The Netherland’s long-awaited and repeatedly delayed ‘controlled cannabis supply chain experiment’ has now been running in its entirety for over a month.
Alongside its European neighbours Germany, Malta and Switzerland, the Netherlands has pushed ahead with its quasi-adult-use framework in an effort to test whether its famous coffee shop model can be fully legitimised, with around 80 shops now able to sell legally cultivated cannabis for the first time.
Despite the experiment expanding to the full 10 municipalities on June 17, 2024, a number of licensed producers are still months away from being up and running.
Furthermore, following the swearing in of a new right-wing government earlier this month, some doubts have been raised as to whether the experiment will be a precursor to full legalisation.
Transitional phase
The initial stages of the experiment began in December last year, with two out of the total 10 municipalities (Breda & Tilburg) beginning sales of legally grown cannabis for the first time.
Three of the 10 licensed cultivators, FYTA Group, Aardachtig, and CanAdelaar were the first to begin supplying product to the coffee shops in these two locations.
However, with the expansion to eight further locations, totaling around 80 coffeeshops, the demand has increased significantly, and it could be months before the rest of the cultivators are ready to begin providing cannabis to these coffee shops.
The experiment, which has been in the works for since 2017, has seen repeated setbacks and delays due to the lack of a readily available supply of legally grown cannabis.
While the 10 licenced growers were officially named at the end of 2020, they have faced numerous hurdles, such as obtaining building permits, finding and retaining investors, and opening bank accounts.
As a solution to the repeated delays, the government opted to allow a ‘transition phase’, in which the coffee shops could continue to sell the black-market-sourced cannabis alongside the new legitimately grown products, until enough legal product was ready to make the transition.
This transitional phase is scheduled to end of September 16, but the government has signalled that it could be pushed back if growers are still not able to supply enough product to meet demand.
One such grower, Leli Holland, owned by North American business Village Farms, said it has purposefully moved more slowly due to uncertainty surrounding the experiment, and the political climate.
Its President, Orville Bovenschen, told Business of Cannabis: “So we’ve been very careful about how we spend our money. We waited a little bit a little bit longer to see what would happen with the market in general, what the Dutch government would do, and if something could go wrong.
“We understand very well that these things are often political. So sometimes the political climate changes, and then the whole project gets halted, delayed, or stopped.”
He explained that Leli Holland began construction on its smaller facility in Drachten this year, and hoped to be operational in Q4 this year, with an estimated output of two and a half tonnes annually.
A second larger facility is also in the works, which will have the capacity to upscale to an output of between 10 and 12 and a half tonnes, depending on market demand.
Meeting demand
With Dutch consumers used to having an array of strains and products to choose from, the government has made it clear that ‘quantity, quality and diversity’ of products must be in place before the full transition happens, otherwise, ‘the risk of illegal trade increases’.
Mr Bovenschen suggested that the concerns surrounding supply were also shared by the coffee shops, but not by him.
“A lot of the producers were struggling to find the financial resources to build out their facilities, so there has been delays, and obviously coffee shops are concerned about whether they’re going to have enough variety to serve their customers.
“The concerns the coffee shops have, which I understand, are not necessarily ones I share,” he explained.
While suggesting Leli Holland would ‘start smaller’ by introducing around 10 strains, due to its connection with Village Farms, it has the ability to bring a lots of new strains to market in future.
“So I want to make sure that I serve them properly, so they can serve their customers. “The benefit that they’re going to see is that the quality of the cannabis will increase significantly. As you can imagine, when you grow cannabis illegally, you’re always in a rush because you don’t want to get caught, so the plant does not get the optimal conditions to grow in.
“Now, in our situation, we can take the time process properly, because now it’s happening legally, so the quality in general will increase… We have a good relationship with coffee shops already, and they’re excited to see the flower that we can bring.”
He pointed out that one major difference between Village Farms, the only North American company with a licence to grow in the Netherlands, and the other nine cultivators, was that it had ‘been doing this on a very large scale’ since 2018, ‘so we have a little bit of a head start when it comes to cultivation experience’.
Despite the delays and potential supply issues, Mr Bovenschen said he believes the Dutch government has made the right choices.
“I’m very impressed with that government, something I don’t say often. I think they’ve had a good approach. They’ve been trying to push it through, and sure, you can bump into hurdles, but I think they look to countries like Canada, what they’ve done right and what they’ve done wrong, and basically took their own interpretation.
“For the country, I think this is a historic moment. We have finally done something to address a system that a large part of society didn’t agree with. You could consume cannabis that was decriminalized since the 1970s, but you couldn’t produce it legally. So, legal money was going into the illicit industry. No one really understood that.”
“It’s also historic because, for the first time, consumers can actually get safe cannabis. It’s fully tested with no pesticides, so you know exactly what you’re consuming. And for someone like myself who is fully Dutch but moved to Vancouver in 2016, this feels like it has come home.”
