As the public viewpoint towards cannabis starts to soften, and the political environment becomes more friendly too, it’s clear that hydroponic equipment companies in Canada are going to be big business.
The legal marijuana market has exploded internationally, and this has brought with it increased demand for cultivation systems. Hydroponic equipment, grow lights, and grow tents are in demand and there is a great window of opportunity for companies that can supply them.
Why the Need for Hydroponics?
Hydroponically grown plants can grow as much as 50% faster and produce higher yields than those grown in simple soil. The industry leaders are finding innovative ways of using hydroponics to improve output. Cannabis growers have known about hydroponics for a long time, but the market was niche when cannabis growing was a grey area legally.
As the attitudes towards cannabis have changed internationally, this means that demand is on the up. This has prompted waves of investment, mergers, and acquisitions to support the growth of the industry. We have already seen this play out in the United States, and over the last year, since the legalization of weed in Canada, it has started to happen here too.
The Growth of Marijuana in Canada
Marijuana is a solid growth sector in Canada. Many high profile companies are profiting from the softening of legislation. Canopy Growth Corp is listed on the NYSE and the TSX, as is Scotts Miracle Gro, MedMen Enterprises Inc, Aurora Cannabis, and Beleave Inc.
The recreational market for marijuana is believed to be around $10 billion in Canada alone, and Canadian companies have the advantage of being close to the United States too, so there are opportunities to sell there as well.
Arcview, a Cannabis research firm, believes that legal pot sales could grow to as much as $22 billion by 2021, and even reach $57 billion for total worldwide sales by 2027. This is no small amount of money. Interest is great enough that even pension funds are investigating the idea of adding marijuana stocks to their portfolios.
Of course, whenever there is a growing sector such as this, there is inevitably a boom in interest, followed by the bursting of the bubble, then some consolidation. Right now, any company that includes Marijuana in their documents is likely to attract some interest, but in the long term, only the companies that have a solid business model are going to survive.
Growers such as Canopy are well-positioned to thrive. Indeed, Canopy is the only grower to have a listing on the NYSE, and its merger and acquisition activity means that it is set to grow rapidly. Scythian is another major cannabis company with a lot going for it, being a major researcher and incubator for cannabis assets.
The really interesting work, however, is in the hydroponics area. Companies that make grow tents, grow lights, and hydroponic equipment are going to enjoy a surge in interests as individuals look to get involved in cannabis growing themselves.
A New Kind of Garden
Take Scotts Miracle Gro as an example. This company has been involved in gardens for a long time but it is now moving into other territories. Just as it helps homeowners to make their lawns look stunning, it also offers services now for cannabis growers.
Hawthorne Gardening is one if Scotts’ subsidiaries, and it focuses on providing hydroponic solutions for the medical side of the marijuana industry. It provides soil, lighting solutions, and nutrients for cannabis growth, and as legislation has become more relaxed, it now also offers solutions to the general weed industry.
Last year, they got $2.11 billion in sales from the consumer segment of the US. That’s around 80 percent of their income. They are heavily reliant on those traditional forms of income, but lawn and garden sales are seasonal and depend a lot on the weather. Cannabis sales do not depend on that. Hydroponics is in demand all year round, and as interest in cannabis grows in Canada, the opportunities are there for more income from them.
The Cannabis Market Sustains Other Markets
The explosion in the popularity of cannabis and the market for growers and growing paraphernalia in Canada is an interesting phenomenon. Just as the people who make lamps, tents, and hydroponics gear are enjoying access to new markets themselves, their growth is sustaining head shops, grower shops, and even online stores.
Payment processors and online shopping platforms are benefiting from the growth in the industry because new sellers are opening businesses, and orders are booming. Shopify reported that when legalization began in Canada, they were processing 100 orders per minute for marijuana-related sales. That’s a tiny fraction of the revenue that Shopify generates when you consider that the company takes orders from a huge range of niches, but it’s an impressive figure for a young niche, and it is one that is only set to grow. Even eCommerce giants see cannabis as being too important for them to ignore.
Cannabis is still a new phenomenon in Canada. While it has been legalized, the mainstream market is still getting used to the idea, and there are generations of adults with high disposable incomes who grew up with the idea that Cannabis was not legal. Selling to them will be difficult, but the younger generations will grow up seeing marijuana as normal, and that will increase sales over the coming years. The hydroponics and gear companies that get established in the industry now are joining the market at a time when it is growing rapidly, and they have many more years of growth to look forward to.
If you have a business idea, now is a good time to try it. If you are an investor, then look for a company with a solid product and good implementation because those companies are set to take over the industry in Canada over the next few years, and this is your chance to be a part of the legal marijuana revolution.