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Wednesday, January 18,2012

Long may you grow

The high-yielding business of indoor garden supply retailers

by Andy Balaskovitz

The year was 1989 and the U.S. Drug Enforcement Administration had its sights set on a new enemy in the War on Drugs: indoor garden supply retailers.

That’s right: Without an inkling of actual drugs in their stores, entrepreneurs across the country had their businesses raided, records seized, inventories wiped out. What else would all that organic soil, 1,000-watt lights and reflectors be used for, the feds thought, than growing pot?

One business raided that year in the DEA’s 46-state crackdown called Operation Green Merchant is Superior Growers Supply. The business was started in an un-insulated barn in East Lansing in 1983 by a Michigan State University horticulture graduate named Jeff Gibson. 

Gibson, 64, cut his teeth in the hydroponics business at a time when federal agents didnīt much differentiate between drug dealers and indoor garden suppliers. As a result of the ’89 raids, some businesses never faced charges and just had their entire inventory destroyed, forcing them out of the business. At least one business owner in Indiana reportedly pleaded guilty to selling cannabis growing paraphernalia and aiding in illegal activity. The New York Times reported that 119 people were arrested on Oct. 27, 1989, in connection with Operation Green Merchant and 22 businesses were involved.

But for SGS, the DEA let them keep the inventory and stay open for business as usual. Records were seized, however, and Gibson prepared for a three-and-a-half-year, several hundred-thousand-dollar court battle that ultimately ended in a federal appeals court in Cincinnati.

In United States vs. Superior Growers Supply, Inc., the garden supplier was charged with “conspiracy to aid and abet the manufacture of marijuana,” court documents show. One reason SGS was targeted was it placed ads in High Times magazine. In federal district court, the charges were thrown out “for failing to allege an illegal agreement” between the suppliers and the growers. The Sixth Circuit Court of Appeals upheld the lower court’s decision and denied a final rehearing on the case in April 1993.

“After two years of difficulty sleeping and great expense, we prevailed,” Gibson said. “We were accused of helping people grow pot. The thing was that we were somehow aiding and abetting them — like malt and sugar for a bootlegger. It got pretty far-fetched. … There was this stigma that this could only be used for one thing.”

Nearly 29 years after opening, SGS employs 50 people at five stores throughout the state. Gibson says the Livonia store is the “biggest hydroponic shop in North America.”

“We took the commercial system and scaled it down for the hobbyist,” Gibson said over coffee in downtown East Lansing last week.

In reality, indoor gardening means a variety of things on an individual level. For some, it’s therapeutic. For others, a mere hobby. For still more, a successful business.

Almost 19 years after Gibson had his successful day in court and three years after Michigan became a medical marijuana state, the indoor garden supply market in Lansing has turned a corner. Six new stores have opened since voters approved Michigan’s medical marijuana law in 2008. SGS added a third Lansing-area location. Storeowners or managers range from 27 to 64 years old. The businesses are taking the place of old auto repair shops, buffet-style restaurants, vacant strip-mall suites. They’re creating jobs and promoting self-sufficiency at home, whether it’s for food or medicine. And they’re looking to expand.

Yet the DEA raids from the ‘80s and the 16 states with voter-approved medical marijuana laws suggest an underlying fuel to this business that you won’t see advertised on products or on neon signs in these storefronts: Cannabis. 

Five store owners or managers interviewed for this story lament a negative stigma still attached to indoor garden suppliers and argue that medical cannabis growers are but one customer-type. Others include your hobbyist vegetable growers, orchid enthusiasts and even schools looking to use equipment for horticulture lessons. These businesses operate to see to it that your yields are high, the bugs stay out of your crop and your operation is as efficient as possible.


Cannabis: The new frontier

Before 2008 in Michigan, if you were growing cannabis at home and needed, say, some more nutrients, a 1,000-watt bulb or a reflector hood, you were smart to keep quiet about what you needed it for when you fetched supplies at the local gardening center. Or perhaps it was more of a wink and nod situation.

The freedom to openly discuss cannabis, retailers say, was one of the biggest changes after Michigan’s medical marijuana law passed. However, most businesses check for a valid medical marijuana card before discussing the plant.

“Before people were carded, you couldn’t tell” what they needed the supplies for. “Everyone was illegal and you didn’t ask questions about it,” said John Ujlaky, owner of Horizen Hydroponics. Horizen opened its Lansing store — its fourth since 2002 — in July near the Lansing Mall. “That really has been the main change: to talk more freely.”

After an industrial accident in the 1990s, Ujlaky and his wife Bridgette set out on the indoor gardening retail frontier. “After the industrial accident, I thought, ‘What the hell?’ I don’t want to work in a factory the rest of my life.” After opening the first store in 2002 in west Grand Rapids, three others in Kalamazoo, Byron Center and Lansing have opened. Horizen employs 21 people total, he said.

Horizen employees, along with at least four other Lansing stores, verify that customers are valid patients are caregivers before openly discussing the trials and tribulations of growing cannabis. Customers who can’t produce a valid card or paperwork are asked to leave.

If there is conflict within indoor gardening circles, it’s the level of openness in using products to grow cannabis.

Jon Olson, co-owner of H2O Hydroponics less than a mile from Horizen, wonders why some stores ask for customers’ credentials. He calls it an “invasion of privacy.” H2O is the only business City Pulse interviewed that does not ask for a valid card or paperwork.

“We’re willing to talk about medical marijuana,” Olson, 33, said. “We don’t want to be known for that, but we’re there for everybody — whether you’re a tomato grower or a medical marijuana grower. … If someone is blatantly talking about” growing cannabis illegally, “OK, maybe we shouldn’t do business with them.”

In fact, Olson estimates that 90 percent of his customers are medical marijuana growers. H2O had its grand opening in March last year. Olson said he and co-owner Bryan Havens hope to open a second store in the Lansing area later this year. H2O employs eight full-time workers. Its 7,000 square-foot showroom in west Lansing used to be a World Buffet restaurant, Olson said.

Advanced Nutrients, a popular Canada-based nutrients manufacturer, is one of the few producers to openly admit to serving the cannabis community. The company is allegedly shut out from several indoor gardening expos because it promotes its product largely for cannabis growers. A YouTube video of the company’s co-owner, Big Mike, shows him excitedly pitching his product to Tommy Chong (whose face probably belongs on a Mount Rushmore-type monument to America’s cannabis culture) at the THC Expo in 2009.

But others in Lansing have strict policies for verifying patient or caregiver credentials before discussing growing cannabis, based on advice from attorneys. Gibson, of SGS, said he went back to the Grand Rapids-based attorney who defended him in the early ‘90s, James Brady, for a “$5,000 to $6,000” legal opinion soon after the 2008 ballot initiative passed. “He certainly suggested we see their identification” because the grow equipment could be interpreted as paraphernalia — “the idea that you’re going to provide them with equipment.”

Ujlaky, of Horizen, said companies like Advanced Nutrients that are more explicit about serving cannabis growers are merely capitalizing on one aspect of the indoor growing market. “They’re not really innovators or designers, they’re just good marketers.”


Beyond cannabis

Retailers say that the negative stigma attached to their businesses — as only serving cannabis growers — neglects a broad customer base that also includes families, orchid- and vegetable-growing enthusiasts and educators.

“Gardening is a really large pie. Medical growing is only part of it. General gardening is a much bigger part,” Ujlaky, of Horizen, said. “Traditional orchid growers are just as frequent as medical customers.”

Tonie Brovont, owner of Owlyn Solutions for Growers at 2398 Jolly Road in Okemos, estimates that customers who are medical marijuana growers versus those who are not is about “half and half, maybe less.”

Brovont said “we’re working really hard to break that down” when asked about a negative stigma attached to her business and others like hers. “We’re not a crop-specific store. … Peppers, petunias — you name it. We have a broad-based clientele.”

Brovont emphasized the benefits that nutrients on display in indoor gardening shops have on growing food. “It’s an amazing quality of produce you get when using these nutrients. Cannabis is a very hungry plant nutrient-wise, much more so than vegetables,” she said. “We’re very much into local food and that whole movement. That’s one reason we started: to help people who want to grow more food.”

Owlyn opened in September. Brovont pursued the business after the medical practice she worked for relocated to Pennsylvania. “I decided I was too young to retire,” she said.

In fact, you could argue these businesses are largely consultants who give advice as much as sell equipment. When H2O opened in March, Olson said about eight out of 10 customers came in to browse but didn’t buy anything. “Now we’re to a point where eight people buy and two people walk out,” he said.

HTGSupply, a Pittsburgh-based company, opened a Lansing location last April. HTG started in Pennsylvania about 10 years ago. The company now has nine stores in seven different states. Not all of them are medical marijuana states. Michigan is the only state with more than one store. “The market in Michigan is very ripe, apparently,” store manager Mark Sorokacs said. “We get a lot of people who just come in to talk.”

He agreed that, unfortunately, a stigma is still attached to grow supply stores as cannabis-only businesses. “It’s really a shame. There shouldn’t be. We’re an indoor garden shop, with nothing even close to being illegal,” Sorokacs said. “We cater to everybody.”


Onward and upward

With seven different businesses and nine stores operating in the greater Lansing area, one might wonder if the indoor garden supply market is getting oversaturated.

“There’s a lot of competition, but also a lot of business, too,” Brovont, of Owlyn, said.

Olson, of H2O, said: “We get all kinds of people humbly thanking us for opening, because SGS was the only one in town.”

Gibson, whose SGS stores have indeed been around the longest, thinks the market is full: “I think there will be less grow shops in a year from now. I think the market is saturated.”

Some say the increased competition ultimately benefits the customers in lower prices. Three owners or managers interviewed for this story each said they have “the lowest prices in town” when it comes to lighting, nutrients or soils.

Gibson is wary that “price wars break out and nobody wins. They get in there and don’t have much to offer other than price. They try to compete on price and it goes quick.”

Economics aside, everyone interviewed for this story agreed that the hydroponics market is expanding rapidly thanks largely to medical marijuana laws and new lighting and growing technologies. There’s a certain excitement within the industry about what will come out next and how it promises to generate higher yielding crops more efficiently.

Some even make the argument that more grow supply businesses means more people are growing crops on their own — vegetables or medicine. The benefits from that means fewer imported products with higher quality — again, whether it’s vegetables or cannabis.

“It’s solid logic: More people growing at home rather than getting it from the black market,” Ujlaky, of Horizen, said.

Gibson, who’s been in the indoor gardening business for nearly 30 years and once was a target of the DEA, agrees.

“Absolutely,” he said when asked if he thinks the rise in his business correlates to more people exploring indoor gardening. “Which means less adulterated products and a more localized market.” 

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