As the legal cannabis market continues to evolve into a national, multibillion-dollar industry, it only makes sense that larger, well-known corporations would move into the space.
Among those that were first to recognize the potential of the marijuana market was gardening company Scotts Miracle-Gro, which has been buying up companies associated with cannabis growing for years as part of its Hawthorne Gardening division. In April, Scotts Miracle-Gro made one of its most significant purchases, buying Sunlight Supply, the No. 1 distributor of hydroponic supplies in the United States, at a cost of $450 million.
The company’s growing web of cannabis-adjacent brands, including General Hydroponics, Can-Filters, Botanicare, Gavita and Titan Controls — along with its connections to agri-giant Monsanto — have made it one of the most controversial businesses in the marijuana space.
Marijuana Venture recently caught up with Hawthorne general manager Chris Hagedorn to talk about the cannabis industry and Scotts Miracle-Gro’s place in it.
Marijuana Venture: Some of your competitors and other people in the industry have made negative comments about how the Hawthorne/Scotts Miracle-Gro connection is bad for the industry. What do you say to those who would brand you as a big, greedy company?
Chris Hagedorn: I’d tell them to take a closer look at what we’re doing and not believe everything they hear. Here are the facts: Nobody has invested more in the hydro industry than us. That isn’t greed, it’s smart.
We’ve made these investments based on a forward-looking view of the business, our retailers, vendors and, most importantly, our consumers — the growers. This industry is rapidly changing and the future will look even more different. Anyone who believes that’s not true is simply kidding themselves.
What we’re trying to do is show leadership and not be victims of the marketplace. That’s why we are establishing a cannabis-specific research and development facility in Canada and why we’ve committed to investing in improving the technical expertise of our sales force. We’re investing to drive this industry to a level it’s never seen before. That’s smart business. While there may be a few loud voices out there who are threatened by what we’re doing, most of the industry seems to have embraced us and what we can bring to the party.
MV: “Big Mike” Straumietis, the CEO of Advanced Nutrients, seems to be especially vocal when it comes to criticism. Are his words justified?
CH: I’ve never met the man, so I’m hesitant to weigh in too much. I’ll say this: As a competitor and a big personality, it’s not surprising that he’d be a vocal critic. I have no issue with run-of-the-mill competition, but I do take issue with people saying things that are untrue. Beyond that, I guess I’d just refer you to the above answer.
MV: How has the landscape changed for your business in the last couple of years?
CH: We’ve changed our business, both by continued acquisitions and functional changes we’ve made, and at the same time, the industry has changed significantly. We see a shift away from caretaker-style growing to larger, commercial operations. That shift has forced us to start evolving our product lines to effectively cater to this new kind of grower while continuing to service smaller growers.
MV: Are you rethinking some of your strategies and goals?
CH: Our overarching goal has always been to be the best, most complete supplier to the hydroponic grower in the world. That has never changed. Some of the strategies we’ll utilize to achieve that goal have shifted in response to the industry growing and changing — as I said earlier, bringing products to market that cater to the larger growers, controlling our distribution network, etc.
MV: What mistakes do you see growers making when they jump into this business?
CH: The biggest thing I’ve seen lately is the oversupply of cannabis in key markets in the Pacific Northwest. Before someone decides to set up a grow, they should take a hard look at the market in their area to understand if that market needs them. Is there an undersupply? Is there high-quality flower/extract available already? Are there underserved neighborhoods? I don’t think enough folks asked themselves those kinds of questions before getting started.
MV: How is cannabis different from other forms of agriculture? Are cultivators facing the same challenges they face in other similar businesses, like tomatoes or roses?
CH: It is a plant, so there are plenty of similarities to other ag/hort businesses, but there are many other things that make cannabis totally unique. The plant itself is unlike any other — what it needs and how it grows, as well as what it means to people. The closest analogy I can think of is wine grapes, but that isn’t perfect either.
The other thing, obviously, is its current legal status. The challenges that creates are massive, affecting everything from taxes (many of our consumers pay up to an 80% effective tax rate, which is insanity) to the ability to have normal banking relationships. And all of that is minor, relative to the fact that our consumers have been locked up (and still are occasionally) over what they grow. I don’t know any tomato growers who’ve been put in that position.
As in any emerging industry, some stuff is working and some stuff is not, but the level of complexity is higher here than in any other ag segment I can think of.
MV: Are you seeing different strategies and approaches in different states? Are growers in Colorado doing things differently than growers in Washington or other states? How does that affect your strategies and sales approach?
CH: The prohibition on interstate commerce has absolutely created unique approaches in different states. The size and style of grows depends a great deal on what regulations states, towns and counties put in place. In addition to that, some areas are suited to outdoor growing and some are not. All of that (and a ton more) influence the way growers run their businesses, which flows upstream to us.
MV: What do you think of greenhouses as a business model for growers?
CH: Greenhouse growing is a significant part of the industry now and I don’t see that changing. In fact, with well-built, light-deprivation greenhouses giving growers a lot of the control/precision of an indoor grow with significantly lower energy consumption, I see it becoming the most prevalent form of growing.
MV: Wholesale prices for marijuana is at an all-time low right now. Do you think the price will rebound?
CH: Disclaimer: this depends a ton on where you are. I do believe prices will rebound to an extent, but they may never reach the heights we saw over the past few years.
That said, there is going to be some stratification of the cannabis market. Some growers will find success selling lower-cost, lower-quality product to consumers who are either more cost conscious or less quality conscious. Other growers will thrive growing smaller amounts of high-quality cannabis at a higher cost. In this respect, I look at the beer market, in which your mass-produced lite beer sells by the millions, yet there still exists an extremely robust craft or artisanal market.
MV: What would you tell a grower who is struggling to stay afloat?
CH: It’s no secret that times are tough right now. We’ve bet heavily that the national market will turn around, but if it doesn’t soon, some folks could be in trouble.
This interview has been edited for length and clarity.