The Netherlands has delayed the official start of its ‘controlled cannabis supply chain experiment’ amid ongoing teething problems in establishing domestic supply.
Last week, two ministers penned a letter to the Dutch Chairman of the House of Representatives, suggesting that the current ‘quantity, quality, and diversity of regulated products will still not be sufficient by September 16’ and the launch of the ‘experimental phase’ should be postponed.
With just three of the 10 suppliers licenced to legally cultivate and supply adult-use cannabis for the landmark experiment currently online, the official start date has been delayed until the levels of supply can reliably meet the demand for the 75 participating coffee shops.
Despite the delay, the President of licenced cultivator Leli Holland, Orville Bovenschen, told Business of Cannabis that not only was this largely expected, but it will benefit the experiment overall.
“It’s always portrayed in a negative light, but I don’t necessarily see it that way. I believe that taking the time is actually beneficial to the overall success of the experiment. I truly believe that taking a little more time at the beginning will benefit both the consumers and, ultimately, the producers in the long run.”
What happened?
As Business of Cannabis reported late last month, the Netherlands’ long-awaited and repeatedly delayed ‘controlled cannabis supply chain experiment’ has now been running for over a month.
However, the experiment, which has enabled participating coffee shops across 10 municipalities to be supplied by legally licensed suppliers for the first time, is currently in its ‘transition phase’.
This transition phase, initially due to move into the ‘experimental phase’ on September 16, was designed to provide an easier transition away from the supply of cannabis products sourced from the illicit market (as they have been for decades) to the new legally produced supply chain.
It also aimed to give the 10 licensed cultivators more time to iron out the kinks in their supply chain and offer some leeway given the numerous delays they have faced obtaining building permits, finding and retaining investors, and opening bank accounts.
Three of the 10 growers, FYTA Group, Aardachtig, and CanAdelaar, are already up and running, with a further two understood to be able to provide supply in the coming weeks.
However, five are yet to begin cultivation, meaning that the existing supply from the three cultivators to the 63 coffee shops currently selling regulated cannabis products is thinly stretched.
Mr Bovenschen, who is confident Leli Holland will be online in Q4 this year, said there are lessons to be learned from Canada’s adult-use market, where he has years of experience.
“Looking at Canada and our experiences there, I believe taking your time is always the better approach in these situations.
“In this specific case, it’s crucial to give consumers exactly what they’re looking for. Consumers in the Netherlands have been familiar with cannabis for a long time, so they have very specific preferences and know exactly what they want. If producers can’t meet those demands, it could be a concern for the overall success of the initiative.”
Conditions not yet met
According to the letter, the country’s ‘track and trace’ system suggests that the supply coming from the three current cultivators is ‘lagging behind the production forecasts they expected last March’.
To meet demand, these growers need to be producing 570kg of cannabis flower and 160kg of hashish per week in total, and there must be a minimum stock of 6800kg of cannabis flower and 2000kg of hashish available.
However, the ministers state that ‘at this time, the condition of sufficient quality is not being met, and based on the forecasts, it appears that this will not be achieved by September 16’.
Moreover, the fourth and fifth growers, thought to be closest to rolling out their products, are not expected to be able to resolve unspecified delays in their preparations by mid-September either, ‘as the process of cultivating, drying and packaging cannabis takes several months’.
The letter continues: “If the experimental phase were to start without meeting the conditions, the risk of illegal (street) trade would increase, as only regulated products would then be allowed to be sold.
“Caution is therefore required, and more time is needed to bring the growers’ supply up to the required level to allow the experiment to proceed successfully. Therefore, the transition phase will be extended.”
The supply issues are particularly problematic in regards to hashish, with expectations that the amount of hash produced by mid-September will be ‘insufficient’ to reliably supply all participating coffee shops. As such, ‘the importance of sufficient hash production (will be) emphasised’ to the growers during quarterly progress discussions.
Given the complexity of producing hash compared to traditional flowers, Mr Bovenschen said this shortfall was ‘not unexpected’. Leli Holland, owned by Canada’s Village Farms, is poised to launch numerous hash products in the Netherlands in the coming months.
“We’ve been producing hash in Canada for a long time and have gained a lot of expertise in the process. I see it as a great opportunity to showcase to the Dutch consumer what we’ve been successfully doing in Canada,” he continued.
9-month deadline
Once the fourth and fifth cultivators are ready to begin supplying product, the levels of production are set to be reevaluated, with an update expected to be released in mid-November.
Meanwhile, the other five designated licence holders have now been given a 9-month deadline to begin cultivation operations or face losing their right to participate in the experiment.
“This means that these growers must start cultivation within nine months from that point; otherwise, their designation may be revoked. This implements the Mutluer motion, ensuring that the progress of the growers who are not yet producing is monitored,” the letter reads.
While the five cultivators will now be in a race against the clock to bring their operations online, Mr Bovenschen suggested that the government has been very open and transparent about these stipulations.
On whether these deadlines will be met, he remained optimistic, stating: “It just makes me sure that all 10 at some point are going to make it to the finish line and going to start cultivation. Obviously, we need other successful companies in order for the experiment to be successful in general, so I think it’s a good thing.”
