Dutch recreational trial postponed again due to supply shortages, but will ultimately “benefit consumers and manufacturers”

The Netherlands has postponed the official launch of its “controlled cannabis supply chain experiment” as teething issues continue to arise in building up domestic supply.

Last week, two ministers wrote a letter to the Speaker of the Dutch House of Representatives suggesting that the current “quantity, quality and variety of regulated products will still not be sufficient by 16 September” and that the start of the “experimental phase” must be postponed.

Since only three of the ten suppliers have a license to legally cultivate and distribute recreational cannabis for this groundbreaking experiment, which is currently online, the official launch date has been postponed until supply volumes can reliably meet the needs of the 75 participating coffee shops.

Despite the delay, the president of licensed breeder Leli Holland, Orville Bovenschen, said The cannabis business that this was not only widely expected, but that it will benefit the experiment as a whole.

“It's always portrayed in a negative light, but I don't necessarily see it that way. I think taking your time is actually beneficial to the overall success of the experiment. I firmly believe that taking a little more time at the beginning benefits both consumers and ultimately producers in the long run.”

What happened?

As The cannabis business As reported at the end of last month, the long-awaited and repeatedly postponed “controlled cannabis supply chain experiment” in the Netherlands has now been running for over a month.

However, the experiment, which enabled participating cafés in ten municipalities to receive supplies from legally licensed suppliers for the first time, is currently in the “transition phase”.

This transition phase, which was initially scheduled to enter the “experimental phase” on September 16, was intended to facilitate an easier transition from the supply of cannabis products from the illegal market (as was the case for decades) to the new legally produced supply chain.

The aim was also to give the 10 licensed growers more time to resolve the problems in their supply chain and to give them some flexibility in light of the numerous delays they had experienced in obtaining building permits, finding and retaining investors and opening bank accounts.

Three of the ten growers – FYTA Group, Aardachtig and CanAdelaar – have already started operations and two more are expected to be able to provide deliveries in the coming weeks.

However, five of them have not yet started cultivation, which means that the current supply of the 63 coffee shops that sell regulated cannabis products is inadequately ensured by the three growers.

Mr Bovenschen is confident that Leli Holland will be online in the fourth quarter of this year, and said there are lessons to be learned from the Canadian recreational market, where he has years of experience.

“When I look at Canada and our experiences there, I believe that in situations like this it is always better to take your time.

“In this specific case, it is crucial to give consumers exactly what they are 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 cannot meet these requirements, this could jeopardise the overall success of the initiative.”

Conditions not yet met

According to the letter, the country's track and trace system indicates that supplies to the three current growers “are falling short of production forecasts from last March.”

To meet demand, these growers must produce a total of 570 kg of cannabis flowers and 160 kg of hashish per week and a minimum stock of 6800 kg of cannabis flowers and 2000 kg of hashish must be available.

However, the ministers state that “the condition of sufficient quality is not met at this stage and, according to forecasts, it is not expected that this will be achieved by 16 September”.

The fourth and fifth growers closest to launching their products are also expected to be unable to resolve unspecified delays in their preparations until mid-September, “as the process of growing, drying and packaging cannabis takes several months.”

The letter continues: “If the experimental phase begins without the requirements being met, the risk of illegal (street) trade would increase, as only regulated products would then be allowed to be sold.”

“Therefore, caution is required and more time is needed to bring the supply to producers to the required level for the experiment to be carried out successfully. Therefore, the transition period is being extended.”

The supply problems with hashish are particularly problematic. It is assumed that the amount of hashish produced up to mid-September will be “insufficient” to reliably supply all participating coffee shops. Therefore, in quarterly progress meetings, “the importance of sufficient hashish production” is emphasized to growers.

Given the complexity of producing hashish compared to traditional flower, Mr Bovenschen said this decline was “not unexpected.” Leli Holland, owned by Canada's Village Farms, will launch numerous hashish products in the Netherlands in the coming months.

“We have been producing hashish in Canada for a long time and have gained a lot of experience in the process. I see this as a great opportunity to show the Dutch consumer what we have done successfully in Canada,” he continued.

9-month period

Production volumes will be re-evaluated once the fourth and fifth growers are ready to begin supplying product. An update is expected to be released in mid-November.

The other five license holders have now been given nine months to start cultivation, otherwise they risk losing their right to participate in the experiment.

“This means that these producers must start cultivation within nine months of that date, otherwise their authorisation may be withdrawn. This implements the Mutluer proposal, which ensures that the progress of producers who are not yet producing is monitored,” the letter says.

While the five growers now race against time to get their operations online, Mr Bovenschen said the government has been very open and transparent about these conditions.

As for whether those deadlines will be met, he remained optimistic, stating: “It just makes me feel confident that all 10 will eventually reach the finish line and start growing. Of course, we need other successful companies for the experiment to be successful overall, so I think it's a good thing.”