The South African cannabis home grow market has been overtraded this year with many businesses closing down. Hydrobiz has bucked this trend by rapidly expanding into the SAHPRA licensee market. CEO Brett Young reflects on the current state of the market and unpacks who is buying what.
Up to seven grow shops in the greater Cape Town area are believed to have closed their doors in the last six months as competition sharpens for the home grow consumer. However, one of the businesses that is expanding rapidly is Hydrobiz, a Western Cape based company that has evolved from serving hobbyists to supplying the commercial cultivation market.
Hydrobiz CEO Brett Young says the competition has been fierce.
“In the retail market there is a lot of movement over the last four years. Initially there was a viral growth of retail stores and e-commerce sites. Almost every time I went on Facebook or Instagram there was another e-commerce site and in cities around the country there was an explosion of brick-and-mortar stores. For the first time this year I have seen a retraction in the market. This year I can count possibly six to seven store closures in greater Cape Town area alone. For example Somerset West had seven grow shops, which was not feasible. The market was simply over traded. Hydrobiz has bucked the trend and during the same time that many have been closing, we have been expanding”.
Hydrobiz launched its fourth ‘bricks and mortar’ store in August this year in Table View and is looking at expanding to Gauteng in 2023.
Young told Cannabiz Africa on 4 October 2022 that Hydrobiz was predominantly an importer and distributor to the commercial market and that 70% of turnover was coming from SAHPRA approved cultivation operations. “Currently we are very happy to list 58% of all SAHPRA licensees as customers” says Young. “The remaining 30% of our turnover is generated by our retail business and this is spread between income generated from our 4 store locations and online sales”.
So what are SAHPRA licensees buying?
Commercially, our SAHPRA customer orders range from numerous light dep tunnels to a pending turnkey multispan greenhouse project via Novagric, our greenhouse partners in Spain. We sell a lot of lights, both HID and LED, one in five licensees operates with our Nanolux. We can’t keep up with the demand for Quest dehumidifiers – we have one container on the water, a second being loaded and a third in production.
Containers 1 and 2 are now presold and we are taking orders on the third. We sell a lot of rolling benches, fans, scrog nets. We sell a lot of daily consumables from Jiffy glueplugs, substrates, IPM products from Andermatt Madumbi and Koppert. We designed and manufacture Mega solution nutrients. It's running multiple SAHPRA projects and in the consumer market is gaining traction. Growers using Mega have consistently been in the top 1, 2 and 3 podium positions across multiple classes for the last four years at the Sannabis Cup.
“One in five licences in SA run Nanolux lights, one in four run Quest Dehumidifiers, one in three operate Trolmaster and our sales growth of Grodan into the market is promising. Our challenge as a company is to increase our penetration into the remainder of the market and turn the smaller customers into larger ones”
Young says Hydrobiz’s strength is I believe the strength of our company is leveraged off the good old-fashioned principles of quality and service.
“We align with the best global brands in the cannabis industry and we have excellent product knowledge and technical support and with over R25 million in inventory, we can respond to most enquiries on demand”.
He says connection to community is a key ingredient for success.
“We work endlessly on our Instagram accounts and event management, where we give away loads of free stuff. Every two months we host a ‘stash and dash’, and three times a year we host the Hydrobiz Swap Meet. At the last swap meet we gave away R80 000 of free stuff to over 200 attendees. I think this goes a long way towards building our ties with our community”.
Young says the biggest challenge facing the fledgling cannabis industry is “access to market and the regulatory environment”.
“Locally, the government needs to put action behind words. With a free and open local market the challenges and access to market for many current and future growers would be alleviated” he says.
“The export market will come, but here too the regulatory environment must change. Recreational cannabis will be more achievable for many growers and entrants. Medical cannabis is an important market but the barriers to entry especially for the European Union will be challenging, costly and time consuming. It won’t happen overnight. There is a long road ahead for many”.
He said the recent Western Cape High Court ruling against the legality or private cannabis clubs had impacted Hydrobiz and many other businsses.
“Our Woodstock store was in the ground floor of the Sensiva private club. Recently Sensiva closed all memberships and operations, and as a result we have to find new premises. So the impact of the court ruling in one microcosm is that 13 jobs are no longer in play. How many jobs are behind these 13? How many families are dependent on this one location?”.