Interview: More than the sun shining in Colombia

Alfredo Pascual, International analyst for MJBizDaily

Alfredo is a Germany-based International Analyst for Marijuana Business Daily, specializing in international cannabis markets and regulations. Previously, he did business development for ICC Labs (TSX-V:ICC) with a primary focus on developing expansion opportunities internationally.

CCI: What do you think are the advantages of the Colombian cannabis licensing system?

AP: One of great things in the Colombian regulation is the export modality. As far as I know, no country in the world has a clear framework designed with a specific modality of license to export. Of course, there are still many details that need to be ironed out but if you compare it with Uruguay, for instance, it’s a big advantage. Uruguay developed its regulations back in 2012–13 when nobody was talking about a booming international industry nor exporting. The debate focused on public safety and the role of the state rather than commercial opportunities.

CCI: What opportunities await Colombian cannabis in the European market?

AP: I see that so far most Colombian firms are trying to be and do everything. Specialization will bring opportunities. Do you want to be in the medical market or sell CBD consumer products? Should the business be in finished products, or extracts for other manufacturers that understand patients or consumers better than you do? In my view, it’s a mistake to think that Colombia’s low growing costs are the essential factor in the competitive structure if you want to develop an export-based medical cannabis business. Quantities of medical cannabis being imported today are still very limited, and medical exports to the EU require EU-GMP certification, which requires significant investments to reach the necessary standards.

“Don’t expect Colombia to be the only country with low-costs trying to export to Germany.”

CCI: What is the forecasted size of the European market as new countries start legalizing?

AP: It’s very hard to predict. Some analysts project billions in a matter of years but you rarely see how they come up with those numbers. But the trend is undoubtedly positive. If you look at Germany, today’s largest medical cannabis market in Europe, there’s a shortfall in demand despite significantly higher margins than anywhere else. It’s not rare that patients can’t find the products their doctors prescribe in the pharmacy. National cultivation is delayed so the country is 100% dependent on imports. In the Netherlands there is only one company exporting and its output is limited. Canada’s legalization of recreational use has also shifted supply towards that market. But don’t expect Colombia to be the only country with low costs trying to export to Germany. Others are also getting ready and Colombia will eventually have competition not only from Latin America (Jamaica, Uruguay, Mexico, Peru) but also from other jurisdictions with relatively low costs in Europe (Portugal, Macedonia, Greece) or closer to Europe (Israel once the government unblocks exports). Oceania is also getting ready for exports.

CCI: How do you see Colombia’s place in regard to the international markets in the next 5 years?

AP: In the strictly medical market, I see Colombia exporting crude extract for further distillation in Europe and North America. But there will also be huge opportunities in the wellness market. Imagine CBD infused local products such as coffee or chocolate. I’d buy those just because of the brand “Colombia”. The wellness sector has a different set of challenges. The rules are not clear at all, and innovative companies face the risk of crackdown at any time. But it prioritizes the strength so many companies see in Colombia: low cultivation costs that will allow a higher margin for massively producing FMCG.