Despite expected sales decline, Scotts Miracle-Gro expands cannabis holdings

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Scotts Miracle-Gro said that first-quarter sales of its New York-based Hawthorne Gardening Co. hydroponic business are expected to decline about 40% because of a slowdown in the cannabis market and supply-chain disruptions.

Scotts noted the expected decline Tuesday while also announcing the acquisitions of two California-based companies to strengthen its cannabis-related business, Hawthorne: Luxx Lighting for $215 million and True Liberty Bags for $10 million.

Los Angeles-based Luxx is a leading provider of lighting systems for growers, while Sonoma County-based True Liberty provides liners and other storage solutions for dry and cure cannabis plants.

Scotts, headquartered in Ohio, pointed to supply issues that companies in a variety of industrial sectors have faced during the coronavirus pandemic and because of severe weather events.

Scotts didn’t detail the issues but said the disruptions have hampered sales of certain product lines.

“We are optimistic the supply chain disruptions we’ve experienced will be corrected by the end of January and we’ll be able to meet the continued demand we’re seeing for our industry-leading signature products,” Cory Miller, chief financial officer, said in the release.

Chris Hagedorn, Hawthorne division president, said the acquisitions reinforce the company’s commitment to provide additional products and solutions to cannabis cultivators in state-legal markets.

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Luxx alone is expected to add $100 million in sales on an annualized basis, according to Scotts, which plans to market and distribute the brand in emerging cannabis markets such as the East Coast.

“While the cannabis market continues to see near-term challenges from an over-production in recent months, we see the current reality as an opportunity to further distance ourselves from the competition and strengthen our business for long-term success,” Hagedorn said in the release.