Medical cannabis is where the profit is, Bedrocan CEO Jaap Erkelens says

One of the oldest medical cannabis companies in the world is returning to Canada after exiting that market five years ago.

Based in Veendam, Netherlands, Bedrocan International was founded in 1984 as an agricultural production company.

Bedrocan got into cannabis seed development in 1992; a decade later, it received its first medical marijuana cultivation license from the Dutch government.

CEO Jaap Erkelens told MJBizDaily that Bedrocan was awarded a new medical cannabis production license from Health Canada on Sept. 27 and is returning to the same building in Scarborough, Ontario, where it previously operated.

The facility can produce up to 3,600 kilograms (7,937 pounds) of flower annually but will produce only a fraction of that to start, Erkelens said, with production starting in early 2025.

The family-owned business also is completing a cultivation facility in Denmark that will commence production early next year, with the expectation that more European countries will launch medical cannabis programs in the coming years.

Erkelens spoke with MJBizDaily about a variety of topics, including the profitability of medical cannabis for Bedrocan and the company’s plans in Canada and Europe.

Why did Bedrocan exit Canada?

Not because of the market – we were making money.

Most of it was because of the original business relationship, which was a joint venture with Canopy Growth (Corp., based in Ontario, Canada).

We were a minority shareholder, but the whole thing was dependent on our know-how and IP (intellectual property).

And the whole thing was under a licensed deal from us: The name was licensed, the genetics were licensed, the technology was licensed – it was all licensed.

Canopy wanted to sell to Tweed; we went along with it in the end – on the agreement that there would have been a firewall between us and Tweed.

The cooperation with Canopy didn’t work.

That was a tough decision because we didn’t want to leave the Canadian patients.

We had an original plan to be back much sooner, and then reality happened.

Why do you restrict your business operations to medical marijuana?

We don’t want to be in rec; it’s that simple.

It’s also a very basic business decision: I don’t know any legal recreational grower that’s actually making any money.

This goes for other competitors as well: Their medical divisions are very, very, lucrative.

It’s the wider play that’s dragging them down.

For me, the question always has been, why is nobody focusing on medical? I actually make a profit.

There are not many Canadian cannabis companies that can say they actually turn a profit; we’ve done so for years.

The question should be the other way around: Why are the others doing rec?

Is the patient base in Canada big enough to sustain a company such as Bedrocan?

We’re a very small, very efficient company, and we’ve already run a business in Canada.

I know the numbers, I know what kind of margin I can get out of there – even with a relatively small footprint.

That facility that we got back is the facility we originally helped design and run, (so) we know the lay of the land.

The Canadian medical cannabis market is much larger than the markets that we are used to operating in back home.

There’s obviously more competition than we’re used to because the Dutch system is very different.

That being said, we’ve already operated there once, and we were successful.

We do contract manufacturing as well.

That’s pretty normal in Canada; there’s definitely room for us there.

What makes the Canadian medical market so lucrative?

In the Netherlands, I supply for a fixed price through a government agency.

I’m not going to say what that price is, but we’ve become very efficient cultivators under this fixed-price system.

Under fixed price, the more efficient you are, the more money you get to keep.

In Canada, I actually get to control more margin than I do back in the Netherlands; that’s what makes it interesting for me.

We have good brand recognition; people know the name.

Will you also do extracts?

We didn’t do extracts at the facility before, so we don’t have that equipment or that production line set up.

But we are definitely interested in introducing new value-added products specifically targeted at patients and not so much at a wider market.

There are certain things happening in Europe, such as trichome powder.

From a pharmaceutical perspective, a flower bud is a very flawed way of delivering your products to somebody.

So we supply homogenized cut flos (milled flower).

It has uniform distribution of cannabinoids, terpenes, flavonoids and other plant compounds throughout the product – batch-to-batch, dose-to-dose.

We’ve been supplying it for years here in the Netherlands.

The way of the future is much cleaner product, product that’s simply the trichomes themselves.

From that perspective, isolating the trichome, you still have everything in there.

Who wants to inhale warm chlorophyll?

Are you concerned about Europe’s progress toward adult-use cannabis markets?

It really depends, country by country.

Germany has turned into a giant clown show; it’s a circus.

We were the first ones exporting to Germany, 15-16 years ago; we still export roughly the same volume.

There’s nothing much changing for us, but that market has grown exponentially – and not in a good way.

A couple of years ago, I was telling German politicians they can’t legalize recreational sales, (because) Brussels (headquarters of the European Commission) is going to knock you for it, and it’s going to be struck down by your own constitutional court if you try and do it.

The only people in Europe who could do something with recreational are the Swiss, because they’re not in the EU.

You’re going to see a lot more of these so-called experiments, and you’ll all see them flounder or fail.

We’ll end up with a weird mixture of Dutch toleration policy, Spanish social clubs and probably a couple of medical programs.

This interview has been edited for content and clarity.

Omar Sacirbey can be reached at omar.sacirbey@mjbizdaily.com.