GrowGeneration – The Home Depot of Cannabis

We learn how GrowGeneration is using acquisitions and organic growth to bring a new sense of scale to the burgeoning legal cannabis industry.

With 53 retail and distribution centres across the US, GrowGeneration is the largest chain of hydroponic garden suppliers in the country.

“We started the company in 2014 with the goal of rolling up a fragmented industry to serve the emerging cannabis market,” explains Michael Salaman, president and co-founder of GrowGeneration. “We could provide the best-in-class products, technology and services needed for growing indoors, which is what we chose to specialise in. With the emergence of legalisation in the US in states such as New York, New Jersey, and the emergence of this national, legal framework for the industry with tens or even hundreds of thousands of locations across the country, we have become the supply chain to service those growers.”

Since the company went public in late 2019 it has experienced tremendous growth, with 100% year-on-year growth, which is expected to accelerate as more states continue to legalise marijuana. But while legalisation is creating space for an exciting new industry, it’s one that requires very specialised knowledge.

“Our unique selling point is we are a one-stop-shop. It’s a very specialised curation that GrowGeneration offers, from the beginning of the harvest all the way through to trimming – the whole harvest cycle. You need an understanding of that harvest and growing process,” Salaman says. “We employ professional growers, we call them GrowPros, and they operate across various divisions of our company. They work primarily within our 53 garden centres, which will increase to over 100 coming out of 2022. The GrowPros provide a level of consultation to these growers. It depends on the type of grower, from hobbyist to new licensees. They can come to our locations and we’ll provide consultation.”

A New Industry

As well as bringing together a disparate selection of specialised knowledge, GrowGeneration is also bringing a sense of scale to an industry that has primarily consisted of smaller operations.

“We’re one of the few companies that have really scaled the ancillary side of the cannabis business into a national retail business,” Salaman tells us. “We have a commercial division that employs grow technicians, engineers, designers. We have benching and lighting and irrigation layouts that are much more sophisticated. Our centres have hundreds of thousands of square feet, and a B2B division on the larger commercial side, but what separates us is this very experienced team of growers driving us. Today we get over 100,000 walk-ins a month and over a million unique hits to our website. So we’re meeting the grower in different parts of the market through the multiple platforms we’ve built.”

As GrowGeneration is bringing a new kind of business into the market sector, it is adopting talent from old places.

“One of the interesting parts of GrowGeneration is if you look at its strategy here in the US, hydroponic garden centres have existed for many, many, years but have always been around in a very fragmented, individual mom and pop environment,” Salaman explains. “Nobody rolled the industry up and did what we did, which was buy the best-of-breed hydroponic operators as part of our acquisition strategy.”

This acquisition strategy isn’t just about growing the business, but about harnessing the enormous amount of expertise out there on the subject.

“We go into the market looking state-by-state, market-by-market for locations we can buy. In the more mature markets we can buy into them, in the new markets there really isn’t anything that exists of the size we’re looking for, so we’ll open up a new location,” Salaman says. “But through the strategy, we’re not only picking up revenue but also personnel. It’s hard to find people who have been in the hydroponic space for multiple years and understand the cannabis plant. So through the acquisition strategy, we’ve been able to pick up revenue and profits and individuals with tremendous expertise. We have built the largest army of GrowPros, operating under the umbrella of GrowGeneration.”

It is, as Salaman points out, a unique resource.

“You can’t duplicate that, and because we’re investing in the hydroponic space, looking beyond the US we’re able to find very experienced individuals who have been owner-operators who bring their staff and existing long-term relationships, but more importantly they understand the products,” he says.

On top of scale and expertise, GrowGeneration is bringing reliability and a strong supply chain to the industry, elements that will become increasingly vital as the market sector grows.

“We can deliver inventory just-in-time. We recognised very early on, the plants never sleep, they need to be fed,” Salaman points out. “We deliver same-day or next-day to all of our customers who rely on us from a supply chain perspective. We have the broadest selection of product in the US. Again, the service comes back to this large army of professional growers that are world-class from a knowledge and sales perspective.”

Of course, growth, especially rapid growth, brings challenges with it. GrowGeneration has gone from nothing to $400 million in an extremely short time. However, it has also managed to successfully integrate all of the businesses it has acquired.

“We’ve been able to integrate acquisitions flawlessly, open up stores flawlessly, and we can do that within 90 days of signing the lease on a new location,” says Salaman. “One thing I’m most proud of is when we buy a store and look at the results not on Day One, but a year from when we acquire it. GrowGeneration typically has 63% growth in the stores we have owned over a year. When we buy a new location, we’re adding value.”

It is a model that Salaman believes can potentially be taken worldwide.

“Right now there’s so much business here in the States but this is a global market. Cannabis will be legal across all countries,” he points out. “Certainly, Canada has already legalised, the US is on its way, Europe is moving in that direction. So we’re certainly looking at opportunities. Our point of view is we can be a supply chain for all growers wherever you are. If that’s here in the US, the Caribbean, South America, you’ll use the products we’ve curated and inventoried. The plant is the plant and it needs the nutrients and the additives and indoor control systems that we sell. Our model will cross country by country. We think we’ll see more multi-state operations start to look outside the US as well.”

Back in the US, GrowGeneration is set to continue its growth trajectory through its vertically integrated business model.

“That to us is the future for GrowGen, bringing that portfolio to be a vertically integrated solution for our customers,” says Salaman. “That’s what separates GrowGen. We’re not just looking to sell products everyone else is selling, we really are a solution provider. We’re providing customers products that have proven to be sustainable, reliable, and high quality – and can deliver the highest return on their investment.”

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