Adam JacksonProduce and cannabis grower Village Farms International (Nasdaq: VFF) is starting to live up to its name, as management on a Wednesday earnings call outlined how the company is slowly making its way into more markets overseas.
After the end of the fourth quarter, the company started setting up its first indoor facility to grow cannabis in Drachten, Netherlands, which CFO Steve Ruffini said received capital expenditure funding of nearly $1 million.
Village Farms owns an 85% majority stake of the subsidiary, called Leli Holland. The arm is one of only 10 that are allowed to legally grow and sell cannabis recreationally in the Netherlands, thanks to a special program called the Dutch Cannabis Supply Chain Experiment.
CEO Michael DeGiglio praised the Dutch regulatory model. He pointed to its advantages, such as limited licensing, which is similar to the most profitable markets in the U.S., including Florida. Those pros also include the absence of excise tax and regulations that aim to stabilize pricing.
Management has high margin expectations due to favorable packaging and taxation policies.
“We expect further growth in the Netherlands beyond this first cultivation facility going forward,” DeGiglio told investors. “We think that would be a definite springboard for us; for other recreational markets that emerge in the EU going forward.”
The company is also adopting a two-pronged approach that targets both medicinal and recreational markets, believing that medicinal markets will persist alongside recreational ones in certain countries, more so than observed in the U.S. or Canada.
The firm plans to start growing cannabis by the end of 2024 and aims to begin selling it in early 2025.
Germany
Management said it plans to build partnerships and grow the brand across the Atlantic by keeping up with regulatory changes and seeking out new markets, such as Germany, which DeGiglio dubbed “a whale.”
“We are excited about the recent German market developments and have a strategy in place to accelerate international export sales in current markets while expecting to launch products in additional European markets this year,” DeGiglio said.
Aaron Grey of Alliance Global Partners was particularly interested in the company’s plan to increase awareness among German doctors and patients about its brand, given the unique dynamics of being prescribed a specific brand rather than a broad medical prescription.
DeGiglio said that the firm intends to collaborate with distributors across a variety of countries, including those that are considering legalizing cannabis in the next 12 to 15 months. The strategy involves establishing partnerships in each country, possibly with multiple partners covering different regions, a model that DeGiglio says has proven successful in Australia.
The company has also launched its own cannabis strains in the EU and plans to further promote these strains globally.
“That medicinal growth for us is a key priority for this year, and we now have formed a separate entity for international export,” he said.
