The Scotts Miracle-Gro Co (SMG) Q2 2019 Earnings Call Transcript
Bill Chappell -- SunTrust -- Analyst
Great, thank you.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Mike, anything you want to add on this, your business?
Michael Lukemire -- President & Chief Operating Officer
I think you got to look at it as retailers in the renewables are counting on us to grow the category and that's the complete solution across all categories versus picking to choose winners and losers. And I think that's where (inaudible) bring more people in and then when we convert with our brands, we went in other categories. And I think that's the effect we're seeing.
Operator
We will now move on to our next question from Jon Andersen of William Blair. Please go ahead, your line is open.
Jon Andersen -- William Blair -- Analyst
Thanks, good morning, everybody.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Hi.
Jon Andersen -- William Blair -- Analyst
Wanted to ask -- start on Roundup. I'm trying to kind of square the idea that Roundup point-of-sale was up 20% with some of the noise around the brand and then the payment that you referred to from Bayer. If you could talk a little bit about the strength of Roundup in light of some of the headlines, what you expect going forward for that brand and is GroundClear meant to replace Roundup over time or added as a kind of an option for those consumers who may not be comfortable on the margin by Roundup in the future?
James Hagedorn -- Chief Executive Officer and Chairman of the Board
All right. I'll start, if I can continue. We're surprised too. So one of things we did is increased the ad spend and both of us, Bayer and Scotts, agreed to pay for it. When you're seeing like whatever it is Prop 65 language in California being talked about, I think we told you guys last year, California in spite of the Prop 65 and IR stuff actually had really good POS results last year in spite of what you would say -- and by the way our research would show that consumers were concerned.
So one of the things that's happened I think is the Southwest had a pretty wet winter and a lot of weed pressure. And so we started out early with really good sales in like Arizona, Phoenix especially. And when you look at it and look a year before that and the year before, it was less -- Roundup, last year was such a bad year that it's a little bit like talking about our consumer business. So part of the growth is the fact that it's less impressive when you look at it compared to sort of the previous years, not excluding last year.
So we increased the advertising. We were concerned, the retailers were concerned. We didn't know what's going to happen. Honestly, I'm not sure I can tell you exactly what happened. But we're happy about the result. I think all of us, Bayer, Scotts, the retailers have been concerned and we're relieved at the result that we're getting. So that's kind of on that side.
The lineup -- GroundClear lineup is designed as a kind of a fallback just because we didn't know and we wanted a product line that was allowed under the agency agreement which GroundClear is to just in case there was a backlash be ready for that. And we funded that at a pretty high level. And so, the result is when you see our sales which are really the category being up almost a third year-to-date, it is impressive, heck. So GroundClear was designed as a backup.
I think it actually has a real place in the -- I mean, we're not going to not focus on that product line next year as a result of the results of this year. I think it gives us a better (inaudible) set, I think it offers an OMRI-certified product for retailers who -- or for consumers who might be concerned or want a different sort of less chemical product. So I think it is a little bit serendipity in that, we had a bad season last year, that season was a lot better, meaning a lot more weed pressure and I think it's probably pretty clear that consumers have a lot more resiliency than maybe our research what's shown in regard to sort of the brand reputation.
Randy Coleman -- Executive Vice President and Chief Financial Officer
Jon, the only other thing I'd add is, you haven't seen that the EPA came out yesterday, US EPA. They've done another review of glyphosate and very comfortable the signs are sound, safe for use. So I think even more affirmation that things are fine.
Jon Andersen -- William Blair -- Analyst
That's helpful.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
I think that I'm going to go and say too, if our friends at Bayer are listening that they've actually been really good to work with so far throughout what I think is extremely disruptive period of their history as they're dealing with integration of Monsanto and the Monsanto kind of reputational issues and sort of legal liability issues that they're dealing with. So, if I look back at kind of where we were last fall after that original Johnson verdict to where we are today, Randy has really primarily led the exercise in trying to figure out how our relationship needs to be modified in order to do the right thing for this company and they've actually been receptive in dealing with that and it's been not pleasant to deal with, but it's been pretty professional.
Jon Andersen -- William Blair -- Analyst
Okay. You talked in the prepared portion of your comments, you know, how important it's going to be viewed or become a trusted partner for large commercial operators in the hydroponic space and you are having the right products, differentiated products. Just wondering if you could talk a little bit about, you know, you have two sides to the business. You have the consumable side and the durable side, and where you think you have the most differentiation or importance today to those large-scale commercial operators and where you have the most work or more work to do to demonstrate that technical expertise and differentiation, again, comparing your durables portion of your business versus the consumables?
James Hagedorn -- Chief Executive Officer and Chairman of the Board
You want to take that, Chris?
Chris Hagedorn -- General Manager
Sure. Hey guys, it's Chris. So it's a good question and it's a little bit difficult for us to break it out. On the one hand, we are the market leader by a pretty significant margin on the lighting side as we are in the consumable side. I think you can look at and say, as with our routes from Scotts Miracle-Gro, the the biggest and most experienced consumer lawn and garden company and thus nutrient and growing media company in the world, I think our prowess there is pretty unparalleled and we compete on the lighting side with some very significant, very established players.
So I think the competition I would probably say is stiffer on the durable side particularly as relates to lighting, but we've got some very strong partnerships with some extremely significant player. So I don't think we're in a disadvantage position there, but I think again just understanding who we are from an enterprise level, Scotts Miracle-Gro, I think our sort of primacy there is pretty unrivaled, not to sound arrogant.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
I probably would say it slightly differently. Sorry, Chris. I think we have on sort of the consumable side, I agree with what Chris said, I think we just have to do it. I think we've got to look at our nutrients business, our soils business, our R&D pipeline. I mean, the things that we can add, when you talk about -- Chris talks about prowess, I think we have to execute against it and I think we are headed down the road. On the life business, first of all, we have a Board meeting tomorrow and Friday where Chris and his team are going to talk about all the stuff, but I think that we aim to lead lighting both in sort of the traditional lights and LEDs. And I think we've got a plan to do that, which is key.
And I think in the other durable areas, which would be sort of hydroponic systems, sort of you're rolling stock, there's a lot of innovation happening. So, I think that, somebody said how far down the track to you think you are in being what I've been saying lately the kind of the perfect vendor, perfect partner to professional growers, I think we're more than halfway there and that's a long way since where we were a year ago.
So I think we've -- we've got a lot of what to do, but when we talk durables, we're really talking kind of plastics and lights. And I think there's a lot of really good work happening, both here in Europe and in Vancouver. And on the consumable side, we've got a lot of value we can add that we're just, I mean, it's been -- I think Randy was actually being or maybe it was Mike last week being defensive of Hawthorne. I said, for Christ's sake guys, we have like eight months to integrate. And when you consider that we're trying to strategically make ourselves into an essential partner, I think we've made progress in both areas, but Scotts has a lot to help Chris with and his group on the consumable side. On the durable side, there is a lot of progress happening.
Randy Coleman -- Executive Vice President and Chief Financial Officer
And just one thing that I want to add that as important as it is to look at those two hats of our business and we do look at them that way between durables and consumables, I think it's also important to note that we have competitors in each of our individual categories, but for me I don't really see the differentiator as much an individual category for Hawthorne. It's the fact that we are basically partnered with people who were basic in every category, and when you look at these operations from a growers perspective, everything has to work in concert, every product, every tool you use has to work together with the others and being the only people out there who offer all of that along with the tech services package that we have, that to me is the big differentiator less than any individual product line.
Joe Altobello -- Raymond James -- Analyst
Okay. great. Last one from me is just, the Number 2 -- Number three player that liquidated relative to Sunlight. What are your expectations for the Number 2 player, are are they kindering, do you expect them to remain as a competitor or what kind of the implications be there going forward? Thanks.
Chris Hagedorn -- General Manager
I'll answer the question for my team. We respect everybody who's competing in this space and we aim to keep them hard until Randy says you better start focusing on margin. So, I would say highly respectful of our other competitor and we are not like taking our foot off the gas either. But I'm not going to say anything about (inaudible) because every time I do, that comes back to bite us on the ass. But I will say, so there are good honest people and we're going to continue doing what we do.
Jon Andersen -- William Blair -- Analyst
Thank you.
Operator
Okay. We will now move on to our next question from Joe Altobello of Raymond James. Your line is open.
Joe Altobello -- Raymond James -- Analyst
Hi guys, good morning.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Hi, Joe.
Joe Altobello -- Raymond James -- Analyst
So I guess couple of questions on the Bayer reimbursement. First, and it's my understand what you said earlier Randy, It's in the guide, but you're spending it back, so don't flow it through the model, number one. And number two, what was the rationale for the reimbursement because it seems like that the Roundup business is doing pretty well as you guys pointed out this morning?
Chris Hagedorn -- General Manager
Right. So let's (inaudible) question one. And Randy is capable of answering the whole thing. I would just say is, as we talked about this before, we didn't know how that was going to go. So we've done a lot of work to make sure that the good result you're seeing today at least as close -- we want to sort of overcome headwinds, I would say three or four months ago. And if I had answer for you, I would tell you, you know, is it safe? I think it was like a marathon man or something. I have no idea, OK, if it's safe. The results certainly --
Joe Altobello -- Raymond James -- Analyst
Product or the outlook, I think you need to be --
Chris Hagedorn -- General Manager
I'm talking about the outlook.
Joe Altobello -- Raymond James -- Analyst
Yes. Okay. Just to be clear.
Chris Hagedorn -- General Manager
You know, the Roundup is through two cases leaving like 12,998 left to go, but given the environment we thought we we're in, I think we spent the money extremely well and I think you're seeing the results of it. So we didn't know how is going to go and I can't predict that it's going to be as good next year. We're two cases into this and it's the court of public opinion and consumers that matters here. Not what we hope, it's -- but I think the money has been spent really well and I think you're seeing the results. But I don't know what it means.
Randy Coleman -- Executive Vice President and Chief Financial Officer
Yeah, I'll just say, Joe, again, this is the payment on April 1st and the sale of the JV on April 1st were both the result of conversations that deep way back to the fall, it took many months to consummate, so that was how we got here, like Jim said. Looking forward we're encouraged by what's happening this year. Difficult to predict the future, really happy the way this year is turning out and we'll go from there. But so far so good.
Joe Altobello -- Raymond James -- Analyst
Okay, understood. And if I could ask a question for Chris. I figured out I'll (inaudible) Jim's voice a little bit but, on California hydroponics, have you like the market's bottom there, where does supply demand stand for cannabis in California. And are you still seeing movement toward the black market which I think would be good for you guys?
Chris Hagedorn -- General Manager
Yes. So we are definitely seeing -- the market there on the legal side, I think is beginning to resolve itself. That being said, I don't think it's happening quickly enough to satisfy, just a pent-up consumer demand there. So we do believe that there is a shift taking place back toward the black market. I would chalk that up largely to again just a sort of a slow rate of legal changeover, as well as just the fact that even in a state like California things I think are relatively permissive and becoming more so, it's still -- it's hard to be a legal grower due to the way that businesses are taxed, the way the businesses can bank at a legal level. I think a lot of folks who dip their toes in the legal market found that unfortunately due to the way that the laws are written, it is more beneficial from them as individuals to remain in the black marker. So there's been a shift back toward that, at least that's what we've seen as the feedback we get from our retailers.
Now the product set that we have that has traditionally serviced that market, it is a relatively high margin product set. So it's not something we're lamenting, but I do hope that the state federal government can work through its issues and we continue to see it toward the white market because I think that's just better for everybody, long-term.
Joe Altobello -- Raymond James -- Analyst
Got you. Okay, thank you guys.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Thank you, Joe.
Operator
We will now move on to our next question from William Reuter of Bank of America. Please go ahead, your line is open.
Unidentified Participant -- -- Analyst
Hi guys, this is Michael for Bill. (Technical Difficulty)
Jim King -- Senior Vice President, Investor Relations & Corporate Affairs
This is Jim King. John, if we can put that caller back in the queue at the help us understand the question. We will be glad to take later. I think there's so much static on the line. (Technical Difficulty) let's do that.
Operator
Of course, sir. No problem. We will move to our next question from Chris Carey of Bank of America. Please go ahead, your line is open.
Chris Carey -- Bank of America -- Analyst
Testing, is this a Bank of America issue or can you hear me as well?
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Loud and clear.
Chris Carey -- Bank of America -- Analyst
All right. It's just the clarity in then. Okay. That's what you get. So I guess I was kind of hearing in the prepared remarks, maybe during the Q&A, I can't remember, that maybe Marvin and team going over to Lowe's has caused the change in strategy there, maybe more engagement, maybe a more aggressive approach to driving these product categories, maybe branded. I wonder if you can elaborate on that a little bit more?
James Hagedorn -- Chief Executive Officer and Chairman of the Board
I can'make it easy, yes. I was having a haircut this weekend and I live that road from (inaudible) me while I was in the chair at the barbershop on Saturday and said, why is Lowe's is looking so good. And I said, well, there is a new management team and this is what I would chalking it up to. It's a very merchant-oriented leadership team there who aims to compete and I view that is good for this business. And we're doing our best to be very fair to all retailers, but I would say Marvin and the team, Bill Boltz are doing really good work and they want to make an impact and if I said, you know, what is it all about. I would say, it's a very aggressive merchant culture that I think is healthy for this business. MIke, anything you would --
Michael Lukemire -- President & Chief Operating Officer
No, I think that you said it right. They're just being aggressive, their first market. They're competing.
Chris Carey -- Bank of America -- Analyst
Okay, makes sense. So obviously, the inventory fill was strong as you guys had expected and the POS is coming through in a pretty strong way and you have the kind of May overhang with being such a strong month. So I'm just trying to marry sort of the risk of working through some of this inventory and the consumption with the comments that you made about the potential to raise guidance when you update the market in June. So do you need POS to continue to be really strong in May in order to get reorders here or is there something else that you're seeing that would suggest that you can get that activity over the next month?
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Okay. So just a couple of points I'd throw out. One, I think pretty much at this point, Mike (inaudible) already ordered up, meaning he's got orders in-house, already to cover May. So then it is a matter of selling product off the shelf. So at the end of the day, it's going to be consumer takeaway that means either during May or beyond May where you add. Effectively where we're at is our feeling is if we can comp May, Randy will have good news in June.
So that's kind of the internal give and take of how do we manage this call, how do we manage expectations. I think we meaning, Randy, Mike and myself are kind of seeing how May goes, which is what customer POS look like. I was listening to news this morning on the way in and the May forecast for the East Coast, long-term forecast, whatever that is 30 days, looks very attractive for the East Coast. So, you know, I think we're in a good place and Randy will be willing and that kind of the challenge is can we comp May. If we do, that's going to be a good result for the year. I don't think we are feeling like there's a lot of risk to the expectations we set, put it that way. So I think we're comfortable where we are. I don't think unless it snows every weekend for rest of the year, I doubt we miss, but the challenge is are we want to call up and I think right now we're just saying, just give us a month and we will tell you.
Chris Carey -- Bank of America -- Analyst
Okay. And I'm conscious of where the call is in time. So just I'll get a quick question from here on, just on promotions in Hawthorne, I'm trying to understand maybe why you've been so promotional and more importantly why you think that going forward do you expect it to become less promotional. Thank you.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Why? I accused them of being gun shy and they are also red hot now. So the opposite of gun shy right now. And we have something to say in the industry and we're saying it. I think we -- I'll put myself in the operator at least bias which is somewhat a conflict with my operating finance boss. I think we've reached his tolerance level probably the end of this year for aggression when it comes to use of margin, really on both sides, which is on Hawthorne and on the consumer side, because generally when Mike and I come back from some place, we made a multi-deal to drive the business which Randy also kind of has a smile on his face, but I kind of -- I view it as something that will evaporate over time.
I think we have something to prove that this business will recover and we can show that, I think we have; that we can take share on Hawthorne, I think we have; and that we can develop the skill set in the professional horticulture market in cult jobs that partners will recognize us as a central to their business. I think we've done that and I think we're doing that on the consumer side as well. So, I think we're pushing Randy about as hard as we can. But all of us, including Chris, recognize that we're going to have to show some more profit discipline next year and beyond and we accept.
Randy Coleman -- Executive Vice President and Chief Financial Officer
Chris, the only thing I'd add is, Jim's taught me that once you've made the sale, it is nothing else to add. So, I want to thank him for representing me still while being through your question, so thank you.
Chris Carey -- Bank of America -- Analyst
Thank you for your answers.
Operator
We will now move on to our last question from Jason Rodgers of Great Lakes Review. Please go ahead, your line is open.
Jason Rodgers -- Great Lakes Review -- Analyst
Yes, thanks for taking the question. Just wanted to have a follow-up question on Hawthorne. You mentioned offering service packages with the durable and consumable sales. I was wondering what percent of Hawthrone sales are currently derived from service. Is there a recurring revenue opportunity here, just if you could provide some more information how services are bundled with that equipment sale with the large growers. Thanks.
Randy Coleman -- Executive Vice President and Chief Financial Officer
Yeah, so I probably should have phrased it differently. We have a tech services team that we deploy across pretty much the breadth of our business, really prioritizing our larger what we would consider kind of key accounts, particularly in Canada right now. It's not something that we've been charging for. I don't foresee us at least in the near term making that a revenue driver, it's more of a sales tool and it comes sort of bundled with using us as a supplier.
James Hagedorn -- Chief Executive Officer and Chairman of the Board
I wanted to just add how critical I think that is. This is a relatively new industry, particularly at the scale that you're talking about where customers like this in a single site could have tens of thousands of lights and they've got to combine that and grow the product that's of quality and predictable, all the stuff you'd expect and everybody's learning as they go. Our ability to step in as a major supplier with a highly professional tech support group that says, what's going on here, how can we help, what's not working. If you are one of the big LPs in Canada and something is not working, you need help and being a partner that can step in with experienced technical support, including R&D, sort of sales, lighting, et cetera, nutrients and say let's get them back up and running or solve a problem as quickly as possible and saying, it doesn't cost anything for that. All you got to do is buy our products. You buy our products, you'll get something that I don't think anybody else can offer for nothing. That's the model and this works right.
Randy Coleman -- Executive Vice President and Chief Financial Officer
Jason, this is Randy. I would just add, if you could meet the people that we have on this team, they are seasoned, they are knowledgeable and they are experienced, here to help, you become really impressed.
Jason Rodgers -- Great Lakes Review -- Analyst
Very good. Thank you
Operator
It appears there are no further questions at this time. I'd like to turn the conference to Mr. King for any additional or closing remarks.
Jim King -- Senior Vice President, Investor Relations & Corporate Affairs
All right. Thanks, John. That's all we've got today. If we've not gotten people's questions, please call me directly, that's 937-578-5622 and because we have not gotten enough plugs in yet this morning for John Anderson's conference, Randy and I would be there on June 6th to give you an update on where we stand year-to-date. Thanks for calling, everybody, and have a great day.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, you may now disconnect.
Duration: 77 minutes
Call participants:
Jim King -- Senior Vice President, Investor Relations & Corporate Affairs
James Hagedorn -- Chief Executive Officer and Chairman of the Board
Randy Coleman -- Executive Vice President and Chief Financial Officer
Bill Chappell -- SunTrust -- Analyst
Chris Hagedorn -- General Manager
Michael Lukemire -- President & Chief Operating Officer
Jon Andersen -- William Blair -- Analyst
Joe Altobello -- Raymond James -- Analyst
Unidentified Participant -- -- Analyst
Chris Carey -- Bank of America -- Analyst
Jason Rodgers -- Great Lakes Review -- Analyst
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