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Is Hydroponics the Next Big Thing for Scotts Miracle-Gro?

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Management on Hydroponics

Scotts Miracle-Gro’s (SMG) acquisition of Hawthrone Gardening helped the company make a foray into the hydroponics business. Hydroponics is essentially an alternative technique of growing plants without soil. In this technique, the essential nutrients and requirements provided to the plant by soil are instead made available through the water. With hydroponics, one can grow plants in tight spaces such as urban areas as well as in any season.

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Growing in importance

Over the past four quarters, the Other segment’s share in SMG’s total sales has grown in significance. During the 1Q17 earnings call, the management stated that it will report the sales from Hawthrone as a separate business segment. It’s clear that hydroponics is becoming a key focus for SMG, which will enable the company to mitigate volatility from seasonality.

Why is hydroponics catching up?

This growth in hydroponics is in part due to the legalization of recreational marijuana in a few states in the US (MXI). Interestingly, in an interview with Forbes, the CEO of Scotts Miracle-Gro also indicated this segment to be the “biggest thing” he has “ever seen in lawn and garden.”

Companies such as Spectrum Brands (SPB), Central Garden (CENT), and the HRG Group (HRG) also stand to benefit from this catalyst.

Recently, PotashCorp (POT) also announced its quarterly earnings. Read PotashCorp Reports 4Q16 Earnings: Stock Falls 3%.

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