audubon Workshop catalog out of bankruptcy

2001 paid $10.75 million for most of the horticultural titles from bankrupt Foster & Gallagher’s, which included Breck’s, Gurney Seeds, Henry Field’s, Michigan Bulb and Spring Hill Nursery; sells F&G’s Stark Bros. catalog

2008 acquired former BlueSky Brands catalogs Bits and Pieces and The Paragon

2009 purchased six catalogs: Room Service Home, Spilsbury, The Added Touch, Images of Canada, TouchStone and the U.S. operations of Thompson & Morgan Seedsmen

2010 bid unsuccessfully for the Park Seed and Jackson & Perkins catalogs

Don’t let the bedbugs bite

The current invasion of bedbugs in urban areas has been a nightmare for businesses and consumers. For Gardens Alive! though, it’s a marketing opportunity to promote a new product.

The cataloger two years ago developed the ClimbUp Insect Interceptor, a plastic, double-well cup with a slick, talc-coated interior and fiber-coated exterior. Users place these eco-friendly traps at the foot of furniture to keep bedbugs from climbing up in search of human hosts to feed on at night. Bedbugs trying to leave the bed or couch after feeding are trapped in the inner well, while bugs attempting to enter the furniture fall into the outer well and can’t escape.

But the product is an indicator of bedbugs rather than a solution for the problem, says Gardens Alive! product manager Craig Harmer. If you find that you have bedbugs, “you need to consult a pest control operator,” he says.

Gardens Alive! began selling the ClimbUp Insect Inter-ceptor in mid-October, so results weren’t available at press time. But Harmer expects sales to be strong “because it’s a well-proven product.” — JT