I ate at Smith & Wollensky in midtown Manhattan with a 25-year-old entrepreneur who has been trying to corner the market in worm scat.
“Worm poop is our core,” said Tom Szaky, CEO of TerraCycle Inc., a Trenton, N.J.-based maker of organic plant foods.
He told me he has a billion red worms eating scraps from Princeton University’s dining hall. They excrete 3 to 4 tons of worm waste each day.
This waste is then liquefied, poured into relabeled soda pop bottles and sold as plant food at Home Depot, Wal-Mart, Target, Wild Oats and other fine stores.
As we ate our steaks, Szaky placed his bottles on the table. They are the result of a long journey. Szaky’s parents, both medical doctors, emigrated from Hungary to Canada in the 1980s and eventually sent their son to Princeton.
One day, though, he visited friends in Montreal, and those plans changed. Szaky said his friends were growing plants in their basement.
“Hmm. What kind of plants do college kids grow in basements?” I asked.
“Use your imagination,” he said.
Szaky said he inquired as to how these plants grew so big and leafy. “My buddy said, ‘Oh, I started feeding them worm poop about three weeks ago.”
From there, Szaky became obsessed with the economics, not of subterranean horticulture, but of worm poop. “I got my friends in a dorm room and we wrote a business plan on how we’d corner the market on worm poop,” he said.
Szaky soon maxed out his credit cards and dropped out of Prince ton, just to harvest this stuff. He couldn’t find venture capital – imagine that – but he was able to finance his dream by winning several business-plan writing contests.
Creating the manufacturing and packaging processes and landing his products in stores nationwide were no small feats.
His company now employs 33 people plus seasonal help in a blighted inner- city area. It had $1.5 million in sales last year. It’s on track to do $6 million this year, and Szaky hopes to hit $15 million in 2008 with help from a new product: fireplace “logs” made from garbage.
TerraCycle operates from a graffiti- coated building in an enterprise zone. To keep the peace, Szaky allows local artists to tag his factory as long as their work is not offensive or gang-related.
“Who used your building before?” I asked, wondering what business could have fallen on such hard times as to become an outhouse for a billion worms.
“It was a newspaper distribution building,” Szaky said. “The Dec. 12 New York Times was the last paper to come out of there.”
Oh.
So I guess Szaky has earned his place as the worm-scat magnate. Unfortunately, such success is not only lauded but litigated.
The Scotts Miracle-Gro Co. has sued TerraCycle, claiming the startup copied its packaging and falsely advertises that its plant food is superior. Scotts has $2.7 billion in annual sales and commands 51 percent of the plant food market, but now its products are sold beside TerraCycle.
“If you are going to claim superiority, you ought to be able to back up that claim,” said Scotts’ spokesman Jim King.
TerraCycle – which Szaky said spent all of $1,000 on advertising this year – has touted a Rutgers University study that showed its worm poop outperforming the “leading synthetic plant food.”
Scotts has demanded to see this study, but TerraCycle won’t provide it. Conversely, Szaky said Scotts refuses to hand over studies it claims show Miracle-Gro as superior. “Why would we give over our research to them when they’re not going to give theirs to us?” Szaky said. “They’re just going to have their paid scientists rip them apart.”
Miracle-Gro comes in a newly minted bottle. TerraCycle comes in pop bottles gathered by fundraising schoolchildren that are then clumsily shrink- wrapped.
Both companies use green – the color of plants – and yellow, a primary color. And this is the basis for Scotts’ claim that TerraCycle copied its packaging?
“No one is allowed to monopolize necessary colors,” said Wendy Seltzer, a visiting law professor at Brooklyn Law School and the founder of www.chillingeffects.org, a clearinghouse of information on trademark infringement claims.
Nor would it be unusual for two plant-food makers to depict plants on their packages, she said. It’s like putting pictures of dogs on dog food.
Still, a company has got to protect its property.
“It is not uncommon for a consumer- products company to be assertive in protecting its trade dress,” King said.
Trademark law is designed to prevent companies from confusing consumers with similar packaging, he added.
“This is more about the fact that we’re taking shelf space at Home Depot and Wal-Mart … than customer confusion,” Szaky said.
There is indeed a fine line between companies protecting their trademarks and using courts to bully competitors.
Scotts has the legal resources to bury Szaky’s worm farm. Szaky, meanwhile, is taking his story to the press and raising money for an expensive legal battle at suedbyscotts.com.
Without providing specifics, King told me that Szaky knows what he needs to do if he would like to settle.
Szaky told me he had no idea what King was saying, claiming Scotts has rebuffed requests for discussions.
“I would love a phone call from them,” he said.
It’s not so easy running a worm farm. You might call it a world of scat.
Al Lewis’ column appears Sundays, Tuesdays and Fridays. Respond at denverpostbloghouse.com/lewis, 303-954-1967 or alewis@denverpost.com.
This article has been corrected in this online archive. Originally, due to incorrect information supplied by a wire service, the column misstated the annual sales and market share of The Scotts Miracle-Gro Co. Scotts has $2.7 billion in annual sales and a 51 percent market share in the lawn and garden industry, company spokesman Jim King said.
