06 Aug 2016

Marijuana Acquisitions Are Big Business

06 Aug 2016

This week, Scotts Miracle-Gro (SMG) purchased Botanicare, an Arizona-based provider of marijuana nutrient and hydroponics products. If you’re a business owner in the cannabis industry, note:

  • Botanicare’s sales price: $40 million
  • SMG stock price: continues to hit its 52-week high (post announcement)
  • SMG stock price: gained nearly $10/share in under a week since its announcement
  • JP Morgan stock analyst: raised SMG’s target stock price by more than 20% and upgraded the stock to “overweight” from “neutral” on the news

marijuana acquisitions Botanicare

And apparently, $40 million is just the tip of the iceberg.

Last year, SMG spent $135 million on two California-based businesses that sell fertilizers, soils and accessories to pot growers. It’s also reported that the company’s dropped another $120 million on a still-undisclosed lighting and hydroponics equipment company in Amsterdam and promises to invest about another $150 million by the end of 2016.

According to SMG’s CEO Jim Hagedorn, he wants to “invest, like, half a billion dollars” in the marijuana industry. “It is the biggest thing I’ve ever seen in lawn and garden.”

However you feel about the entrée of corporate behemoths into this industry, they’re coming. Today, it’s ancillary business lines (like Botanicare or Microsoft’s seed-to-sale software partnership with KIND financial), but little-p pharma is putting its toe in the (bong) water. Walgreen’s “Stay Well” Tumblr blog recently espoused the benefits of medical marijuana.

Nearly 60% of Americans support marijuana legalization, according to last year’s Gallup poll, with 71% of respondents ages 18 to 34 supporting legalization. A number of states are slated to vote on legalization ballot initiatives in November — including Florida, Ohio and California, which is deciding on recreational legalization. If the California ballot initiative passes, the state would become one of the largest legal marijuana markets in the world.

We will see more and more local businesses being acquired by larger players. Whether you want to sell to or compete with these larger enterprises requires business planning and a marketing strategy that can help you either way. Let us know if we can help you with that.

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