Santa Rosa Hydroponics sold to Colorado retail chain GrowGeneration

During the Gold Rush, it was the merchants selling sifting pans who struck it rich and not the legions of 19th century fortune seekers looking for wealth in California’s rivers.

Santa Rosa brothers Rick and Jason Barretta applied that wisdom to the nascent marijuana industry about 10 years ago when they opened Santa Rosa Hydroponics and Grower Supply in a dilapidated old flower shop on Highway 12 in Rincon Valley. The industry boomed, and so did their business, expanding to a 3-acre property and warehouse in southwest Santa Rosa and reaching annual revenues north of $10 million.

This month, the Barrettas sold Santa Rosa Hydroponics for $1.75 million in cash and $3.5 million in company stock to GrowGeneration, a Colorado-based hydroponic gardening store chain. Jason Barretta said it was a logical next step as California’s new recreational cannabis market brings corporate competition and consolidation to all facets of the industry.

“We can’t go against big corporate guys. We stand no chance,” said Jason Barretta, 34, who’ll stay on as vice president of sales. “I see a lot of businesses with ‘going out of business’ signs on their doors. We didn’t want to have to hang those signs.”

Hydroponic farming is a method using liquid nutrients to grow plants in water instead of soil. The word “hydroponic” has become shorthand for stores specializing in marijuana cultivation, both indoors and out.

In Sonoma County, where marijuana has largely been grown indoors compared to Mendocino and Humboldt counties, small hydroponic storefronts began proliferating more than 10 years ago. At one point, the county had several dozen shops.

Today, online business listings show about one dozen specialized hydroponic retail stores.

Sonoma County also has been a significant market for hydroponic nutrient makers and suppliers. General Hydroponics, which was founded in Sebastopol in the 1980s by Larry Brooke, was acquired by Scotts Miracle-Gro in 2015. The company’s headquarters remains in Santa Rosa, and its products are manufactured at a Corporate Center Parkway warehouse in west Santa Rosa.

Another hydroponic nutrient maker, John Piccirilli, started his Cutting Edge Solutions line of liquid nutrients in 2001 in Sebastopol.

He said he’s created a niche of high-end nutrients he sells to grape growers and orchid farmers in addition to cannabis cultivators.

Piccirilli said major changes are afoot with local companies, including his own, at a time of high economic activity spurred by marijuana’s newfound legitimacy in California.

“This is a crazy period of time,” said Piccirilli, who spoke by phone Friday from a Petaluma-area cannabis cultivation project site where he was working as an adviser to the growers.

Jason Barretta said Santa Rosa Hydroponics when it opened stood out among a crowded field of hydroponic shops as a well-run operation with longer hours, a wide range of merchandise and Spanish-speaking staff compared to other hydroponic companies. The shop also held popular customer-appreciation parties with DJs and motorcycle stunt riders.

“We don’t smoke weed, and all the others were potheads,” Barretta said. “We kept everything on the books. We opened up at 9 a.m. Everyone else opened at noon.”

This year has been their slowest, yet. They believe far fewer people are growing than previous years because of the state’s new marijuana laws, many of which kicked in this year.

California’s newly regulated adult-use and medical marijuana markets have created a system of permits and licenses for commercial cultivation, which combined with new taxes require a significant outlay of cash most local growers can’t afford.

Santa Rosa-based cannabis industry consultant Nick Caston said 2018 has been a rough year for all kinds of businesses because so few people are growing cannabis.

“That’s a dramatic constriction in the market,” Caston said. “I haven’t heard of anyone closing their doors, but I have heard people are trying to sell. Consolidation makes sense.”

But Caston sees it as a temporary disruption. And there’s a new customer base. Californians 21 and older can grow and consume marijuana for personal use without medical marijuana recommendations, opening up a new group of customers curious to try growing their own pot.

“Everyone (in the cannabis industry) is trying to hunker down and bide their time until the regulated cannabis market gets on its feet,” Caston said.

Santa Rosa Hydroponics is the fifth acquisition so far this year by GrowGeneration, which now has a portfolio of 18 retail stores, including six in California. The company also has stores in Colorado, Michigan, Nevada, Rhode Island and Washington state.

Michael Salaman, the company’s president and co-founder, said they’ll close an existing GrowGeneration store on Industrial Drive in Santa Rosa and move all sales to the current Santa Rosa Hydroponics location at 4180 S. Moorland Ave.

Salaman said GrowGeneration’s primary customer is the commercial farmer, and the store will offer services to help people set up operations, from supplies and design to build-outs and permitting assistance. Salaman said he launched GrowGeneration in 2014 to buy existing hydroponic stores and bring management expertise and capital to the businesses.

He said he wanted to build a bigger presence in Santa Rosa for years because of its strategic location as an urban hub in northern California’s famed marijuana-growing region. Santa Rosa Hydroponics is the largest gardening store serving the marijuana industry in Sonoma County and perhaps the state, according to Salaman and the Barrettas.

“We find Santa Rosa to be an area that is very open to cultivation,” Salaman said.

You can reach Staff Writer Julie Johnson at 707-521-5220 or julie.johnson@pressdemocrat.com.