The Ohio-based Scotts Miracle-Gro Company ($SMG) makes lawn and garden products. They’re known especially for their namesake Miracle-Gro plant food. Millions of homeowners use their products in the U.S. and around the world, and every major home improvement store carries them.
According to those in the know, Miracle-Gro’s products are particularly awful for cultivating and growing marijuana. Most marijuana growing operations use hydroponic systems, which sees plants grown in high-tech, soil free solutions. For the longest time, Scotts did not sell hydroponic products and lost out on a budding market.
Realizing they were missing out on potential revenue, Scotts recently changed up their business a bit. Not only did they invest millions in hydroponics, but anything and everything pertaining to legal weed.
Marijuana is a business, and business is good.
The legal and medical marijuana industry in the United States is worth billions, and the legal grow houses make up a sizable percentage of the business. Growing operations in numerous states grow and ship metric tons of weed to distributors, labs, and anywhere one can legally procure pot. These businesses spend millions on everything from materials needed to grow plants to automated growing machines, heavy-duty farming equipment, and other high-tech appliances to efficiently create product.
Thanks to recent legalization efforts, there are countless companies in the weed-growing appliance space. For instance, a company called Leaf builds WiFi-enabled growing monitors that let anyone check on their cannabis plants remotely. iGrow, an Ohio company, makes induction light bulbs specifically for grow houses. Leaf, a “smart fridge,” enables “hobbyists” to grow their own plants within the span of three months. If there’s a function necessary for growers and consumers, you can bet there are several companies competing for their dollar.
Enter Scotts Miracle-Gro.
Scotts didn’t want to start their own marijuana-based subsidiaries from scratch, especially when hundreds of companies are already competing in a booming market. Instead, Scotts invested nearly half a billion into weed-focused startups. Starting in 2015, the company purchased General Hydroponics and Vermicrop organics under the newly formed Hawthorne Gardening subsidiary. They also bought everything from lighting companies to WiFi-connected sprinkler systems to further their reach into the “urban gardening” market.
These investments are a mixed blessing. They’re terrible news for independent companies in the marijuana industry, as their competitors now have the financial muscle of a multi-billion-dollar lawn-care company. For Scotts’ investors, they’ve been one of the reasons why the company’s stock performed so well in the last two years. Consumers don’t see an effect at all, but if Scotts corners the market on growing supplies and jacks up the price for their products, the cost increase could eventually be passed onto weed enthusiasts nationwide.
Should you invest in The Scotts Miracle-Gro Company?
The company’s portfolio of marijuana-centric investments is only growing. Scotts will likely make future investments in other key startups and fold them into Hawthorne Gardening. If you think these investments will continue to help the company grow as the legal marijuana market grows, be sure to do your research before you put any money into the company. If you think the future of legal weed could be shaken up by the current administration, you might want to invest elsewhere.