California’s slow adoption of marijuana rules hampering Scotts Miracle-Gro sales

A slow start to implementing regulations for California’s recreational marijuana program has impeded sales of Scotts Miracle-Gro’s hydroponics division this year.

Several factors have contributed to the Golden State’s sluggish cannabis rollout, including:

  • A majority of localities are dragging their feet on developing rules.
  • A slow conversion of the gray market to the legal sector.
  • Uncertainty among retailers in securing a steady supply chain from producers.

Scotts CEO James Hagedorn expects the company’s hydroponics subsidiary – Hawthorne Gardening, which serves marijuana cultivators – to experience flat sales or even a falloff, according to Columbus (Ohio) Business First.

Hagedorn sees a silver lining, however, and predicts the problems will work themselves out.

“It’s sort of a pain in the ass,” Hagedorn told the publication, “but it’s what needs to happen as the country moves toward normalization of this product.”

Here’s what you need to know:

  • Despite slowing sales, Hawthorne Gardening still accounted for a 7% sales increase to $221.5 million for the quarter ending Dec. 31.
  • Revenue for Scott’s mainstream gardening lines was stagnant compared to 2016, but acquisitions drove a 20% increase to $76.7 million. Without the acquisitions, the division’s sales declined, according to Business First.
  • Scotts, which trades on the New York Stock Exchange as SMG, has built up Hawthorne by acquiring companies that supply equipment for indoor cultivation.
  • In September 2017, Scotts jettisoned its overseas business interests to focus more capital on the U.S. cannabis industry.

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