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Item 1. Business

2023-11-28 compared with 2022-11-22 · 134 added, 144 removed, 262 unchanged (51% of the section changed)

Central Garden & Pet Company (“Central”) is a market leader in the garden and pet industries in the United States.

Central Garden & Pet Company (“Central”) is a market leader in the pet and garden industries in the United States.

For over 40 years, Central has proudly nurtured happy and healthy homes by bringing innovative and trusted solutions to consumers and customers.

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Pet and Garden.

Our Pet segment includes dog and cat supplies such as dog treats and chews, toys, pet beds and grooming products, waste management and training pads, pet containment;

Our Pet segment includes dog and cat supplies such as dog treats and chews, toys, pet beds and containment, grooming products, waste management and training pads;

supplies for aquatics, small animals, reptiles and pet birds including toys, cages and habitats, bedding, food and supplements;

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These products are sold under brands such as Aqueon ® , Cadet ® , Comfort Zone ® , Farnam ® , Four Paws ® , K&H Pet Products ® ( “ K&H ” ), Kaytee ® , Nylabone ® and Zilla ® .

Our Garden segment includes lawn and garden consumables such as grass seed, vegetable, flower and herb packet seed;

Our Garden segment includes lawn and garden consumables such as grass seed;

vegetable, flower and herb packet seed;

wild bird feed, bird houses and other birding accessories;

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To grow, we are seeking to develop more differentiated new produ cts and reinvest some of our annual cost savings in brand building and demand creation to help us drive sustainable organic growth and build market share.

We continuously strive to get a deeper understanding of our consumers, including what products and features they desire and how they make their purchasing decisions.

We are investing in consumer insights, data analytics and research and development to achieve our innovation goals with a strong pipeline of new products.

We recognize that consumers are increasingly researching, as well as buying products online.

Therefore, we are advancing our digital capabilities.

One key area is in marketing communication where we are working to better reach consumers at key points in their path to purchase with advanced capabilities in precision marketing, search engine optimization and social listening, to name a few.

We are seeing promising early marketing campaign results driving accelerated growth and share gains across several brands, including our Pennington "Smart from The Start" and Kaytee "All for the Small" campaigns.

We continuously strive to get a deeper understanding of our consumers, the products and features they desire and how they make their purchasing decisions.

We are investing in consumer insights, data analytics as well as research and development to achieve our innovation goals with a strong pipeline of new products.

We recognize that consumers are increasingly researching, as well as buying products online and we continue to advance our digital capabilities.

We have seen promising early marketing campaign results driving accelerated growth and share gains across several brands, including our Pennington “ FlipTheTurf ” and Zilla “ Rep Yourself ” campaigns.

Win with Winning Customers and Channels

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Recent trends have shown that eCommerce channels, including pure-play, omnichannel and direct-to-consumer, are the preferred solutions for today's convenience-oriented consumers.

To address the changing consumer landscape, we are building out our digital and eCommerce capabilities while also ensuring we have the right policies, products and programs to allow all channels to compete effectively.

To address the changing consumer landscape, we continue to build out our digital and eCommerce capabilities while also ensuring we have the right policies, products and programs to allow all channels to compete effectively.

Concurrently, we are optimizing our supply chain for high-demand eCommerce items to ensure customer and consumer availability requirements are met at optimal cost.

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We are managing each business differentially, based on clearly articulated strategies that define the role of each business within our portfolio.

We have assessed the profitability and growth potential of each of our businesses.

We regularly assess the profitability and growth potential of each of our businesses.

All businesses have clear roles in the portfolio and a strategy that is consistent with that role.

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We generally seek growth and margin accretive, brand-focused companies with talented management teams.

We are also committed to divesting businesses where we cannot find a path to profitability and have done so in the past, for example the disposal of our dog and cat food business in 2020.

We are also committed to divesting businesses where we cannot find a path to profitability and have done so in the past.

For example, we sold our distribution business into the independent garden channel in 2023.

Central Ventures, our venture fund which we established in 2020, further supports our M&A strategy.

Our objective is to partner with leading entrepreneurs and innovators in the garden and pet industries and leverage our experience and capabilities to accelerate growth.

The fund is primarily focused on three emerging growth areas across the pet and garden industries:

Our objective is to partner with leading entrepreneurs and innovators in the pet and garden industries and leverage our experience and capabilities to accelerate growth.

The fund is primarily focused on three emerging growth areas in our two industries:

sustainability, health and wellness, and digitally connected products and services.

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We believe we have not only the opportunity but also the responsibility to make a difference and drive positive change.

Our Central Impact Strategy - focused on protecting our planet, cultivating our communities and empowering our employees - is our commitment and approach to sustainability.

Our Central Impact strategy - focused on protecting our planet, cultivating our communities and empowering our employees - is our commitment and approach to corporate sustainability.

Reduce Cost to Improve Margins and Fuel Growth

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We have already consolidated some of our dog and cat treat and toy businesses and numerous garden manufacturing facilities.

We recently combined our outdoor cushion business with our pet bedding business given the synergies in sourcing, manufacturing and innovation.

In addition, while we value being a business-unit led company, we believe we have significant opportunities to improve our performance by driving processes and programs that allow us to align for scale and share best practices across our business units.

For example, we’ve simplified our portfolio by eliminating thousands of SKUs, shifted some of our wild bird and garden controls production from co-manufacturers to our own plants and invested in automation in many of our businesses.

We combined our outdoor cushion business with our pet bed business given the synergies in sourcing, manufacturing and innovation, and recently closed a pet bedding facility.

In addition to the short-term actions we have taken in recent quarters to cut costs, we are advancing our plans to more significantly simplify our business and improve our efficiency across the organization by rationalizing our footprint, streamlining our portfolio, and improving our cost structure.

The focus of our Cost and Simplicity program is on a number of key areas, including procurement, logistics, manufacturing, portfolio optimization and administrative costs.

We expect to reduce complexity, which means fewer SKUs, fewer plants and fewer distribution centers.

We further expect lower cost of goods sold through lower logistics costs and better procurement, lower administrative costs through scale, leverage and efficiency, and a gradual shift in focus to our higher margin, higher growth potential branded pet and garden consumer products.

Strengthen Our Entrepreneurial Business-Unit Led Growth Culture

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“We do the right thing.” “We strive to be the best.” “We are entrepreneurial.” “We win together.” “We grow every day.” and “We are passionate.”

We believe our employees work at Central because they love the pet and garden categories and that creates a passionate and effective team.

We believe one of the reasons our employees work at Central is because they love the pet and garden categories, and that creates a passionate and effective team.

We strive to make Central a great place to work that embraces diversity and inclusion.

In fiscal 2020, we implemented a diversity and inclusion council and introduced our diversity and inclusion strategy, which reflects our dedication to making meaningful progress in the areas where we can have the most impact including recruiting, employee education, mentorship and leadership development.

Over the course of the past year, we formalized our mentorship program, designed for mid- to senior-level leaders, with a focus on women and people of color who have a desire to build their career and leadership skills.

The intent is to develop strong and diverse talent in our future leaders, while fostering cross-level relationships.

In 2022, our 150 top leaders from across all business units and functions came together for the first Central Leadership Council Summit.

Over the course of the Summit, we reaffirmed our conviction and ownership of our Central to Home strategy, shared best practices, celebrated accomplishments, and strengthened our winning culture.

In fiscal 2023, we introduced the Women in Leadership Council, a collective of senior female leaders from across Central brought together to help advance women at Central.

The Council has established four committees that are dedicated to making progress across key areas that align with our diversity & inclusion strategy.

These key areas are mentorship, leadership development, retention & recruiting and employee education.

Competitive Strengths

We believe we have a number of competitive strengths, which serve as the foundation of our Central to Home strategy, including the following:

Broad Portfolio of Leading Brands Across Key Garden and Pet Segments

Broad Portfolio of Leading Brands Across Key Pet and Garden Segments

We are one of the leaders in the U.S.

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Our net sales grew on average 8.4% annually over the last five years, driven by acquisitions and organic growth.

Operating income grew slightly faster over the same period, 10.8% on a GAAP basis annually.

Operating income grew on average 4.7% on a GAAP basis annually over the same period.

We have a strong cash and liquidity position driven by a combination of capital raises and cash flow from operations which puts us in a strong position to grow further through both acquisitions and organically.

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These acquisitions have successfully expanded the breadth of our pet and garden portfolios.

We acquired D&D Commodities Ltd.

("D&D"), a leading provider of premium bird feed in June 2021 and Green Garden Products, a leading provider of vegetable, herb and flower packet seed, seed starters and plant nutrients in February 2021.

In December 2021, we acquired Hopewell Nursery, a leading live goods grower and DoMyOwn ® , a leading and fast-growing online retailer of professional-grade control products.

We are a patient and disciplined value buyer, typically focused on opportunities that build scale in our core garden and pet categories or in priority adjacencies, with a recent emphasis on those that enhance key capabilities, for example in digital and eCommerce.

Most recently, in early November 2023, we acquired TDBBS, LLC, a provider of premium natural dog chews and treats.

The addition of TDBBS will expand our portfolio with bully and collagen sticks, bones and jerky, add scale to our dog and cat business and enhance our eCommerce and digital capabilities.

We are a patient and disciplined value buyer, typically focused on opportunities that build scale in our core pet and garden categories or in priority adjacencies, with a recent emphasis on those that enhance key capabilities, for example in digital and eCommerce.

We are open to businesses that, on top of traditional operating synergies, can leverage our expertise and capabilities and allow us to add value through our low-cost manufacturing and distribution competencies.

We generally prefer to acquire brand-focused businesses with growth and margin rates above Central’s rates, with proven, seasoned management teams, who are committed to stay with the acquired business after closing.

We have been successful in growing our acquisitions organically after acquiring them into our portfolio.

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Independent retailers value our high level of customer service and broad array of premium branded products.

We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to Costco, Walmart and Petco and among the largest lawn and garden consumables vendors to Home Depot, Walmart and Lowe’s, and the club and mass merchandise channels, as well as a leading supplier to independent pet and lawn and garden retailers in the United States.

In fiscal 2022, Bell Nursery was awarded the Home Depot Environmental Partner of the Year recognizing Bell Nursery’s commitment to sustainability and Petco recognized Central as the Companion Animal Vendor of the Year.

Pet Supplies Plus acknowledged one of our leaders with the prestigious Lifetime Achievement Award at their annual Suppliers Awards meeting and our pet distribution business was awarded the 2022 Distributor of the Year Award by Petsense by Tractor Supply.

In fiscal 2021, Bell Nursery was awarded Home Depot's Supplier Partner of the Year.

We believe these strengths have assisted us in becoming one of the largest pet supplies vendors to Costco, Walmart and Petco, among the largest lawn and garden consumables vendors to Home Depot, Walmart and Lowe’s, in the food, drug and mass merchandise channels, and a leading supplier to independent pet retailers in the United States.

In fiscal 2023, Bell Nursery was named Outdoor Garden Partner of the Year by the Home Depot after having been awarded the Home Depot Environmental Partner of the Year in fiscal 2022, recognizing Bell Nursery’s commitment to sustainability.

In fiscal 2022, Petco recognized Central as the Companion Animal Vendor of the Year, and Pet Supplies Plus acknowledged one of our leaders with the prestigious Lifetime Achievement Award at their annual Suppliers Awards meeting.

Our pet distribution business was awarded the 2022 Distributor of the Year Award by Petsense by Tractor Supply.

Walmart, our largest customer, represented approximately 16% of our total company net sales in fiscal 2023 and 17% in fiscal 2022.

Home Depot, our second largest customer, represented approximately 16%, and 15% of our total company net sales in fiscal 2022 and 2021, respectively.

Lowe's, Costco and Petco are also significant customers, and together with Walmart and Home Depot, accounted for approximately 51% of our net sales in both fiscal 2022 and 2021.

Home Depot, our second largest customer, represented approximately 16% of our total company net sales in both fiscal 2023 and 2022.

Lowe's, Costco and Petco are also significant customers, and together with Walmart and Home Depot, they accounted for approximately 52% of our net sales in fiscal 2023 and and 51% in fiscal 2022.

Leading Manufacturing, Sales and Distribution Network

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In addition, some of our proprietary branded products are manufactured by contract manufacturers, including one of our registered active ingredients, (S)-Methoprene, which is manufactured by a third party under an exclusive arrangement.

We are a leading supplier to independent specialty retailers for the pet supplies market and the lawn and garden consumables market.

Our sales and distribution facilities are strategically placed across the United States to allow us to service both our mass market customers as well as independent specialty retail stores, serving traditional brick & mortar but increasingly also omnichannel and pure-play retailers selling only through the internet.

We are a leading supplier to independent specialty retailers for the pet supplies market and to select national retailers for the lawn and garden consumables market.

Our sales and distribution facilities are strategically placed across the United States to allow us to service both our mass market customers, as well as independent pet specialty retail stores, serving traditional brick-and-mortar but increasingly also omnichannel and pure-play retailers selling only through the internet.

In addition, we operate facilities in China, Canada, the United Kingdom and Mexico.

This network also supports distribution of many other manufacturers’ brands and combines these products with our branded products into single shipments, enabling us to serve our customers in an effective and cost-efficient manner.

We believe this gives us a competitive advantage over other suppliers as this network provides us with key access to independent pet specialty retail stores and retail lawn and garden customers that require two-step distribution, facilitating acquisition and maintenance of shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products and immediate exposure for new internally developed and acquired brands.

We plan to continue to utilize our team of dedicated salespeople and our sales and logistics networks to expand sales of our branded products.

We believe this gives us a competitive advantage over other suppliers, as this network provides us with key access to independent pet specialty retail stores and select national retail lawn and garden customers that require two-step distribution, facilitating acquisition and maintenance of shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products and immediate exposure for new internally developed and acquired brands.

We plan to continue to utilize our team of dedicated salespeople and our sales and logistics networks to expand sales of our branded pet and garden products.

Strong and Experienced Leadership Team

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We believe the depth and breadth of their perspectives and experiences create an optimal foundation for our entrepreneurial business-unit led growth culture and facilitates innovation, which is critical to capturing and maintaining market share.

We are one of the leading producers and marketers of pet supplies in the United States.

In 2023, our Chairman and founder, William E.

Brown, was recognized with the prestigious Lifetime Achievement Award by the World Pet Association for his achievements and contributions in the pet industry.

We are one of the leading producers and marketers of branded pet supplies in the United States.

We also produce numerous private label brands.

In addition, our Pet segment operates one of the largest sales and distribution networks in the industry, strategically supporting our brands.

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The pet supplies segment includes:

products for dogs and cats including edible bones, premium healthy edible and non-edible chews, rawhide, toys, pet beds, pet containment, grooming supplies and other accessories;

products for birds, small animals and specialty pets including cages and habitats, toys, food and chews and related accessories;

animal and household health and insect control products;

products for fish, reptiles and other aquarium-based pets including aquariums, terrariums, stands and lighting fixtures, pumps, filters, water conditioners, food and supplements, and information and knowledge resources;

as well as products for equine and livestock.

The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2022 was estimated by Packaged Facts to have been approximately $131 billion.

dog and cat treats and chews, toys, pet beds and containment, grooming products, waste management and training pads;

supplies for aquatics, small animals, reptiles and pet birds including toys, cages and habitats, bedding, food and supplements;

products for equine and livestock, animal and household health and insect control products;

live fish and small animals.

The total annual retail sales of the pet food, treats and chews, supplies, veterinary and non-medical services and live animal industry in 2023 was estimated by Packaged Facts to be approximately $145 billion.

We expect the industry to continue to grow from that foundation.

Based on Packaged Facts estimates for 2022, we estimate the annual retail sales of the pet supplies, live animal and treats and chews markets in the categories in which we participate to be approximately $30 billion.

Based on Packaged Facts estimates for 2023, we estimate the annual retail sales of the pet supplies, treats and chews, and live animal markets in the categories in which we participate to be approximately $39 billion.

According to Packaged Facts, the U.S.

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The majority of these smaller companies do not have a captive sales and logistics network and rely on us or other independent distributors to supply their products to regional pet specialty chains and independent retailers.

The pet food and supplies industry retail channel is composed of a wide range of retailers, from national chains like Petco and PetSmart to approximately 14,000 independent pet specialty stores in addition to mass-market, online and other retailers.

The pet food and supplies industry retail channel is composed of a wide range of retailers, from national chains like Petco and PetSmart to approximately 5,900 independent/non-chain pet stores in addition to mass-market, farm & feed stores, online and other retailers.

In the last decade, independent pet stores have suffered not only from growing online competition, but also competition from mass-market retailers expanding their pet offerings with services and private label products.

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Long-Term Pet Industry Characteristics

Long term, we believe the U.S.

pet supplies market will continue to grow due to favorable demographic and wellness trends tracking within Pet.

During the Covid-19 pandemic, the pet supplies market benefited from the addition of millions of pets, the heightened focus on wellness among pet owners, the rush of online shopping and adaptability of consumers, marketers, retailers and service providers to meet every pet's healthcare needs.

A 2022 Packaged Facts survey found that approximately 95% of U.S.

pet owners view their pet as family.

The pandemic has elevated concerns over human and pet health and wellness and almost 90% of pet owners agree that they look for products to improve their pet's health and well-being.

Pet adoption has been higher among the younger generations as Gen Z adults are joining the pet owner pool, with 45% of pets now being owned by Millennials and Gen Z, which should support continued growth.

Long term, we believe the U.S.

pet supplies market will continue to grow due to favorable trends tracking within the pet industry, including demographics, health and wellness, humanization and premiumization.

For the first time, pet ownership is split equally between younger generations (Gen Z and Millennials) and older generations (Gen X and Baby Boomers), with the younger generations spending more on their pet in the past year.

A 2023 Packaged Facts survey found that across generations, the majority of pet owners depend on their pets intensely for companionship, affection, fun and mental and physical health benefits.

The same survey found that approximately 96% of U.S.

pet owners view their pet as family, and pets are interwoven into the lifestyles and daily routines of pet parents.

Moreover, the majority of pet owners agree that they look for products to improve their pet's health and well-being.

Branded Pet Products

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Our Nylabone brand is one of the leading brands in dog toys and treats, Kaytee in pet birds and small animal, Farnam in equine, Aqueon in aquatics and Comfort Zone in cat calming.

In addition, we operate our Arden Companies ® outdoor cushion business in the Pet segment due to synergies in sourcing, manufacturing and innovation with our pet bedding business.

In addition, we operate our Arden Companies ® outdoor cushion business in the Pet segment due to synergies in sourcing, manufacturing and innovation with our pet bed business.

We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.

In fiscal 2022, we launched our new GoodGood dog supplements line with no artificial colors and only natural flavors.

We also launched Nylabone Gourmet style dog chew toys, which are uniquely crafted with enticing gourmet flavor bits roasted throughout.

In fiscal 2021, we launched our new Comfort Zone Opticalm ™ diffuser, helping cats feel safe and happy.

We also launched a patented aquarium kit with smart clean technology under our Aqueon brand.

It combines the easy to clean function fish keepers need with the styling and design they want.

We introduced Field+Forest by Kaytee premium small animal food, hay and hay rolls with wholesome ingredients, carefully curated from nature's fields and forests to support a healthy diet.

In fiscal 2023, our Nylabone brand launched a new collection of play toys for imaginative fun as well as four new product lines that include a variety of chew toys and chew treats.

These releases feature chew toy s hapes inspired by everyday objects with a fun twist;

multi-flavored Basted Blast chew toys;

the Sneaky Snacker TM chew & treat toy;

and Healthy Edibles ® Meaty Center chew treats.

And our Cadet brand introduced a unique line of all-natural, highly palatable, and digestible long-lasting chews called Bully Hide.

In fiscal 2022, we launched Nylabone Gourmet Style chew toys, which are uniquely crafted with enticing gourmet treats, and an exciting combination of flavor bits roasted throughout.

Over the last two years, many of our pet products have won industry awards.

In fiscal 2022, Field + Forest by Kaytee Hay Bale was selected as an Editor’s Choice Winner by Pet Product News, Nylabone again won Chew Toy Product of the Year award, Kaytee NutriSoft™ was selected as winner of the Bird Food Product of the Year award and Vetrolin® Bath was selected as winner of the Shampoo Product of the Year award in the 2022 Pet Independent Innovation Awards.

At SuperZoo 2022, Aqueon Stick’ems and Zilla Rapid Sense Décor won first place in the New Product Showcase award in the Aquatics and Herptile category.

In fiscal 2021, Nylabone won Chew Toy Product of the Year in the 2020 Pet Independent Innovation Awards.

At SuperZoo 2021, Farnam earned Top Honors in Equine for its Apple Elite electrolyte pellets.

Kaytee's Superfood Treat Stick won an Editors choice award from Pet Product News International.

Eight of our pet brands (Aqueon, Coralife ®, Four Paws, K&H, Kaytee, Magic Coat ® , Nylabone and Zilla) were recognized by Newsweek in August 2021 as America's Best Petcare Brands.

In fiscal 2023, our Nylabone brand was selected as a finalist in the 2022 Pet Product News Editors’ Choice Awards for its Gourmet Style chew toys.

Aqueon won “Health Focused Product of the Year” and “Waste Innovation of the Year” in the 2023 Pet Innovation Awards in addition to “Runner Up” at the SuperZoo New Product Showcase .

In fiscal 2022, Field + Forest™ by Kaytee Hay Bale was selected as an Editor’s Choice Winner by Pet Product News, Nylabone won Chew Toy Product of the Year award, Kaytee NutriSoft™ was selected as winner of the Bird Food Product of the Year award, and Vetrolin ® Ba th was selected as winner of the Shampoo Product of the Year award in the 2022 Pet Independent Innovation Awards.

At SuperZoo 2022, Aqueon S tick’ems™ and Zilla Rapid Sense™ Décor wo n first place in the New Product Showcase award in the Aquatics and Herptile category.

Our dog and cat category, featuring brands such as Cadet, Four Paws, Healthy Edibles ® , K&H, Mikki, Nylabone, Nubz ® , NutriDent ® among others, is an industry leader in manufacturing and marketing premium edible and non-edible chews, interactive toys, grooming supplies and pet beds, pet containment, training and waste management solutions.

Aquatics and Reptile Supplies.

We are a leading supplier of aquariums and terrariums as well as related fixtures and stands, water conditioners and supplements, water pumps and filters, sophisticated lighting systems and accessories featuring the brands Aqueon, Blagdon ® , Coralife, Interpet ® and Zilla.

Small Animal and Bird Supplies.

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Animal Health (Health & Wellness, Equine and Professional) .

We supply calming products under the Comfort Zone brand, dog supplements under our GoodGood brand as well as flea and tick controls under the Adams ® brand.

We supply calming products under the Comfort Zone brand, and flea and tick controls under the Adams ® brand.

We also offer innovative products for horses in the fly control, supplements, grooming, deworming, wound care, leather care and rodenticides categories.

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Moreover, we are a leading supplier of insect control products sold into various markets.

We are the only domestic producer of (S)-Methoprene, which is an active ingredient used to control mosquitoes, flies, fleas, beetles and ants in many professional and consumer insect control applications.

We are the only domestic provider of (S)-Methoprene, which is an active ingredient used to control mosquitoes, flies, fleas, beetles and ants in many professional and consumer insect control applications.

Our products are sold primarily under the Starbar ® and Zoëcon ® family of brands, as well as standalone brands such as Altosid ® , Centynal™, ClariFly ® IGR, Diacon ® , Essentria ® and Extinguish ® .

We also sell (S)-Methoprene to manufacturers of other insect control products, including Frontline Plus.

Aquatics and Reptile Supplies.

Live Fish and Small Animals .

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Pet Sales and Distribution Network

Our domestic sales and distribution network exists to promote both our proprietary brands and third-party partner brands.

Our domestic sales and distribution network exists to promote both our proprietary brands and third-party brands.

It provides value-added service to over 9,800 retailers, many of which are independent specialty stores with fewer than 10 locations, and over 6,400 veterinary offices.

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Our sales strategy is multi-tiered and designed to capture maximum market share with retailers.

Our customers include retailers, such as club, regional and national specialty pet stores, independent pet retailers, mass merchants, grocery and drug stores, as well as the eCommerce channel.

Our customers include retailers, such as club, regional and national specialty pet stores, independent pet retailers, food, drug and mass stores, as well as the eCommerce channel.

We also serve the professional market with insect control and health and wellness products for use by veterinarians, municipalities, farmers and equine product suppliers.

Costco Wholesale accounted for approximately 11% of our Pet segment's net sales in both fiscal 2022 and 2021.

Costco Wholesale accounted for approximately 13% of our Pet segment's net sales in fiscal 2023, and 11% in fiscal 2022.

Walmart, Petco, Amazon and Kroger are also significant customers.

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Over the last two years we have received a number of awards for marketing.

In fiscal 2022, Kaytee won two packaging design awards from Graphic Design USA for Kaytee Nutrisoft and Field + Forest by Kaytee.

In fiscal 2021, the National Association of Container Distributors (NACD), recognized Farnam's Vetrolin packaging with a bronze award.

For example, in fiscal 2022, Kaytee won two packaging design awards from Graphic Design USA for Kaytee NutriSoft and Field + Forest by Kaytee.

Pet Competition

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We are a leader in the consumer lawn and garden consumables market in the United States and offer both premium and value-oriented branded products.

We also produce value brands at lower prices, including numerous private label brands.

In addition, our Garden segment operates a manufacturing, sales and distribution network that strategically supports our brands.

We also produce numerous private label brands.

In addition, our Garden segment operates a manufacturing, sales and distribution network that strategically supports our brands with select national retailers.

Garden Industry Background

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Long-Term Garden Industry Characteristics

The Freedonia Group expects the industry to continue to grow as lifestyle changes and shifts in demographics are creating new opportunities in gardening.

The COVID-19 pandemic has impacted daily habits, with many people spending much more time at home.

As such, outdoor living has become much more significant and increased the emphasis on creating a pleasant outdoor living space.

A survey by Freedonia Group found that in the 12 months ending March 2021, 36% of consumers agreed that they spent more time on outdoor projects while 26% of consumers planted a food garden because of the pandemic.

Among key outdoor living trends, millennials are increasingly interested in gardening as a leisure pursuit, with 70% of respondents indicating that they enjoy gardening.

They have become the nation's largest group of gardeners, representing 29% of all gardeners.

According to the National Association of Realtors, Millennials have become homeowners in large numbers;

a shift accelerated by COVID-19, remote work and a steady increase in income.

Their interest in natural and organic products is particularly benefiting products with a positive environmental profile.

The Freedonia Group reports that nearly three quarters of gardeners believe that they have a personal responsibility to be environmentally friendly.

Building off of trends that grew in prominence during the COVID-19 pandemic – including a surge in garden activity, increased use of outdoor spaces for entertainment, staycation and do-it-yourself lawn maintenance – the Freedonia Group expects the industry sales for 2023 to remain above 2019 pre-pandemic levels.

Gardening and outdoor recreation continue to be popular among many consumers and lifestyle changes and shifts in demographics are creating new opportunities in gardening.

Interest in outdoor living is particularly high among millennials, the nation's largest group of gardeners.

Representing 29% of all gardeners, millennials are increasingly interested in gardening as a leisure pursuit.

We believe this trend bodes well for live plants, pot and planters and garden consumables.

According to the Freedonia Group, 55% of people who grow plants, refer to their plants as “babies” or have called themselves a “plant parent”.

Gardeners who use this term are more likely to spend more money on their “plant babies” by investing in more attractive pots or planters, looking for unique plant varieties, or buying specialty tools or high-end consumables to care for them.

Branded Lawn and Garden Products

Our principal lawn and garden consumables product lines are grass seed, vegetable, herb and flower packet seed, wild bird products, insect control products, lawn and garden care products including fertilizers and live plants.

Our principal lawn and garden consumables product lines are grass seed, wild bird products, lawn and garden care products including fertilizers, insect control products, live plants and packet seed.

Our Pennington brand is one of the largest in grass seed, wild bird feed and birding accessories.

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We continuously seek to introduce new products, both as complementary extensions of existing product lines and in new product categories.

In fiscal 2023, our Ferry-Morse brand introduced more than 40 different Plantlings™ Garden Starter Kits, curated bundles of Plantlings that complement each other and take the guesswork out of planning and buying.

In fiscal 2022, we launched Pennington Smart Patch lawn products, ideal for patching bare lawn spots and thinning areas.

In fiscal 2021, we relaunched Pennington Smart Seed ® lawn products with patent-pending fertilizer-enhanced seed coating to speed seed establishment and promote greener grass.

We also launched a variety of new bird feeders under our Pennington brand.

We expanded our live plants offering with small decorated holiday products and introduced plantlings delivered directly to the consumers.

We are a leading marketer, producer and distributor of lawn and garden weed, moss, insect and pest control products.

We sell these products under brands such as Amdro, Corry’s ® , Daconil ® , IMAGE, Knockout ™ , Lilly Miller ® , Moss Out ® , Over-N-Out ® , Rootboost ™ and Sevin as well as other private and controlled labels.

We are a leading marketer, producer and distributor of numerous varieties and mixtures of cool and warm season grass seed for both the residential and professional markets, as well as forage and wildlife seed mixtures.

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The Pennington grass seed manufacturing facilities are some of the largest and most modern seed coating and conditioning facilities in the industry.

Vegetable, Herb and Flower Seed.

We are a leading provider of vegetable, herb and flower packet seeds and seed starters.

We sell these products under the American Seed ® , Ferry-Morse, Livingston ® , McKenzie ® Seed, Jiffy and other brand names.

We are the leading producer, marketer and distributor of wild bird feed, bird feeders, bird houses and other birding accessories.

These products are sold under the Pennington, Wild Delight ® and 3-D ® Pet Products brands.

Many of our branded wild bird mixes are treated with a proprietary blend of vitamins and minerals.

For example, our Pennington brand mixes are enriched with Bird-Kote ® , our exclusive process which literally seals each seed with a nutritious coating containing vitamins and minerals that are beneficial to the health of wild birds.

These products are sold under the Pennington, 3-D ® Pet Products and Wild Delight ® brands.

Many of our branded wild bird feed mixes are treated with a proprietary blend of vitamins and minerals.

For example, our Pennington brand feed mixes are enriched with Bird-Kote ® , our exclusive process which literally seals each seed with a nutritious coating containing vitamins and minerals that are beneficial to the health of wild birds.

Fertilizer and Controls.

We are a leading producer, marketer and distributor of soil supplements and stimulants.

We manufacture several lines of lawn and garden fertilizers and soil supplements in granular and liquid form under the Alaska ® Fish Fertilizer, Ironite ® , Pennington, Superthrive ® and Pro Care ® brand names and other private and controlled labels.

With Bell Nursery and Hopewell Nursery, we are the primary supplier of superior quality flowers, trees, shrubs and other plants to Home Depot in the Northeast and mid-Atlantic regions, producing and shipping tens of millions of annuals and perennials each year, also offering items we don’t grow, such as orchids and indoor plants.

We manufacture several lines of lawn and garden fertilizers and soil supplements in granular and liquid form under the Alaska ® Fish Fertilizer, Ironite ® , Pennington, Pro Care ® and Superthrive ® brand names and other private and controlled labels.

We also produce, market and distribute lawn and garden weed, moss, insect and pest control products.

We sell these products under brands such as Amdro, Corry’s ® , Daconil ® , IMAGE ® , Knockout™, Lilly Miller ® , Moss Out ® , Over-N-Out ® , Rootboost™ and Sevin, as well as other private and controlled labels.

We are a leading provider of vegetable, herb and flower packet seeds and seed starters.

We sell these products under the American Seed ® , Ferry-Morse, Jiffy ® , Livingston ® , McKenzie ® Seed and other brand names.

Garden Sales and Distribution Network

Our sales and distribution network exists primarily to promote our proprietary brands and provides us with key access to retail stores for our branded products, acquisition and maintenance of premium shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products, immediate exposure for acquired brands and comprehensive and strategic information.

The network also sells other manufacturers’ brands of lawn and garden supplies and combines these products with our branded products into single shipments enabling over 4,400 customers and over 38,000 stores to deal with us on a cost-effective basis to meet their lawn and garden supplies requirements.

Our sales and distribution network exists primarily to promote our proprietary brands and provides us with key access to select national retail chains for our branded products, acquisition and maintenance of premium shelf placement, prompt product replenishment, customization of retailer programs, quick responses to changing customer and retailer preferences, rapid deployment and feedback for new products, market intelligence and potential acquisition targets.

The network also sells other manufacturers’ brands of lawn and garden supplies and combines these products with our branded products into single shipments enabling select national retail chains to deal with us on a cost-effective basis to meet their lawn and garden supplies requirements.

Garden Sales and Marketing

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The marketing strategy for our value products is focused on promotion of the quality and efficacy of our value brands at a lower cost relative to premium brands.

Our customers include retailers, such as mass merchants, home improvement centers, independent lawn and garden nurseries, drug and grocery stores, and professional end users.

Our customers include retailers, such as home improvement centers, food, drug and mass merchants, and professional end users.

Sales to Home Depot represented approximately 35% and 33%, sales to Walmart represented approximately 24% and 28% and sales to Lowe’s represented approximately 14% and 16% of our Garden segment’s net sales in fiscal 2023 and 2022, respectively.

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• dedicated sales forces represent our combined brand groups;

• retail sales and logistics network, which provides in-store training and merchandising for our customers, especially during the prime spring and summer seasons;

• a retail sales and logistics network, which provides in-store training and merchandising for our customers, especially during the prime spring and summer seasons;

• dedicated account-managers and sales teams located near several of our largest customers;

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Our Garden segment competes primarily based on its strong premium and value brands, quality, service, price and low-cost manufacturing.

Our Garden segment’s sales and distribution network also competes with a large number of distributors, with competition based on price and service.

While demand for our pet supplies products, except for pest controls, is generally balanced over the year, our lawn and garden consumables business is highly seasonal with approximately two-thirds of net sales occurring in our second and third fiscal quarters combined.

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The principal raw materials required for our bird feed are bulk commodity grains, including millet, milo and sunflower seeds, which are generally purchased from large national commodity companies and local grain cooperatives.

In order to ensure an adequate supply of grains and seed to satisfy expected production volume, we enter into contracts to purchase a portion of our expected grain and seed requirements at future dates by fixing the quantity, and often the price, at the commitment date.

In order to ensure an adequate supply of grains and seeds to satisfy expected production volume, we enter into contracts to purchase a portion of our expected grain and seed requirements at future dates by fixing the quantity, and often the price, at the commitment date.

Although we have never experienced a severe interruption of supply, we are exposed to price risk with respect to the portion of our supply which is not covered by contracts with a fixed price.

The COVID-19 pandemic has caused a significant increase in demand for pet supplies and garden consumables.

This has caused strain on our supply chain network and its ability to meet such demand.

For information regarding the impact of changes in commodity prices, see “Risk Factors – The COVID-19 pandemic has impacted how we are operating our business, and the duration and extent to which this will impact our future results of operations and overall financial performance remains uncertain” and “Risk Factors – Seeds and grains we use to produce bird feed and grass seed are commodity products subject to price volatility that has had, and could have, a negative impact on us” in Item 1.A.

Patents, Trademarks and Other Proprietary Rights

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Along with patents, active ingredient registrations, end use product registrations and trade secrets, we own numerous trademarks, service marks, trade names and logotypes.

Many of our trademarks are registered but some are not.

Many of our trademarks are registered.

For those that are not, we rely on our common law trademark rights.

Human Capital Management

We believe Central employees are part of our organization because they are passionate about the pet and garden industries.

We believe one of the reasons Central employees are part of our organization is because they are passionate about the pet and garden industries.

Every Central Team member and every job is important to our success and helping us to achieve our purpose.

As of September 30, 2023, we had approximately 6,700 employees, of whom approximately 6,300 were full-time employees and 400 were temporary or part-time employees.

We also hire substantial numbers of additional temporary employees for the peak lawn and garden shipping season of February through June to meet the increased demand experienced during the spring and summer months.

We also hire substantial numbers of additional temporary employees for the peak lawn and garden shipping season of February through June to meet the increased demand during the spring and summer months.

The majority of our temporary employees are paid on an hourly basis.

Except for approximately 50 employees at a facility in Puebla, Mexico, none of our employees are represented by a labor union.

Except for approximately 100 employees at our facilities in Puebla, Mexico and Brandon, Canada, none of our employees are represented by a labor union.

The attrition rate of our non-seasonal full-time and part-time workforce was 39% in fiscal 2023.

We believe that attracting, developing and retaining a diverse and inclusive workforce is an important component to our continued success.

We have taken several steps to further enhance our diversity, including the creation of a diversity and inclusion council.

We consider gender, nationality, ethnicity, age, educational and professional background, among other things, in our recruiting and internal promotion decisions.

Women serve in several senior leadership roles, holding 39% of leadership positions (defined as Managers, Directors and Senior leaders (Vice President and above), including Senior Vice President Human Resources, General Counsel and Secretary, Chief of Staff, Senior Vice President Pet Consumer Marketing, Vice President Accounting Operations, Vice President Investor Relations, Vice President Corporate Development, Vice President Real Estate, President Segrest, General Manager Health & Wellness and Vice President Pet Specialty Sales.

We recognize financial stability is a critical component to our employees’ well-being.

We believe that attracting, developing and retaining a diverse and inclusive workforce is important to our continued success.

Women serve in several senior leadership roles, holding 39% of leadership positions (defined as Managers, Directors and Senior leaders (Vice President and above), including Interim Chief Executive Officer, General Counsel and Secretary, Senior Vice President Supply Chain, Senior Vice President Pet Consumer Marketing, Vice President Digital Marketing & Commerce, Vice President Investor Relations & Corporate Sustainability, Vice President Real Estate, President & General Manager Segrest, General Manager Health & Wellness and Vice President Pet Sales.

We recognize that financial stability is a critical component to our employees’ well-being.

Our competitive compensation programs include base salary or hourly compensation for all employees.

In addition, we provide an annual 401k profit-sharing bonus program and a bonus program for eligible employees which is based on the success of our businesses as measured by designated performance metrics and individual performance contributions.

In addition, we provide a discretionary annual 401k employer contribution and a bonus program for eligible employees, which is based on the success of our businesses as measured by designated performance metrics and individual performance contributions.

Another component of our overall compensation program is long-term equity, which is offered through annual and individual grants.

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Developing our employees so that they can assume key roles within Central is an important strategic priority for us.

We offer a variety of programs and resources to train and enhance the skill set of our workforce, including subsidizing college and advanced degrees for eligible employees.

We offer a variety of programs and resources to train and enhance the skill set of our workforce, including a mentoring program and subsidizing college and advanced degrees for eligible employees.

We also engage in regular discussions around succession planning and talent development at all levels of the Company.

Our Board has frequent contact with business leaders within the organization and participates actively in the succession planning process.

Our Senior Vice President Human Resources reports directly to the Chief Executive Officer and works with management to evaluate internal talent for future leadership positions within the organization on an ongoing basis.

Our Chief People Officer reports directly to the Interim Chief Executive Officer and works with management to evaluate internal talent for future leadership positions within the organization on an ongoing basis.

In evaluating potential acquisitions, an important consideration is the quality of the management team of the target company and our ability to obtain sufficient assurance that such management will remain with Central as needed if and after we acquire the business.

We encourage and drive high standards in our safety performance by recording, reporting and investigating all incidents to root cause.

We encourage and drive high standards in our occupational health and safety performance by recording, reporting and investigating all incidents to root cause.

In the ongoing push for progress, we set new annual safety targets and invest in our operational capabilities.

In fiscal 2022, we were able to improve our recordable incident rate by 24% compared to fiscal 2021.

In February 2021, for the first time in the Company's history, Central was named as one of Forbes 2021 America’s Best Midsize Employers.

We have improved our recordable incident rate for four consecutive years and in fiscal 2023, we were able to improve it by 20% compared to fiscal 2022.

Regulatory Considerations

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Such regulations are often complex and are subject to change.

For example, in the United States, all pesticides must be registered with the United States Environmental Protection Agency (the “EPA”), in addition to individual state and/or foreign agency registrations before they can be sold.

For example, in the United States, all pesticides must be registered with the United States Environmental Protection Agency (“EPA”), in addition to individual state and/or foreign agency registrations before they can be sold.

Fertilizer products are also subject to state Department of Agriculture registration and foreign labeling regulations.

Grass and other seed are also subject to state, federal and foreign labeling regulations.

Grass and other seeds are also subject to state, federal and foreign labeling regulations.

The Food Quality Protection Act (“FQPA”) establishes a standard for food-use pesticides, which is a reasonable certainty that no harm will result from the cumulative effect of pesticide exposures.

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The long-term profitability of our business requires us to do our part to protect the planet, care for the local areas we serve, and provide our Central employees a safe, healthy and rewarding workplace.

Sustainability is embedded throughout our long-term enterprise roadmap, and brought to life through our Central Impact strategy.

We demonstrated our commitment to sustainability by publishing our first Central Impact Report in fiscal 2022.

Corporate sustainability is embedded throughout our long-term enterprise roadmap and brought to life through our Central Impact strategy.

We demonstrated our commitment to corporate sustainability by publishing our first Central Impact report in fiscal 2022.

This inaugural report provides detailed information on our Central Impact strategy, our focus areas - protecting our planet, cultivating our communities and empowering our employees, and we have set goals in 10 critical areas - energy & greenhouse gases, water, waste, biodiversity, philanthropy, employee volunteering, product stewardship, health & safety, diversity & inclusion, learning & development - and our progress and examples of our commitment in action.

The report can be found on our website www.central.com.

In fiscal 2023, Central was recognized for its efforts in promoting eco-conscious procurement practices by ODP Business Solutions.

Information About Our Executive Officers

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Brown 82 Chairman of the Board

Cofer 54 Chief Executive Officer

Mary Beth Springer 58 Interim Chief Executive Officer

Hanson 58 President, Pet Consumer Products

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Walker 65 President, Garden Consumer Products

Joyce McCarthy 53 General Counsel and Secretary

Joyce McCarthy 54 General Counsel & Secretary

Brown has been our Chairman since October 2019, having also served in this capacity from 1980 to 2018.

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From 1977 to 1980, Mr.

Brown was Senior Vice President of the Vivitar Corporation with responsibility for Finance, Operations and Research & Development.

Brown was Senior Vice President of Vivitar Corporation with responsibility for Finance, Operations and Research & Development.

From 1972 to 1977, he was with McKesson Corporation where he was responsible for its 200-site data processing organization.

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in manufacturing, engineering and data processing.

Cofer became our Chief Executive Officer in October 2019.

He is a 30-year veteran of the Consumer Products industry.

Most recently, from 2016 to 2019 he served as Executive Vice President and Chief Growth Officer of Mondelez International.

Previously he served as Executive Vice President and President of Asia Pacific, Eastern Europe, Middle East & Africa of Mondelez, Inc.

Prior to that, Mr.

Cofer served in senior-level operating roles at Kraft Foods, Inc., including Executive Vice President and President of European Region, President of Oscar Mayer Foods and President of Kraft Pizza Company.

Mary Beth Springer.

Springer became our Interim Chief Executive Officer in October 2020.

She has served on our Board of Directors for the past 10 years and acted as the Lead Independent Director for the last three years.

Springer currently also serves as an

independent director for Amy’s Kitchen, a privately held organic food company.

She spent over 20 years at The Clorox Company in roles of increasing responsibility, finalizing her time with Clorox as Executive Vice President and General Manager.

Hanson became our President of Pet Consumer Products in August 2019 after serving as a board member during portions of 2018 and 2019.

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Prior to joining Central, he worked in private equity and investment banking.

Walker became our President of Garden Consumer Products in 2017 and has responsibility for Central's branded garden business including sales, marketing operations, the controls and fertilizer, grass seed and vendor partner business units, as well as the retail sales & service team and garden distribution.

Prior to his promotion, he served as Executive Vice President and General Manager - Garden Branded Business from 2014 to 2017 and began with Central as Senior Vice President - Garden Sales in 2011.

He served as Executive Vice President and General Manager - Garden Branded Business from 2014 to 2017 and began with Central as Senior Vice President - Garden Sales in 2011.

Prior to joining Central, Mr.

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Joyce McCarthy .

McCarthy became our General Counsel and Secretary in April 2022.

McCarthy became our General Counsel & Secretary in April 2022.

From 2018-2022, she served as General Counsel & Secretary for Ferrara Candy Company where she oversaw all legal and compliance matters for the company.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business