Scotts Miracle-Gro Invests In Cannabis Cultivation
Scotts Miracle-Gro CEO Jim Hagedorn is a former pilot who still commutes to work by flying his plane. Now he’s hoping for his cannabis cultivation investments to “take off.” Hagedorn was responsible for the successful merger of Scotts and Miracle-gro in 2001, only six years after taking over as CEO.
The merger resulted in an 80% boost in revenue from 2001 to 2009, closing in on companies like Home Depot and Lowe’s. However, the recession hit and the companies recent growth was halted and has remained stagnant ever since. This is what led the CEO to look for alternative ways to increase profit margins.
One day in 2013, Miracle-Gro’s CEO Jim Hagedorn entered a garden center in Yakima, Walsh. He noticed there were almost no Scotts products in stock but “there was a massive row of equipment for hydroponics,” Hagedorn told Forbes.
He asked an employee to speak to the store owner who explained to him that people called him an idiot for bringing hydroponic equipment into his store, but it was a big hit.
In fact, he told Hagedorn receipts for hydroponic equipment were averaging $400 cash, a stark difference from what was happening with Scotts products in a nearby Home Depot. After this experience, he returned to company headquarters and announced to everyone.
“We’re doing it, if you don’t like it, leave. It’s beyond stopping. And we’re not getting into pot growing. We’re talking dirt, fertilizer, pesticides, growing systems, lights. You know it’s a multi-billion dollar business, and we’ve got no growth in our core. Are you guys stupid?” Hagedorn went on to fire half of his management and took a gamble on pot growers.
With $135 million invested into two California-based businesses that supply accessories for pot growing last year alone, it’s apparent Hagedorn is serious about the potential he sees in the cannabis market.
He also invested $120 million into a lighting and hydroponics company based in Amsterdam, and he promises to spend another $150 million into the industry by the end of the year.
So far one of the companies purchased by Scotts Miracle-Gro in 2015 is already bringing in revenue and growing quicker than any of Scotts Miracle-Gro non-cannabis related ventures.
General Hydroponics and its sister company, Vermicrop, raked in $50 million of revenue since Scotts decision to acquire them last year.
Both companies have seen a 20% increase in sales which is four times higher growth rate than the rest of Scotts. Profits from the core business have also been up 50% since Hagedorn fired more than half of his management.
Scotts Miracle-Gro shares went up 13% since last year so Hagedorn may be onto something with his ventures into cannabis capitalism. And with a big company like Scotts Miracle-Gro diving into the cannabis industry, how long until your local Home Depot has an aisle dedicated to cannabis cultivation?