Bedrocan owes profit to its focus on medical cannabis: Q&A with founder Tjalling Erkelens

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Image of Tjalling Erkelen

(Photo courtesy of Bedrocan)

Are medical and adult-use cannabis effectively the same thing, and can businesses thrive in both markets?

Some executives and regulators will tell you there is no real difference, but Bedrocan founder Tjalling Erkelens isn’t one of them.

The Veendam, Netherlands-headquartered cannabis producer does not waver from its focus on and belief in medical cannabis and operates under a clear distinction from adult use – despite the hype that often comes with new recreational markets.

Erkelens says the focus on medical is a core reason for Bedrocan being a profitable cannabis producer.

“People were asking me, ‘Why don’t you do rec?’ I said, that will take my focus off what I’m really trying to do. I think adult use in the end will be a bear market – the lowest price will prevail,” he said in an interview with MJBizDaily.

Erkelens spoke with MJBizDaily about what it takes to run a profitable medical cannabis company in Europe, the opportunity in Germany and expanding into new markets such as Denmark.

When Canadians were spending billions to expand their cannabis businesses globally, in countries with no meaningful sales, you didn’t follow them. What did you know that they didn’t?

I want to spend money responsibly.

That’s more or less the old-fashioned moral here in the Netherlands and in Europe in general – if you have investors on board, use and spend their money wisely and make your company profitable.

What I have always been doing is producing on demand. That is a core rule in the company. Figure out the demand, then live up to that level and, if needed, expand.

Overproduction is a major problem in the industry, not just in Canada. Why is producing on demand so important to you?

Produce what you can sell, and don’t produce what you cannot sell.

Your biological assets will go up not in smoke or vape, but they will end up in the trash can in the end, because in the pharmaceutical world, there are expiration dates.

I never had an idea of expanding without demand, thinking the world’s demand would grow (to reach my production).

When people started talking about thousands of kilos and metric tons (for export), I was thinking, “Where are those tons going?”

If you want to sell cannabis in Europe as a medical product, as a pharmaceutical product, you better know what you’re doing.

I have seen North Americans approach this basically from an adult-use attitude and not from a true medical attitude – especially on the cultivation side.

Your cultivated product should have a level of standardization – genetically and chemically – that allows it to be processed as a true pharmaceutical product.

What else is core for Bedrocan?

Your product is also core. You need to know what you’re producing.

If you’re the CEO of a (cannabis) company, you need to know your cultivation department inside out.

You need to know the genetics of your product inside out.

We started with small-scale production. That is where I learned.

Why are you expanding into Denmark now and not five years ago, like most of your competitors?

There was no definitive regulation in Denmark that allowed for commercial export. That only happened two years ago.

There was a pilot program for Danish patients.

A lot of Canadian companies went to Denmark in the hope that the pilot program would be finalized and become part of the law, which eventually happened in the end. (Most Canadian cannabis companies have exited Denmark.)

But those are the things (regulatory and legal evolution) I cannot bet on.

I cannot bet on a regulation or law that is still in the pilot phase and then spend millions on something that might end in a few years again.

So we waited until May 2021, when the Danish parliament approved the definitive law for production, cultivation, processing and exporting.

Now it is law, so we can go there.

Why now? Because of demand. We have demand for product. It’s not a wild idea for us to set up a production facility in Denmark.

The production capacity has been sold for everything we are building now, so I know what I’m getting when I open that facility.

I know the people working there will not be fired two years after it opens.

What I also know is my numbers on production, revenue and profit. I know those numbers already. That’s the way we operate.

What’s your goal for Bedrocan?

Bedrocan will diligently but carefully expand its activities – and footprint if needed – to wherever legitimate demand for its products becomes apparent.

Bedrocan is not focusing on business leadership nor domination but, rather, on fulfilling the needs of patients and their professional caregivers in the most ethical and sustainable way possible.

Medical demand is rising on multiple fronts, on the patient and scientific side, because of the quality and standardized level of our products.

What about recreational cannabis?

I see too many risks in the adult-use market business-wise.

It’s very unwise to mix two totally different markets – to mix them in one company.

One of the mistakes in the boardrooms is when they think cannabis is just cannabis, but that’s not the case.

Cannabis for medical purposes is a very different product compared to cannabis for recreational use.

Medical cannabis is strictly about standardized products, proven quality and efficacy.

One of the things we’re doing is clinical research.

We opened up our clinical research unit just this year because we now have the money to do it.

We’re basically bankrolling everything ourselves.

This is the road we have chosen, to grow incrementally on demand.

Scientific and clinical research for us is a very important leg to stand on.

Some North American businesses bet heavily – and lost – on Germany’s original plan for full legalization. What did you expect and why?

In the German situation, there was unbelievable optimism, but I had never been optimistic about that situation from the beginning.

The political optimism that was there two years ago – we immediately said they’re not going to make it and it isn’t going to work.

Germany as a country will not trespass on (United Nations) and European rules. That’s impossible, because Germany is the driving power in Europe.

In Europe, we are also dealing with a number of countries that don’t want to legalize at all.

I’m still surprised Germany found a compromise (for regional trial programs), but they still have to check back in with the European Union again before they launch the plan for social clubs and homegrows.

What they did in the meantime is separate medical from rec, and I am very happy about that.

(This interview was edited for length and clarity.)

Matt Lamers can be reached at matt.lamers@mjbizdaily.com.