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.