In October, marijuana industry heavy hitter Aurora Cannabis Inc. spent $3.85-million to acquire BC Northern Lights Enterprises Ltd., a Vancouver-based company that manufactures refrigerator-sized “grow boxes.” The miniature nurseries, loaded up with high-powered lights, ventilation systems and hydroponics equipment, are designed to hold four to 18 marijuana plants and made specifically for the home-growing market.
BCNL, which has been around for nearly two decades, has been selling boxes to medical-marijuana users since limited home growing became legal in 2001 for patients with government-approved growing licences. With the federal government legalizing recreational cannabis use this coming summer, BCNL’s chief executive officer Tarren Wolfe is expecting an avalanche of new customers. “I believe [the number of home growers] is at least going to double when the doors open,” he said. That could mean tens of thousands of new hobby horticulturalists looking for an easy way to cultivate.
In the overall context of Canada’s ballooning cannabis market, it’s unlikely that home-grown marijuana will ever make up more than a small portion of consumption. The federal government’s draft marijuana legislation has capped the number of plants recreational users can grow at four. Quebec has already given a firm no to any recreational home growing and challenges related to the sometimes unruly medical-marijuana home-growing market could invite further restrictions.
But even with these caveats, companies that have long worked in the world of hydroponics – the technique of cultivating plants indoors using artificial light and water-based nutrients – are expecting to benefit from a wave of DIY enthusiasm.
“There will be a huge influx of people just trying it out for the first time,” said Justin Cooper, co-founder of Surrey B.C.-based nutrients manufacturer and hydroponics wholesaler Green Planet Wholesale Ltd. “It will be like beer and wine: you can brew your own, which most people don’t do. But the ability to go brew your own has also led to the craft industry, and that’s now a huge component of the beer industry.”
Green Planet is scaling up its manufacturing and distribution capacity to meet the expected demand, Mr. Cooper said. He sees his company doubling in size within the next 24 months, from around 75 employees to around 150. Part of that growth will be driven by supply contracts with licensed producers, he said. But supplying home growers could “easily be 50 per cent of our business,” he added.
Whether this demand will be seen at the level of storefront hydroponics retailers is less clear, according to Trevor Wilkinson, owner of Toronto hydroponics store Grow It All Inc.
“I think in the short run we’ll see an increase in demand, as it will be a novelty,” Mr. Wilkinson said. “Eventually it will die down, because it will be a lot more convenient to just go out and buy your own.”
Recreational legalization also has a potential downside for retailers, Mr. Wilkinson said. With cannabis-related products no longer taboo, specialized hydroponics shops, which have weathered years of restrictive regulation and public unease, could suddenly be undercut by big-box retailers.
“In the [United] States, Home Depot is already selling lighting equipment. Scotts Miracle-Gro has purchased General Hydroponics, they’ve purchased Botanicare … and they’ve gone out into large-box stores down in all the states that are legal,” Mr. Wilkinson said. “That’s going to happen here for sure.”
He’s hoping that the “mom and pop” nature of his business will help maintain a viable customer base. “People come here because they can get some advice on how to do things,” he said.
As with other parts of the emerging cannabis market, the big winners will inevitably be the companies able to navigate the highly regulated field. Both BCNL and Aurora are betting that tight restrictions around electrical safety, moisture and scent suppression and security, will play in their favour.
“I have a feeling … that they’re going to make it mandatory that anybody who wants a licence to be able to grow their own also has to provide a CSA approved box.” said Mr. Wolfe, referring to the Canadian Standards Association, which certifies electrical appliances are up to a certain standard. “Currently, we are the only producers of that on the market.”
That edge was on the mind of Cameron Battley, executive vice-president of Aurora, who described the BCNL purchases as part of the company’s effort to create “a fully integrated” cannabis company. Unlike other licensed producers that avoid encouraging the home-grow market, lest it cut into demand for finished product, Aurora’s acquisition of BCNL suggests a more optimistic vision of how companies can make money off individual producers.
“They’re not short-sighted,” Mr. Wolfe said. “Aurora can supply the customer with everything from start to finish … They can sell [home growers] live clones, they can still supply the seed, they can supply the nutrients, they can supply the growing appliance. And then, if that customer wants to try different strains before they make up their mind on what they’re going to grow, they can try the end product through them as well.”
credit:420intel.com
