Village Farms International Inc. (TSX: VFF) (Nasdaq: VFF) is close to being an official licensed producer for Dutch weed-friendly coffeeshops taking part in Europe’s first legal recreational market.
On Tuesday, British Columbia-based Village Farms — owner of best-selling cannabis brand Pure Sunfarms — said it has an option to settle a €3.9 million agreement to own 80 per cent of Netherlands-based Leli Holland B.V.
Leli was one of the ten companies to win a licence to sell pot via a government lottery for the Dutch Supply Chain Experiment (WECG). The new program is testing and analyzing closed supply chains for recreational weed sold at coffeeshops, where people can buy and smoke the plant publicly.
In order to accept the deal, Village Farms has to pay €50,000 and an initial payment of €950,000. The remainder amount is due in three installments pending completion of certain milestones.
“Village Farms has a long, proven track record as a vertically integrated controlled environment agriculture grower — design and construction of leading-edge facilities, efficient, large-scale operations, product development strategy, branding and marketing — that combined with Leli’s local expertise position us for success in this market,” CEO Michael DeGiglio said in a statement.
Read more: Growth slows for Pure Sunfarms
Even though Dutch coffeeshops have been popular among cannabis connoisseurs for years, the legal status of recreational cannabis in the European country is still ambiguous, as production and distribution are strictly prohibited while sale and use for recreational purposes is tolerated by authorities.
In the four-year experiment, the government wants to see what happens when controlled cannabis is legally supplied, as the lack of clear policy has caused public health and safety issues.
As per the current deal, the companies plan to build two indoor production facilities where Village Farms, as majority owner, would be responsible for designing and constructing the infrastructure, as well as product commercialization, branding and marketing.
“Building on the successes of Pure Sunfarms in Canada, we look forward to leading the market in another legal, regulated recreational cannabis market, with an existing, large consumer base, in what we hope becomes a national and permanent policy,” DeGiglio says.
The ten approved producers participating in the experiment will be growing at least 65,000 kilograms of dried flower per year.
Depending on the number of participating coffeeshops, the Dutch government estimates that by the third year the market will need a minimum of 485,000 kilograms of dried flower to meet demand.
Apart from recreational cannabis, Village Farms owns greenhouse growing company Village Farms Fresh, CBD-focused brand Balanced Health Botanicals, hemp seed harvesting company Village Fields Hemp and VF Clean Energy, which focuses on converting landfill gas to sustainable power.