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The Largest Vertically Integrated Cannabis Manufacturer

The largest vertically integrated cannabis manufacturer with Chris Hagedorn of Hawthorne Gardening. Hawthorne Gardening is the largest vertically integrated cannabis manufacturer, direct seller and service provider dedicated to servicing North America’s licensed producers and hydroponics retail industry. Chris Hagedorn has been on a mega shopping spree. As general manager of Hawthorne Gardening, Scotts Miracle-Gro’s hydroponics subsidiary for cannabis growers, Hagedorn has been instrumental in acquiring several major brands. On his watch, Hawthorne has spent approximately $1 billion snapping up Sunlight Supply, General Hydroponics, Botanicare, Gavita Horticulture Lighting, and other businesses.

They speak about the science of cultivation, especially cultivating a product that is consumed by humans. Since there are some regulations in place, they go through his thoughts around responsibly growing products that consumers put into their bodies, usually as a wellness product. As well as the burdens of companies who may be pulling in high revenue but still don’t really make a profit. it’s clearly a symptom of the failed war on drugs and prohibition-era thinking, and it’s hurting the legally regulated cannabis industry.

 

Transcription:

 

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Hi, thanks for tuning into another episode of NCIA’s cannabis industry voice on Cannabis Radio, I’m your host Bethany Moore, on the communications Project Manager at the National cannabis industry association. I’m happy to welcome my guest today. It’s Chris Hagedorn of Hawthorne gardening author gardening is the world’s largest vertically integrated manufacturer direct seller and service provider dedicated to servicing North America’s licensed producers, and hydroponics retail industry. Welcome to the show, Chris.

Thanks for having me, it’s good to be here.

Good to have you as well. Let’s start off by getting to know you a little bit better learning about your background and what kind of experiences you may have had before finding yourself where you are now serving this exciting cannabis industry.

Yeah, for sure. Okay, so, started off and really I was born into the gardening business. So, just quick, quick background on me and my family. So my grandfather Harris started “Miracle Grow” writing, he poaching on New York. Where I’m more… I’m currently based and live back in the 1950s. The business grew and evolved in the mid-90s, my father Jim took the business over and merged it with a company called a Scotts company which is based out in marries Bohai where they’ve been for 50 years, and I was actually… This is the 150 anniversary in the business, so we merged with them in ’95 And Scotts Mariacle has been our family’s business since then. So again, grew up around the gardening business, in having in my blood, third-generation and it’s me and some other family members. Now, it’s still work here, so we see it as a family business now still it’s gotten a little bigger than it used to be, but grew up around it and always had a passion for it. Didn’t work directly in it. Come at a college, worked in advertising and some other things to try to find myself, but ultimately, ultimately found myself in coming home to the family biz. I was about 20-11 and…

Gotcha, excellent. I really love hearing about the family business aspect even though you said it’s gotten much bigger, by now, but it’s wonderful to hear a family for decades having a business, thriving and being able to make it work. So, thanks for sharing that background for sure. So do you personally love to garden? Do you have a lot of greenery in your backyard at home that I do?

Yeah, so my wife and I, we have two young boys, we got a 40-year-old and a two-year-old, so we’ve tried to raise them, are on plants and gardening. So obviously in new era we can’t have Canvas. France grown at home, which is a shame and I look forward to when that changes to decorative. They’re very pretty.

I’ve heard but I also heard that the local law enforcement look wouldn’t look kindly on us having a nice decorative cannabis plant. So were gonna hold off the time being… So yeah, we’ve got a bunch of herbs that sort of thing. Grown right on our patios we can go pick those we’re cooking and then got raised beds with we’re out there yesterday, watering ’cause it’s been just hot as hell recently, so we’ve got same on a broccoli and we’re doing PEs this year we’re doing some melons this year for the boys, so we’re trying to do some different stuff, and obviously some corn and tomatoes that kind of thing, going.

Yeah, so it’s a fun time, year ’cause I start getting the point. We can start actually harvesting stuff.

Oh, I love it, that’s amazing. Yeah, the last couple of conferences NCIA has held we’ve been able to bring some hemp plants in just for decorative touches and we’re always tickled about it even though they’re just ten plants, but still… So actually, you mentioned it. We got a house up in Vermont we’ve got a farm up there, we run a foundation on… But anyway, that’s a story front other day. But on the farm, we’ve started growing him there just to see if gonna offset some of the cost of running the foundation up there by selling by song to him. So this is our first summer. It’s just out in a feel we’re gonna see how it does, but it is interesting going up there and saying, “Holy crap. There’s three acres of hemp plans. ’cause obviously they look just like the real thing.

Sure thing, yes.

So it’s all interesting. We have a board meeting coming up, actually a Scotts board meeting on Friday so that will be at the farm with the backdrop of the field of him, so we’ll see how that goes.

Not too shabby cool, yeah well, thanks for sharing all that as well. So, gardening is one thing, but getting involved in the cannabis industry and the cannabis movement before there was an industry it means there’s a lot of challenges. There’s federal prohibition to deal with. We’re still on a state-by-state kind of thing. So how did you and your company get involved in cannabis? It had to have been a risky move to think about expanding into because of the compliance, the regulations, and the risk.

Sure, yeah, it was definitely, I think it seemed more controversial that than, it does now, looking back on it, but yeah, this is something that that we as a company been looking at for about 10 years now, I think… Actually I think it might have been closer to 12 years at this point. So my father Jim who’s the Chairman CEO of Scotts medical company, so I report to a guy that reports to him, he first talked about this on a Wall Street Journal interview back in I think 2007, 2009 saying There’s no reason we wouldn’t be in this space as people, grown plants. And what we’ve done for 15 years is help people reliance as best they can.

So I don’t see why we avoided it. Now at the time, the our board of directors and a lot of our investors and just consumers at large didn’t like the idea, so we, we didn’t pursue it, but as public perception changed as we changed the composition of our board a little bit, the resistance, I lightened up and when we went back and looked in 2013 and then 2014, we saw some pretty free opportunity. Now, there’s the business opportunity which is a big part of the practices in this category when we saw a bunch of really innovative, really interesting, small family-run businesses that were all at this inflection point where typically the founders had gotten a little bit older, they’ve been in the business for some time, flat or our first acquisition, which was general hydroponics, back in 2014, Larry Brook who founded that business who’ve been running it the entire time he was in his mid-60s wanted to retire, take some money off the table. So we found that that was a really good time for us to have the conversations they look… And this business off and we can help take this into the next generation. Take the legacy you’ve created an honor it. So the timing worked out well for us, but obviously this is something that… It wasn’t just Ottawa with the angels, so, it, it was something that my family something we were pretty passionate about as consumers, frankly? And just seeing as advocate seeing how important this just wanted to consumed recreationally. So I think our business interest lined up with our personal interests and passions in a way that I am super dreadful for. ’cause you don’t see it happen that often. So again, business opportunity met personal passion.

I think the perfect time, both for the maturation, the businesses, we want to acquire a and just the industry as a whole becoming a little bit more widely accepted by the mainstream.

Got it. Yeah, that makes sense, awesome, well, we’re glad to have you for sure.

So let’s fast forward to present day. You’re working at Hawthorne gardening. Tell me more about where the company is at right now and your role there and what you’re up to these days.

Alright, for sure, yeah. So look, you’ve already said it at the top.

Oh, we were the… Were the single largest supplier and partner to the cannabis grower and we strive to be that partner. Whether you got two plants or you got 200,000 plants up in Canada.

We wanna help people grow plants as efficiently as they can get as much joy out of it as they can then hopefully end up with the best possible product at the end, again whether that’s for themselves or for sale.

So to do that, we sell everything from lights to plant foods and nutrients to HAC. Equipment to motor action, and hear it up with what we call our technical services team which is just a bunch of really smart plant people, whether they’re lighting experts, or plant biologists or nutrient experts just to help people and those guys are typically utilized more by our commercial customers just to help make sure all the equipment is set up properly, the grows optimized if they have any issues will help diagnose and fix some kind of keep on for careers. So isn’t at operate globally. We’ve gotten pretty big at this point, we’ve done largely through acquisition at this point, we’re integrating all those different businesses, we bought into one cohesive business, which has taken time and a lot of effort as… For me, I am just lucky dude who gets to get to run it.

The teenage and I have a… Yeah, well I can’t help be grateful for the spot I find myself in. Again, it’s just my family is business, which in having a family business is a great thing, and I would never ever sort of look for sympathy on but it was always just such an un-exciting uncles business. We sell bags of dirt, and we sold grass seed that kind of thing. It never aligned with something that I had a ton of passion for until we started looking this and saying, Man, there’s a way we could make cannabis a real job here and a really important part of the future of our business because frankly the offer who grows at a couple of percent a year, and it’s a really good, really say super mature business, and when you’re looking for we use the injectable, growth and excitement into your business. This was just such a great opportunity. So the serendipity of like I said before, personal passion with a business opportunity with it, actually, made sense to do it in again, I am just the lucky beneficiary of all those things and I just hope not to screw it up,

Understood that’s great. I can understand that hauling bags of dirt and such around on the surface doesn’t seem glamorous but when you combine it with this exciting movement, an industry and get to have a seat at the table on how policies are going to be formulated how to make business more efficient. How to actually make this industry grow and thrive all the metaphors of cannabis growing budding there are to avoid it but I…

We really have an opportunity, those of us in the industry now, those of us who have been doing this for maybe just a few years were brand new to the industry as well. We have an opportunity to shape this industry the way we want it to, for it to be a new kind of industry, with new values more forward thinking values where as we like to say as the Hippies like to say the lessons of the plant are going to be infused into our new industry.

And I really agree and I’m glad that we’re creating a new industry with some new values. So I agree, but quickly. I’m sorry, interrupt. I’d say. I think we’re creating a new industry, I suppose, but I think the reference at least personally, if I have and look clearly there are some things that had to evolve and change for this business to become an accepted part of for mainstream America.

And now that is despite the fact that… And a lot of people don’t like to talk about the fact that lots and lots and lots of normal people get high, lots of people consume cannabis as part of their daily lives and they don’t talk about it and they… They would lie about it, maybe if they were asked, but the reality is cannabis is mainstream and it has been for some time, but the fort vacated into mainstream Wall street level business as you said things had to change. So for me, I don’t look at it so much. As we’re creating a new industry, I think that would be kind of the height of humerus at least for me to believe, ’cause we just bought businesses we haven’t created a whole lot.

What we’ve tried to do is staying on the shoulders. Those people who did pretrial it into, I think, what it can become as it moved forward. So I apologize for interrupting but I think that’s really important.

No problem. Yeah, I think it’s well said. Thanks for sharing that.

Okay, we’re gonna take our first commercial break here, and then we’ll be right back with Chris Hagedorn of Hawthorne gardening to chat more about the industry. So, stay tuned will be right back”

 

Alright, we’re back here on NCIA’s cannabis industry voice on cannabis radio speaking with Chris Hagedorn of Hawthorne gardening. So let’s jump into talking about the science of cultivation the special, the cultivating a product that’s consumed by human beings.

And there are some regulations in place, obviously, but I’m curious what your slots are around responsibly growing products at that consumers are ultimately going to put in their bodies, usually with the intention of it being a wellness product, so we definitely don’t want pesticides, or heavy metals, or mold or Powdery Mildew syndrome is the thing I see with cannabis plants quite a bit. As a problem, what are your thoughts around that?

Well, I can agree that we need to be able to grow these plants in such a manner that the folks consuming them whether they’re consuming them for medical reasons or for recreational reasons, can do so with confidence I think that it should go without saying, “Oh I’m not sure, it always has. So part of it’s regulation, the government in most every other category now, and this is not meant to delve into whether we believe government regulation and other categories, is effective or positive, but it does exist in whether it’s food or pharmaceuticals there are certain standards companies are forced to live up to that do not exist in this category, so it falls the industry to regulate itself, which I think it has done to varying degrees of Condor effectiveness, and I think organizations like NCIA’s can really help to put forward that philosophy of “We must regulate ourselves. It it’s a moral and ethical imperative.”

Now that said, I think there are some challenges that we’ve had in part of it as we talked in the earlier segment about the evolution of this industry, from the older, more underground outlaw culture to the more mainstream and I hate to use the term corporate, but the more corporate culture that’s beginning to develop frankly, that we’re part of, and I think as that evaluate there’s been a lot of good those shoulders of the giants I mentioned before that we stand on, but there were some things that weren’t so good and I think there were people who use products to control pests and their growth, that should never have been put on anything that was consumed certainly nothing that was burned and consumed.

And one of the things that we found a lot of people don’t understand or appreciate is, some compounds that may be okay, if they weren’t something you were to eat or drink once you combust those, and inhale them, they become something completely different, it could be something much more dangerous. So for us doing the kind of research that frankly a lot of companies don’t have the resources to do was very important and really, again, as a consumer. And is someone who watched my mother-in-law has since passed away from cancer but she had a long, long fight with cancer. I started before and I was doing born and he actually has a couple of years he not.

Oh, well and, yeah, it’s a remarkable kind of fight she had and just the amount of fight she had in her anyway he treated her symptoms and the symptoms and side effects of her medication with cannabis or about life.

And here in New York, there is at least when she was alive, there was no medical regime for her to get product confident in a … by-products and frankly, turned to me is this is at the time it was the high school kid dating her daughter to help her, and it was protested. Have a very limited amount of confidence in, would that create… And that would, before I knew what I know now, which is again how scary some of these things that go into these plans can be great.

Well, thank you so much for sharing those thoughts, to move on to the next question. I wanna talk about the burdens of companies in this industry who may be pulling in some high revenues on paper. But honestly, they’re still not really making much of a profit and it’s primarily because of our ridiculous is tax code 280e, which is not allowing direct plant companies who are following the rules to take normal tax business, deductions. And I do wanna point out NCIA’s policy recommendations is to amend the tax code in that section to exempt state, legal businesses. seems reasonable to me, but it’s all clearly a symptom of the failed war on drugs, and prohibition-era thinking and it’s hurting legal, regulated cannabis industry companies in, am I right? Is this impacting you as well?

Oh yeah, we look is tax and banking, which is a very closely related issue as the single biggest barrier in the way of this industry. Really taking on the potential or realizing potential that it has. So, yes, I can see the agree.

That is Al Capone era tax. If I use slightly foul language on here, I don’t get a… And I, Okay cool, it’s completely fu*king insane than we are regulated by tax law. That was written to nab a gangster from 100 years ago.

So as you said, “Look I think you took the words out of my mouth, we are penalizing businesses for following the rules. It’s not backwards ridiculous thing that anyone could imagine. So, 28e is insane. It causes businesses that should be making a lot of money in tax at a 20 or 30% Active or 90% at the “forename money on to make the problem even worse, since they can’t make money now, if they could get a loan for a bank to sustain them until they tackle a rationalized as because banks won’t work with them either because they’re considered to be breaking federal law. So you’ve got national banks that won’t extend loans, these guys, they cannot make enough money sustain their businesses on their own even though the businesses are profitable, just the only people actually making money off the cannabis industry at in.

So the whole thing is backwards. I apologize, I’m getting worked up. I just think this is the craziest thing in the world. No, I completely agree. And for any smart genius, stable genius business man, fixing these things would seem common sense. So I completely agree with you on that.

And not a is in common sense, but it’s unethical to sit here and lock people up for breaking federal law, but at the same time, the only people making real money off it, is the federal government is just, it’s insanity.

Agreed.

And as you mentioned add insult to injury, especially the smaller businesses are having difficulty even getting and keeping a bank account merchant accounts loans, as you mentioned, and all those things. So, of course, NCIA  has had an integral role in pushing banking fixes specifically the SAFE Banking Act to secure and fair enforcement Banking Act along in Congress, which we’re very excited about, and even just recently, we have seen movement and hearings in the House and the Senate and this is a very, very exciting time for cannabis policy. The year 2019, has been like a roller coaster. When in previous years we maybe saw a couple of pieces of legislation get introduced, but go nowhere. So, to see this SAFE Banking Act move along in Congress is really… I think a lot of people are feeling optimistic even though we’re sitting here still lamenting about banking.

Well, yeah, I think there’s a lot of reason to feel optimistic. But when we talk up the potential this industry here in America, I think all you have to do is look up in Canada and say, Okay, so they rationalize banking and taxation up there, they allow these guys to take actual bank loans to actually work in capital markets. What happens now like, regardless of whatever your opinion of the product at a company, I can be or a row might be putting out.

You’ve got cannabis businesses up there that are worth three or four times what the Scotts Miracle-company is now and so it’s like you see the potential for the creation of value when the sort of shackles are taken off this industry. I look forward to the day it happens to America.

We’re all in this together. So you mentioned that Hawthorn Gardening is a larger company and therefore has access to a few more resources than a smaller company may have but even you guys know that you can’t just keep your head down and run your business without also getting involved in the advocacy, in the public education and it obviously sounds like you’re very passionate about it. So let’s talk a bit about that as we wrap this segment, we have a minute or two about your political values and there’s a big difference between state level advocacy and federal advocacy. And my right there’s a huge difference in…

We came out of the gate focused on federal we figured Let’s make big structural changes here and really write the ship. And what we discovered, much to my dismay is that, it’s really hard to move the Federal Government in any direction, and I’ve always felt like advocacy is a good word, lobbying a dirty word, a bad word.

So, I, I… Was it a side of… We’re looking for something good here. Something rings true. And what we found is that loving the federal level for us at least, as just an individual business has been very difficult to make any progress. So we shifted a lot of our resources for government relations people two more state and local things where we felt like we could actually make a difference when we’ve been out for a car, for sure, it does. And what we’ve shifted our philosophy, say, Look if we can affect change at those levels help our customers help consumers and patients, that if we get enough critical mass at the state and local level eventually the federal government will be left no choice but to do the right thing, and that for philosophy it’s working, slowly but surely alone with a lot of help from organizations like yours, but it can’t happen soon enough especially for people who’ve been negatively affected by this, by the laws, which we be able to avoid up to this point.

Yeah, yeah, totally. Well, thanks for getting involved and having a seat at the table along with us here at “ncia is we’re trying to push the dial at that glacial pace of federal government.

Okay, we’re gonna take our last commercial break here, and then we’ll come back and wrap up our chat with Chris from Hawthorne gardening. Stay tuned, we’ll be right back in NCIA’s cannabis industry.

 

Alright, we are back on NCIA’s cannabis industry voice on cannabis radio, and we’re talking with Chris from Hawthorne gardening and we’re just wrapping up our chat here.

We’ve had a good chat about some of the big issues going on in our industry, the banking crisis 280e, as well as safe testing regulations and the importance of being a part of NCIA. We are National Association we have nearly 2000 member companies of all sizes and all industry sectors as a member, not only supporting the federal advocacy work we’re doing on behalf of the industry but also participating joining committees, applying to serve on our board of directors or our policy council which is doing great things as well. I would love to hear more about why Hawthorn joined NCIA and why your membership is most important to you.

Oh gosh, well we joined NCIA because we saw what you guys were doing, which was putting together a coalition of businesses and individuals who were one side in this industry evolve and seeing real those real structural changes I mentioned seeing those come to light. So we looked around and there’s a lot of different industry organizations and coalitions of different varieties now, and we’ve been involved with plenty of them.

I think for you guys, we saw a group that was a little bit more serious whose values aligned a little bit more closely with hours and who seemed to have a real plan how to on how to see… That’s what we saw with you guys again we saw philosophies aligned and that none of this is gonna happen if everybody kinda stays in their own little swim lane. If we band together as an industry, have a real organized plan, agree on what we wanna see happen, we can make things change we can help it or force the government, frankly, to evolve.

So that’s what we saw, and I think so far it’s been going pretty well.

Absolutely, thank you. Yeah, so one way to get involved in addition to coming to lobby days which I highly recommend for every NCIA member. Next spring is our next opportunity in 2020. It’ll be in NCIA’s 10-year as an organization, in our 10th Annual lobby days, so it’s kind of a big year coming up next year, but there’s smaller opportunities around the country for people to come network with their peers here. What NCIA has been up to, we have a regional networking event series called Industry socials.

They’re kind of a little bit fun and relaxed but it’s a great way to come connect. Our next set of events is called our Heartland tour of industry socials throughout the month of August we will be in Minneapolis, Chicago, St. Louis Oklahoma City and Austin.

So right there in the middle of the country, it’s exciting to see some movement in those places. “ncia members can register for free.

And if you’re not an NCIA member, there’s just a ticket cost involved for you there. I highly recommend that.

And then if we wanna fast forward to our next big conference, it’s the California Cannabis Business Conference over 8th through 9th in Long Beach, California. It’s a great opportunity to connect with industry leaders, policy makers, and other entrepreneurs to really get into the California specific regulations, trends, advocacy California, and it’s been interesting to watch the adult-use regulations get rolled out.

Not everything’s perfect, but as we go through these growing pains this conference is a great opportunity for us to all figure it out together.

So for more information about that, you can go ahead and register. Now, the website is California cannabis business conference Com.

Do you think you and your team are gonna make it out? And actually let’s talk about before we wrap the show, some of your team got to go to our cannabis business Summit, and Expo in San Jose which is our biggest conference that we host throughout the year.

I had a chance to catch up with them and hear what their experience was like.

Yeah, so definitely did have a team there, yeah, look, everybody is impressed. Just the quality of the other exhibitors the folks who are there this whole thing is about to adults coming to the party and getting real professionals more and more involved in the category. So definitely saw that reflected at the most recent event that you guys put on. And yeah, as for all the future NCIA events and everything, I hope to be there in person. My schedule gets a little crazy. But we, boys and trying to spend as much time with them as I can. But yes, I will endeavor to be at all of the future events at least as many as I can be and my team will be at all of them.

Wonderful, well where can people find out more about Hawthorne gardening

Gosh, go to Hawthorn GC dot com, just search for Hawthorne gardening company, go to local hydro-shops, we’re all over the place, we make ourselves as visible as possible. Obviously Instagram and Facebook and all that stuff, but go down to your local high pro-shop talk to guys in the counter and get Ron’s super fun, get grow. And I like it,

alright, well, thanks again for being a guest on the show, today, it’s been great chatting and thanks everybody for tuning into another episode of NCIA’s cannabis industry voice, until next time

 

 

 

 

 

 

 

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