Scotts Miracle-Gro is hiking its holdings in hydroponics.
The lawn-and-garden giant — helmed by a CEO who sees legal marijuana as a billion-dollar opportunity — shelled out $136 million for Gavita, a Dutch grow lighting and hardware company, and on Monday inked a deal to buy Arizona-based Botanicare, a plant nutrient and hydroponics products provider that notched about $40 million in sales, Scotts Miracle-Gro officials said Wednesday.
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Scotts Miracle-Gro, mostly via its subsidiary Hawthorne Gardening Co., has been making some big plays in the hydroponics industry in recent years, including investing in companies such as Boulder’s AeroGrow indoor gardening company. The $130 million buyout last year of California’s General Hydroponics was the company’s largest acquisition in 16 years, according to Columbus Business First, which reported the Gavita and Botanicare deals on Wednesday.
CEO Jim Hagedorn has been vocal about the potential he sees in the burgeoning cannabis industry, and on Wednesday he reiterated that hydroponics simply makes good business sense.
“I think we have a good vision on where we want to go with it that doesn’t freak out my board or my lawyers. And I’m really pleased with that,” Hagedorn said to investors Wednesday, according to a Bloomberg earnings call transcript. “But I think it’s both. I think it’s both we have ideas on how we can be good stewards of these businesses and really become essential partners to the community of people who use these products, one.
“And two, just take advantage of something that’s high margin, high growth.”
Scotts Miracle-Gro’s legacy business — the soils, the weed-and-feeds, the plant foods — had a “decent” but not a great season, Hagedorn said.
Alternatively, Hawthorne — the seller of hydroponics equipment, the “gritty” Black Magic brand and organic soil made from food waste — has recorded a sales spike of 300 percent from last year, seen its General Hydroponics brand at a consistent 20 percent, and was well on pace to surpass $250 million in sales, he said.
And the “medicinal laws that are sort of taking place in the United States” should only enhance that growth, he said, referencing the Marysville-based company’s home state of Ohio, which in June legalized medical marijuana.
Once the Botanicare deal is done, Hawthorne likely will pull back from any major transactions in the hydroponics space, he said, adding that his firms’ approaches will be to funnel in support for sales, research and development and supply chain to help provide “a little bit more of a professional bent.”
Hagedorn also said he knows that his company is an outsider in this tight-knit business, a space that is more West Coast, urban and rural than suburbia. He took a minute during Wednesday’s call to try to allay concerns among hydroponics retailers and growers, according to the transcript:
“So, to our new friends in the hydroponics space, I want you to know that we take seriously our responsibility as the industry leader. And since we are an outsider, I know a lot of people will be watching to see how we behave.
“We’ve done more than just assemble a portfolio of the best brands within the various industry categories. Along the way, we have also assembled a great array of talent, entrepreneurs who’ve built strong companies from the ground floor. The goal was not simply to buy their businesses. The goal, in fact, the obligation is to make them better. Whether it’s through innovation, new products, improved technical support, improved packaging, or registered control products, our job is to be great stewards of these brands and partners with this industry.”
Scotts Miracle-Gro officials were not available Thursday for comment.