Hydroponic plant growing systems are on display in the weGrow marijuana cultivation supply store in Washington, D.C., in March 2012. (Alex Wong, Getty Images)

Scotts Miracle-Gro eyes global leadership position in hydroponics sector

As Scotts Miracle-Gro settles in on its play in hydroponics, it’s ratcheting down a buying spree and turning attention to integration and cost-saving.

The venerable lawn-and-garden company’s goal is simple:

“To become the best supplier of hydroponic growing products in the world to both the consumer and professional markets,” Scotts CEO Jim Hagedorn told analysts and investors Tuesday.

Scotts’ leap into an ancillary sector of the cannabis industry continues to bolster a top line pressured by a late start to the growing season and struggles among mass-market retailers, the Marysville, Ohio-based company noted Tuesday as part of its third-quarter earnings report.

“As we approach our third year on hydroponics, I think we are in a great place,” Hagedorn said during the company’s earnings call, referencing Hawthorne Gardening Co., the subsidiary that serves as the umbrella for the hydroponics businesses.

For the quarter, Scotts’ core business in the U.S. saw 5 percent sales growth, to $792.2 million. Comparatively, the “Other” category, which includes Hawthorne, recorded 36 percent sales growth to $192.6 million.

Although Hawthorne’s sales are not yet categorized independently in the earnings report — that’s expected to come next quarter — Hagedorn said the division saw sales growth of 146 percent for the quarter that ended July 1. For the nine months year-to-date the sales growth is hitting 160 percent, he said.

Those growth rates were largely influenced by the acquisitions of grow light company Gavita and nutrient maker Botanicare. Assuming Hawthorne owned those businesses this time last year, those growth rates would have settled in at 21 percent for the quarter and 15 percent year-to-date, he said.

For the company’s third quarter, Scotts made $152 million on $1.1 billion in revenue. A year earlier, Scotts had posted a net income of $213 million on $994 million.

Hawthorne’s product portfolio is in “pretty good shape,” Hagedorn said.

Two potential deals are on the near-term horizon — one that should land in the next couple of weeks, and the other in a couple of months — and there likely will be some tuck-in deals in the months following, he said.

The next step — integration — is something in which Scotts is well-versed, Hagedorn said.

“If you say what is the power of Hawthorne, it is not just that we bought a bunch of good brands with good (profit and loss positions), it’s converting that into the best supplier to a professional industry that I think has ever been seen, at least in this space,” he said. “And I think we know how to do that. Remember, we did this with our professional horticulture business and we’ve done it with our Scotts business.”

Scotts has made some headway on those actions in markets such as Canada, he added.