GrowGeneration Corp. recently announced its acquisition of Downriver Hydroponics, a Michigan-based indoor garden supply center. The headline news was the latest in a long string of garden supply center acquisitions that has seen GrowGen stake a growing claim to the market segment.
It was the ninth acquisition for GrowGren this year alone, and an opportunity that the company took to raise its 2021 revenue guidance to $415-$430 million.
CEO Darren Lampert spoke with Cannabis Business Times about the company’s acquisition spree, noting that these transactions have been a pillar of the company’s growth. GrowGen has targeted “best-in-breed” supply centers that mesh with the company’s outlook and corporate culture.
He said this growth is a symptom of a maturing cannabis industry, even while a hefty portion of the business still involves hemp, fruits and vegetables. A wave of legalization is sweeping across the U.S., and cultivation resource needs are increasing. Budgets are increasing, too.
“In order to properly represent these big, large grows around the country, you need stores that can handle it," he said. "The product mix is enormous. We carry 10,000 SKUs, usually at least 3,000 SKUs in our stores. You need distribution. The big growers are just too large—the multi-state operators, the single-state operators. So, we saw this evolution. We saw the sea change switch. And what GrowGen did was we started small.”
The company began with four stores in Pueblo, Colo.: 2,000 square feet apiece, $1 million in business. By 2018, GrowGen was pulling in $30 million in annual business, still a far cry from the latest 2021 guidance.
Now: GrowGen is in 11 states, with more than 50 stores supplying some of the largest cannabis businesses in the U.S. market, like Cresco Labs, GTI and Trulieve, along with many single-state operators and even smaller outfits, all comprising a customer base that totals some 2,000 licensed cannabis businesses. The business employs more than 500 “grow pros”—each of whom knows how to grow a cannabis plant, Lampert said.
GrowGen plans to have 55 to 60 stores in 15 states open by the end of the year.
“And we do believe we're just getting going,” Lampert said.
The company’s acquisition strategy is a big part of that. Not only has GrowGen secured existing commercial enterprises, but the company is also adding talented workers to its own employee base.
“When I look at GrowGen as a whole, the most important part of GrowGen is certainly our staff of growers,” Lampert said. “We’ve done a tremendous job integrating that part GrowGen into the executive part of GrowGen. Every one of our employees can read a balance sheet right now—and an income statement—and also our executives know how to grow. So, it's been a wonderful learning experience in a lot of ways, but when looking at acquisitions, it's understanding balance sheets and income statements, which is a must in each and every acquisition we do, but it's also understanding the customer base.”
To understand the customer base, Lampert said, one key is understanding that staffers who had been servicing that customer base. It’s the integration of personnel—from the floor on up to management—that forms the basis of a successful acquisition, he said. It comes down to culture. And while this is a common theme that emerges from most acquisition deals in the rapidly evolving cannabis space, it’s certainly a key ingredient when working with a range of businesses in the space (as well as at-home growers in certain states).
