COLUMBUS, Ohio (COLUMBUS BUSINESS FIRST)–Scotts Miracle-Gro Co. continues to shore up its dominance in suppliers to the cannabis industry despite supply chain disruptions affecting sales.
The Marysville lawn and garden company has acquired Luxx Lighting Co. for $215 million and Liberty Bags, which makes liners for drying and curing plants, for $10 million.
They join its Hawthorne Gardening Co. subsidiary, which supplies the cannabis industry and other horticulture, which Scotts (NYSE:SMG) built through more than $1 billion in acquisitions since 2014.
“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,” Hawthorne President Chris Hagedorn said in a news release.
Luxx, based in suburban Los Angeles, joins a portfolio of Hawthorne indoor grow light brands including Gavita and Sun System. Scotts can extend Luxx marketing and distribution to the East Coast. The acquisition adds about $20 million profit on $100 million sales annually.
Hagedorn said the company will announce “significant cost synergies” and process improvements for lighting in coming weeks. The company will announce its first-quarter results Feb. 1.
True Liberty, based north of San Francisco, makes nylon food-grade bags and bin liners. Besides the cannabis industry, which uses it for curing, storage, and transportation, it sells to other industries and makes commercial products from roasting bags to baby products.
Hawthorne made two other acquisitions last summer, including a water reclamation and purification company and maker of horticultural fertilizers.
Meanwhile, Scotts projects that Hawthorne’s sales for the first quarter that ended Jan. 1 will come in 40% lower than the same period last year, worse than expected, but it expects recovery over the year as supply chain issues resolve. Pre-orders are up, the company said, so it expects the full-year sales for the division as flat to a 10% decline from fiscal 2021.
There are several disruptions in the industry even as more states legalize sales. California growers and dispensaries sent a letter last month to Gov. Gavin Newsom warning that they are near a “breaking point” due to high taxes and a shortage of retail outlets making it difficult to compete with prices in the illicit market, according to sister publication Silicon Valley Business Journal.
Scotts also is expecting a decline in its much larger consumer gardening supply and live plant division, but that’s because of a record sales surge last winter leading into a record year. Usually, the first quarter is the slowest for Scotts, but last year it posted its first-ever profitable winter.
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