It seems that cannabis companies are looking to take the entire chain into their own hands as much as possible, taking over horticulture industry suppliers. The latest example of this is Terra Tech, which announced it has made a $5 million investment in Hydrofarm. Hydrofarm was founded in 1977 and is based in Petaluma, California with ~300 employees globally. One of the biggest independent providers of hydroponics products in North America, it recorded over $250 million in revenues in 2017.
This strategic investment provides Terra Tech with an ownership stake in the longest standing specialty indoor garden wholesaler in the U.S. The company also expects to leverage this relationship to drive down its capital equipment and cultivation input costs. Hydrofarm offers a full spectrum of hydroponics products, including approximately 5,000+ SKUs, and 1,000+ proprietary SKUs (25+ proprietary brands). It serves 1,700+ customers through brick-and-mortar, eCommerce, and commercial wholesale channels via nine distributions centers across North America.
Through this funding round Hydrofarm has raised a total of $55 million, of which Terra Tech contributed $5 million. The capital will be used by Hydrofarm to expand market share as end market demand increases as a result of adult-use cannabis legalization efforts led by California and Canada and the continued expansion of cannabis for medicinal purposes.
“This investment provides our shareholders with access to, what we believe, is the largest independent hydroponic growing equipment and supply distributor in the U.S.,” Derek Peterson, CEO of Terra Tech, stated. “Hydrofarm has a stable business model and generates significant revenues from its broad customer base, which covers 1,500+ retailers. The hydroponics equipment and supplies industry is growing rapidly and we believe that Hydrofarm holds significant upside potential. As a result of the capital injection, it is well-positioned to expand its leading position both in the U.S. and Canada through both organic growth initiatives and its M&A strategy. Moreover, this strategic investment in a leading provider of hydroponics equipment provides synergistic benefits to Terra Tech and is expected to enable us to improve our supply chain and bring down our capital equipment costs.”
Hydrofarm is one of the two major consolidators in the hydroponics equipment and supplies industry. In November 2017, Hydrofarm acquired Eddi’s Wholesale and the distribution division of Greenstar Plant Products, Inc., the #1 and #2 Hydroponics and Lawn & Garden distributors in Canada, respectively. Hydrofarm believes numerous opportunities exist for further acquisitions in a fragmented market.
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