The big boys are moving in position to co-opt and control the exploding cannabis market. Get ready for K-Mart GMO cannabis and Certified Organic cannabis….kinda sounds like food doesn’t it?
Scotts Miracle-Gro’s bold plans to bolster its presence in marijuana has divided industry professionals, the latest sign that Corporate America is poised to reshape cannabis. Some see it as a promising development that will push the cannabis industry forward, while others fear it represents the start of the eventual corporatization of marijuana.
Many growers are also opposed to the company’s chemical-based products, saying they have no place in the marijuana industry. The iconic lawn and garden company’s CEO, Jim Hagedorn, last week disclosed his desire to pump half a billion dollars into the cannabis sector. His comments follow on the heels of news that software giant Microsoft Corp. and Arrow Electronics, another Fortune 150 company, have teamed with marijuana-related firms to provide services and products. Signs have also emerged recently that tech titan Google is eyeing the marijuana industry as well.
Those in Favor
James Lowe – president of cultivation at MJardin, a Denver consultancy specializing in cannabis cultivation – contends that Scotts Miracle-Gro’s presence will give the industry a shot in the arm. He and others view it as another sign that marijuana is gaining legitimacy, believing the company could help improve the industry’s overall standards through research and testing. “Any time a large, well-known company gets involved with any business, but especially cannabis, you see more tested and legitimate products come into the market,” Lowe said.
“That’s been a problem in the cannabis industry,” he added. “You get unlabeled or mislabeled fertilizers. You get people that are making false claims and claims that can’t be verified. When the Miracle-Gros of the world come into the industry, they stay away from the snake oil. They will help set standards for the industry.”
Another camp is critical, however. These cannabis professionals say that Scotts Miracle-Gro – an Ohio-based supplier of grass seed, fertilizers, pesticides and dirt dating back nearly 150 years – is just a big company with mediocre products that won’t usher in any special benefits to the industry.
They also single out the company’s chemical fertilizers and pesticides, which include the Osmocote and Ortho brands, saying they violate the spirit and soul of cannabis cultivation. “I don’t believe there to be any added legitimacy to cultivators due to Scotts Miracle-Gro jumping into the industry,” said Tim Shaw, a marijuana cultivation expert and senior vice president at MariMed Advisors, a Massachusetts cannabis consulting firm.
“Most cannabis cultivators would agree they would never use a Miracle-Gro-type product on their crop. It is another sign that big corporations are beginning to get involved in the cannabis industry.” Scotts Miracle-Gro didn’t respond to repeated requests for comment.
In 2011, the company’s Hagedorn told the Wall Street Journal he intended to invest in the medical marijuana market, making him the first CEO of a major publicly traded company to say that he planned to capitalize on opportunities in the medical marijuana market. Last year, Scotts Miracle-Gro subsidiary Hawthorne Gardening acquired General Hydroponics in California and a sister company for $135 million, and this year dropped $120 million for a 75% stake in an undisclosed hydroponics equipment company in Amsterdam.
Hagedorn told Forbes he plans to spend another $150 million on the cannabis space before the end of the year. “It’s the biggest thing I’ve seen in lawn and garden,” Hagedorn said of marijuana. His intention, he told Forbes: “Invest, like, half a billion dollars.”
Shaw of MariMed Advisors, who also owns Green Matters, a chain of three garden stores in Massachusetts that specialize in hydroponics equipment, clearly isn’t the only industry official dubious about Scotts Miracle-Gro’s cannabis investments. The company’s affiliation with chemical fertilizers and pesticides is a red flag for some.
“Once Scotts bought General Hydroponics, my customer base that was using their products decided to switch to a different nutrient company,” Shaw said. “I think this is due to the perception of Miracle Gro being a chemical fertilizer, and the vast majority of people involved in this industry are more aware of what they consume, and look for a more natural alternative. This could have negative effects to the companies that partner with Scotts.”
According to Forbes, General Hydroponics and its sister company Vermicrop have increased their sales by 20% since being bought by Hawthorne Gardening – about quadruple the growth rate of the rest of Scotts.
Raking It In
On the question of what motivated Hagedorn’s big wager on the industry, Shaw and Lowe share similar views. “Scotts sees a huge opportunity for a new revenue stream with this growing industry,” Shaw said. “Knowing that the federal laws keep the major money out of the industry, this is prime time for them to capitalize.”
Lowe chalks it up to “the slow legalization” of cannabis. “They won’t be the last. I hope we’ll see more investments that are far larger than $500 million,” he added.