Environmentally friendly products are hot sellers today and the number of products touting their "green" credentials is growing but TerraCycle Plant Food may be the ultimate organic product to come to market. A college student from Toronto named Tom Szaky founded TerraCycle after some buddies showed him how worm droppings could be used as a cheap and eco-friendly fertilizer.

Szaky based his business model on recycling, starting with the trash that TerraCycle turns into compost and feeds to millions of red worms. The worm castings are then liquefied and put into previously used plastic water and soda bottles. Even the company's shipping cartons come from recycled materials.

TerraCycles's organic plant food hit store shelves in 2004 with labels boasting that it "Contains Liquefied Worm Poop!" Within two years company sales passed $1 million and the company snagged shelf space in retail giants like Walmart Canada and Home Depot Canada. Founder and President Tom Szaky liked to refer to his company as "the anti-Miracle-Gro." But Scotts, the industry giant and maker of Miracle-Gro, thought that TerraCycle was encroaching too closely on its territory. In 2007, Scotts sued Szaky's young company for trademark infringement and for making "false claims" that its organic products were superior to syntheticversions.

Small companies can easily fold under the weight of such a lawsuit. Even if they win, the legal costs can cripple them. So TerraCycle took its case to the Internet with a blog, hoping to stir public support and raise contributions for its legal fees. "I knew there was no way I could out-lawyer Scotts," Tom Szaky says. "So as I thought about it, I wondered what core competency our company had that we could exploit. Guerrilla marketing seemed to be the obvious answer." He adds that they hoped to get so much public support for their cause that Scotts would drop itssuit.

The blog offered a comparison chart titled "David vs. Goliath" that illustrated the differences between the two companies. A photo of TerraCycles's modest headquarters behind a chain-link fence was in stark contrast to Scott's grand, pillared entryway. The blog listed TerraCycles's CEO's "major perquisite" as "unlimited free worm poop," whereas Scott's CEO enjoys "personal use of company-owned aircraft."

The blog also countered Scott's claims that consumers might be confused by its "overly similar yellow and green packaging" by posting photographs of TerraCycle's wacky and unusual bottles in their variety of shapes and sizes beside Miracle-Gro's uniform and professional-looking ones. Scotts continued to insist that TerraCycle change its labels, but TerraCycle's general counsel, Rickard Ober Jr., stated that changing packaging would hurt the sales momentum.

Su Lok, a Scott's spokesperson, argued that the blog was just one of TerraCycle's PR tactics and insisted that none of its arguments had merit. "We've spent a lot of time building up brands that consumers trust,"shesays,"andwearegoingtoprotectthosebrands."IraJ.Levy,anintellectualpropertylawyer,

warned that Scotts could have had more to lose by pursuing TerraCycle than it was worth. "By pursuing a trade dress case," Levy says, "they can allow a small player to promote itself on the national stage. When word gets out that the mega-conglomerate is suing the little guy, you risk having bloggers launching boycotts, and the plaintiff ends up injuring his own business."

Which is precisely what Tom Szaky hoped would happen. The lawsuit wasn't something he wanted to fight, he said, but it was a chance to generate buzz. "It's like The Art of War," he explained. "You need to have a villain to be up against, and for us, that's Scotts."

Thefightisnowover.TerraCyclereachedasettlementwithScottsandagreedtochangeitspackagingand its advertising claims. In its time, the blog gained massive media attention, leading major newspapers and magazines to cover the story, and hundreds of bloggers to defend TerraCycle's cause. Although on-line donations totaled less than $1,000, overall company sales surged 122% within weeks of the blog's launch andTerraCycle'smainwebsite,whichaveragedabout1,000visitorsaday,spikedtoashighas13,000.29

Questions

1. WhattypeofconsumerproductisTerraCycle'splantfood:convenience,shopping,specialty,or unsought?Why?
2. HowwelldoTerraCycle'sbottlesperformthefourpackagingfunctionsdiscussedinthislesson reading? Compare TerraCycle's products to Miracle-Gro's (www.scotts.com) Do you think TerraCycle's package design distinguishes its products well enough from those of the industry giant, or are they similar enough to cause customerconfusion?
3. Go tohttp://www.terracycle.com/en-US/about-us.htmland look at the types of products the companysells.Describeitsproductmix.Howwideisit?Whichbasicproductlinesdoesitsell? How long are the productlines?
4. Doyouthinkthatproductlineextensionorproductlinecontractionwouldmakemoresensefor TerraCycle at this stage of the company's growth?Why?