Scotts Miracle-Gro helps cannabis producers miracle grow pot: a tale of two hustles
When the weed killer is also the weed grower... The green thumb takes on a new meaning. Scotts Miracle Gro stock is up 84% since mid-March, when the lockdown-driven home makeover frenzy took hold. Since decking out the house extends to the yard, Scotts' lawn/garden care sales have surged (pesticides are the rosé of summer gardening):
- Scotts' Miracle-Gro announced that plant soil/food sales surged almost 40% in May on pimp-yo-lawn love.
- Then it boosted its 2020 US sales forecast from 7% pre-coronavirus to 16%-18% after. That's largely thanks to its interesting side hustle...
Side hustle smokes the main hustle... A few years ago, Scotts decided it wanted a piece of the cannabis market (minus the cannabis). Enter...
- Hydroponic systems: Tools for growing plants with nutrient-infused water instead of soil. Hydroponics are used by cannabis-growers to control pot production/quality — so Scotts went ham and acquired 50 hydroponics-related brands. Now...
- Scotts hydroponics-focused Hawthorne division is a market leader and drives growth for all of Scotts.
- Sales high: Hawthorne's sales nearly doubled in 2019, jumped 51% in just the last quarter, and are expected to grow another 45%-50% in 2020.
In the cannabis gold rush, you can be a miner or a shovel-maker... Cannabis producers are the "miners" who take the biggest risk: their success depends on striking gold (cannabis sales). Scotts makes the "shovels". They get a smaller upside with less risk, but enjoy more consistent success along the way — as long as there's still a rush.