Hydroponics giant Hydrofarm plans new headquarters in Northern California after IPO, 3 acquisitions

A publicly traded company will be temporarily relocating its headquarters from Petaluma to the East Coast, spending $ 343 million to acquire three additional companies and preparing to return to a larger hub in North Bay. It’s been seven busy months for the indoor farm equipment manufacturer and distributor Hydrofarm.

On December 14th, nearly 10 million shares of Hydrofarm Holding Group began trading on the Nasdaq Global Select Market under the ticker symbol “HYFM,” for $ 182.3 million in revenue, according to the March 31st annual report. The company made a follow-up bid of 5.5 million shares through May 3, raising $ 309.8 million more.

After peaking at $ 92 in mid-February, the share price closed at $ 56.96 on Friday.

Hydrofarm then moved its headquarters to its distribution center in the Philadelphia area earlier this year. It’s one of nine, covering a total of 900,000 square feet, that the four-decade-old company operates in the United States, Canada, and Spain. Hydrofarm also has branches in China.

This happened because Hydrofarm was building a larger site elsewhere in the North Bay that has been looked for in recent years.

Hydrofarm had planned to relocate Petaluma headquarters to the 250,000-square-foot Victory Station warehouse south of Sonoma, but that deal didn’t materialize amid the rapid cooling in real estate demand from the newly legal cannabis industry, according to real estate sources.

Hydrofarm was unavailable for comment on the plans for North Bay.

While cannabis has become a major driver of demand for farm produce in a controlled environment, hydrofarming began in Marin County during the catastrophic drought of 1977-1978, the Business Journal reported in 2010 Gardeners.

The product line has been expanded to include energy-efficient plant lamps and germination kits. Then Hydrofarm switched to manufacturing and selling indoor gardening tools for professional growers and hobbyists.

Today the main markets are the producers of cannabis, flowers, fruits, plants, vegetables, grains and herbs. The portfolio now includes 26 self-developed own brands with around 900 product variants under 24 patents and 60 registered trademarks. In addition, the company has more than 40 exclusive and preferred brands with a total of 900 additional storage units.

Company brands account for around 60% of sales. The complete catalog, which contains products from over 400 suppliers, includes over 6,000 SKUs.

“Our sales mix continues to shift towards our own brands, while we continue to innovate and improve overall margins,” says the annual report. “Also, our revenue stream is very consistent as we believe we generate approximately two-thirds of our net sales from the sale of recurring consumer products, including growing media, nutrients and supplies.”

Net sales were $ 342.2 million last year, up 45.6% from 2019. The company speculated in its annual report that public health orders in the context of the coronavirus pandemic contributed to this jump in sales . Net sales in the previous year only grew by 11.0% compared to 2018.

Net sales for the first quarter were $ 111.4 million, up 66.5% year over year. The company attributed this to a 59.6% increase in sales volume and a 6.9% increase in the price and mix of these products.

As a sign of its commitment to stay in North Bay, Hydrofarm secured a lease for a 175,000 square foot new distribution warehouse at 2225 Huntington Drive in Fairfield earlier this year. Meanwhile, Hydrofarm founder Stuart Dvorin prepared the sale of the 110,000 square foot Petaluma main facility at 2249 S. McDowell Blvd. Extension, a $ 17.5 million deal that closed on June 7th.

“We also intend to move our existing sales activities in Northern California from the existing Petaluma building to a larger distribution center in the area,” the company writes in its annual report.

Founded in Marin County in 1977 as Applied Hydroponics, Hydrofarm moved its headquarters to Petaluma in 1994 and employed 65 people at the time. There it was gradually expanded to 150,000 square meters with more than 150 employees by 2010 and then to 195,000 square meters in the city in 2017. As of the end of February, the company had 327 full-time employees at all locations, as it reports.

In 2017, Hydrofarm made a major expansion into Canada with the acquisition of Eddi’s Wholesale and Greenstar Plant Products. That deal helped Hydrofarm become a leading supplier of hydroponic equipment in Canada, the company said.

This year Hydrofarm took over three more companies. The Los Angeles area premium nutrient maker Heavy 16 was acquired for US $ 78.1 million and Humboldt County’s brand portfolio for House & Garden for US $ 125 million. A $ 161 million deal was announced this month for Aurora International Inc. and Gotham Properties LLC, Oregon, manufacturers and suppliers of organic hydroponic products.

“We see mergers and acquisitions as a major growth driver as the hydroponics industry is fragmented and prepared for consolidation,” writes Hydrofarm in its annual report.

Hydrofarm has also fertilized its C-Suite with ingenuity in recent years. In early 2019, Bill Toler joined the company as CEO and brought over three decades of executive experience at large consumer goods companies, including most recently seven years as CEO and President of Hostess Brands. B. John Lindeman joined in March 2020 as Chief Financial Officer with 25 years of leadership experience in agriculture and finance.

Jeff Quackenbush covers wine, construction, and real estate. Prior to the Business Journal, he wrote for the Bay City News Service in San Francisco. He graduated from Walla Walla University. Reach him at jquackenbush@busjrnl.com or 707-521-4256.

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