Dutch recreational cannabis production pilot beset by delays

(This story has been updated to correct the price of Village Farms International’s Netherlands option.)

A pilot program to allow the limited cultivation and distribution of recreational cannabis in the Netherlands has been hit with another major delay.

The program, which is supposed to involve 10 cannabis cultivators supplying dozens of stores, was originally intended to launch in 2020.

But that plan was delayed to 2022, and the latest delay has the program expecting to kick off in the second quarter of 2023, according to a ministerial letter to parliament about the experiment.

The stores, known as coffee shops, currently operate in a system where sales are legally tolerated but marijuana cultivation has been prohibited.

“Unfortunately, it has now become apparent that starting in 2022 is no longer realistic,” the letter notes.

“The selection procedure of the remaining growers is taking longer than expected, and some growers are having trouble securing a location.”

The Netherlands has been laying the groundwork for the pilot program for almost four years.

So far, the Dutch government has selected only eight of the 10 growers, according to the letter.

“It is expected that the ninth and 10th growers will also be designated soon,” it says.

The delay is bad news for a number of Canadian companies that have stakes in Dutch producers.

Late last year, Edmonton, Alberta-based Aurora Cannabis invested in upstart Netherlands-based Growery B.V., one of the lottery winners selected to cultivate and distribute adult-use marijuana under the yet to be launched government-backed pilot program.

Earlier, competitor Village Farms International struck a deal to purchase an 80% stake in Netherlands-based Leli Holland B.V. – another of the 10 winners. The option came with a price tag of 50,000 euros ($58,400).

Banking has also become an issue for cannabis businesses in the Netherlands.

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“A number of growers indicate that they have had problems obtaining a bank account,” according to the ministerial letter.

“The banks involved and the growers themselves are looking for solutions. We will provide an update in the summer.”

Banking has also been an obstacle in other places where cannabis has been regulated by the government in some way, including, in the United States, Canada and Jamaica.

The letter cites as an example banks’ obligations under a Dutch money laundering and terrorist financing law.

A track-and-trace program is also under development.

The experiment is supposed to run for four years.

Other European markets have also experienced major delays or, in some cases, revisions to cannabis regulation.

Last year, Luxembourg backpedaled on its plan to establish Europe’s first fully legal recreational cannabis market.

After benchmarking the Canadian model for use in Luxembourg, the government instead announced plans to allow home cultivation of up to four plants for personal use – with no option for retail sales.

“Made in Denmark” medical cannabis was available in Germany before it was made for sale to Danish patients.

The Dutch letter is available here.

Shares of Aurora trade as ACB on the Toronto Stock Exchange and the Nasdaq.

Shares of Village Farms trade on the Nasdaq as VFF.

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