Speaker 1: You're listening to Cultivation Elevated, hosted by Michael Williamson, where we discuss vertical farming in the future of cannabis and food production.
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Speaker 1: Cultivation Elevated, sponsored by Pip Particulture.
Speaker 2: Hello and welcome to another episode of Cultivation Elevated, sponsored by Pip Particulture.
Speaker 2: I'm your host, michael Williamson.
Speaker 2: I'm here in Berlin, germany, with Timo, general manager of Fluence, because we are in.
Speaker 3: Germany.
Speaker 3: I also want to introduce all of you in German.
Speaker 3: Wunderschönen guten Morgen hier von ICBC in Berlin.
Speaker 3: Ich freue mich auf das Interview.
Speaker 2: Let's get it on.
Speaker 2: So tell me a little bit about your role.
Speaker 2: Before you were part of Fluence.
Speaker 3: I have a background in economics, work for different companies and transformation projects and so on, and at one point I was hired by a big lighting company called Osram and they wanted to go into order culture and I was an innovation manager to bring the company into this segment and that at one point led to the acquisition of Fluence, which is nowadays part of the Zsignify family.
Speaker 3: But yeah, so that was my journey of the last eight years in horticultural lighting and when did you start looking into horticultural lighting?
Speaker 2: What year was that when you started the pivot into horticultural lighting?
Speaker 2: So that was 2015,.
Speaker 3: End of 2015.
Speaker 3: And you know, back then, lighting LED lighting for crops was really special.
Speaker 3: So back then, growing crops only was artificial light, was like space emissions.
Speaker 3: It felt like two people right Nowadays it's totally accepted technology, adopted technology.
Speaker 2: So, yeah, it was an interesting journey the last eight years.
Speaker 2: I remember when Fluence came out with the full, with the spider, for the first time 2015-ish, and that was the first time that all growers really started paying attention.
Speaker 2: They said that's interesting, Because before that it was like no LED, no LED, especially in flower.
Speaker 2: They were like oh yeah, so yeah, you guys were disruptors.
Speaker 2: And then we just watched the evolution of multi-tier lighting.
Speaker 2: Approaches like PIP behind us here really take off in the States.
Speaker 2: So 2015 in Europe there's not much, it's just starting to come together.
Speaker 2: How many people are like operating at that point?
Speaker 3: So back then there were, I would say like maybe actually only one legal cannabis producer.
Speaker 3: There was one medical producer in the Netherlands, okay, also in Israel.
Speaker 3: They were.
Speaker 3: They always, it was always allowed to do research in cannabis.
Speaker 3: So there was also a couple of things going, but that's it.
Speaker 3: On campus 2015,.
Speaker 3: There were no legal markets in Europe.
Speaker 3: Of course, greenhouses all over the place especially in the Netherlands, the highest concentration of high-tech greenhouses in the world and also there was really hard to disrupt the old technology and get LED in because the initial investment were higher back then.
Speaker 3: Nowadays, no one in this area would buy an old technology.
Speaker 3: It's totally disrupted.
Speaker 2: Yeah, and also, I imagine, by law and just by the mentality of efficiencies of Germans.
Speaker 2: It seems like it's a legacy technology.
Speaker 3: You're absolutely right, and the European Union is doing the lawmaking in regards to phasing out old technology to go and upgrade to more efficient lighting.
Speaker 3: You see it in all different lighting verticals.
Speaker 3: At one point they said okay, you cannot use fluorescent, you cannot use your halogen or whatever technology and need to go to LED.
Speaker 2: And I talked to people internationally, outside of Germany.
Speaker 2: Germany is a very important part of their dialogue.
Speaker 2: It's a big part of their plan.
Speaker 2: So I talk to people in South Africa or Australia or anywhere in Europe they always talk about we hope that we can export to Germany someday.
Speaker 2: And so can you talk to me about why Germany is kind of seems to be where everything is funneling to, or the center of the cannabis industry for Europe and also for, it seems like, the globe?
Speaker 3: Yeah, so I think the one part of the answer is definitely Germany has 83, 84 million inhabitants, so it's the biggest society population within Europe.
Speaker 3: So it's the biggest single addressable market.
Speaker 3: Right, if they go, you know, medical or hopefully a later date of recreation.
Speaker 3: You have a big addressable market and also a lot of you know if things happening in Germany.
Speaker 3: You often have a kind of domino effect because it's the biggest domino false, the rest false easier.
Speaker 3: So if you have a good Macoto market there, you can expand beyond.
Speaker 3: So that is a couple of reasons.
Speaker 3: But right now from a market point of view, the biggest medical cannabis market in Europe is Germany.
Speaker 3: So with that it makes sense and that's why also you see that a lot of the ecosystem is in Germany.
Speaker 3: So you see a lot of startups and you know coming and popping up in Germany.
Speaker 3: For the industry it just just makes sense, develops itself as a hub right now for Europe.
Speaker 2: And talk to me a little bit about the German program.
Speaker 2: So there's about 300,000 registered patients on the medical program.
Speaker 2: But it sounds like I've heard different, conflicting things.
Speaker 2: Some say it's easy to get a medical license for as a patient, and other people tell me it's quite difficult because I think you do not have chronic pain as an option.
Speaker 2: Yes, you're right.
Speaker 3: So the indications for what you can get prescribed are very limited and it must be a very severe issue, like multidisciplinary and epilepsy and other things, and then you get it prescribed and it's opening up for so there are more things where you can get it, but generally it's difficult to get it and it's more that also the doctors don't know how to prescribe it.
Speaker 3: So that makes it challenging.
Speaker 3: And still in Germany the far majority of what is prescribed is flour and you need to hit special thresholds.
Speaker 3: You cannot have you know, your product must be of high consistency and some strains just drop off because they don't hit the thresholds the next time and then they're not available.
Speaker 3: But doctors don't prescribe here strains.
Speaker 3: That is very unique and that's difficult because if it's not available then the patient comes back to the doctor and it's complicated.
Speaker 2: And the doctors don't like it.
Speaker 3: But yeah, you can back through Some 3-in-1-thousand patients.
Speaker 3: Roughly 25 tons have been imported to Germany and 15 tons ended up in the pharmacy.
Speaker 3: Just to give you a to put it in relation, Israel, which is like 10% of the society and have like below 200,000 patients, had 40 tons.
Speaker 3: So factors three more.
Speaker 3: So you see that they consume also more per patient.
Speaker 3: So I think there's still room in the amount of patients in Germany, but also how much they get prescribed.
Speaker 2: Now, another thing too is if it doesn't go to the pharmacy, who would sell the product?
Speaker 2: Only pharmacies allow, only pharmacies, right.
Speaker 2: But also it's covered with by your country's universal healthcare.
Speaker 2: Yes, you're absolutely right.
Speaker 3: So the Czech Republic and Germany have by far the highest reimbursement rates.
Speaker 3: There is in the medical, the patients.
Speaker 3: Some are paying for themselves and some get reimbursed.
Speaker 3: Depends a little bit how the insurance companies are seeing how severe the issue is.
Speaker 3: But yeah, there's higher reimbursement and that is cool.
Speaker 3: So normally if we see other markets where you often had first the medical market and then the recreation come in, you see that medical is plateauing and then declining because the recreation is heating up.
Speaker 3: Here because of the reimbursement, it's a little bit more protective if you get it for free kind of.
Speaker 3: That is definitely one thing, but from a recreation side this takes a little bit.
Speaker 2: So typically in the United States you have a medical program first, always, and it opens up the door for adult use or recreational.
Speaker 2: But typically there'll be like a syntax on top of the adult use, so they make it a little bit more expensive, but maybe it's only 10 or 15% more expensive.
Speaker 2: And so some people say I don't need my medical card, I don't want to pay the card, I'll just.
Speaker 2: You know, I'll get a little bit.
Speaker 2: But when you're talking about reimbursing 70 plus percent of the medicine, like you said, that would be a very good reason to maintain your medical.
Speaker 2: Yeah, one of the things that I think is interesting.
Speaker 2: Coming from a medical background, I worked for a buyer before being in cannabis, and so what's interesting is that the doctors are prescribing a single cultivar strain for ailments.
Speaker 2: But we also are learning that when you consume the same cultivar over and over again, you build a tolerance no different than alcohol or opiates or anything like that, and so it's interesting to hear that they're prescribing single, because we do see that there's an additional entourage effect by having different varieties.
Speaker 2: I understand.
Speaker 2: So that's really, yeah, that's interesting and as a cultivator, it's extremely challenging to grow a product.
Speaker 2: You can grow a product harvest by harvest, but to be consistent with it, especially within like a pharmacology guidelines, I imagine it's quite challenging.
Speaker 3: It is, and we are seeing that right now the product which is ending up in German pharmacies is really coming around the boat New Zealand, australia, south Africa, lisutu, south America, canada and then in Europe from you know, portugal and you name it really global supply chain.
Speaker 3: But you often see that a grower will divide there and then it drops out and it's extremely important for the pharmacies to have, you know them available longer time but also have alternative strains which are similar, you know, in TSC and CBD values, so that you can change that.
Speaker 3: You don't get into.
Speaker 3: The issue with intolerance is to him need to increase.
Speaker 3: See the amount you're taking over time so that the doctors have some possibilities possibilities right now I would say you have been doing pharmacies in Average like 150 to 170 strains right now available.
Speaker 3: That's pretty good, but they are also all very high TSC, so it's also interesting that it still takes a little bit.
Speaker 3: There's only a couple of strains where you have a balance THC, bd or a lower THC and so on.
Speaker 3: I think there's definitely room in the market and patients would like to have that, sure, but right now there's still a lot of I want more and mentality.
Speaker 3: You know high TSC, but I think this is something about.
Speaker 3: You know, the longer the market is Legal or available, that you will see that there are also other preferences and that is something I'm personally very excited about that there are more alternatives than to get really high TSC full-to-large, sure.
Speaker 2: No, no concentrates or attractions.
Speaker 3: yet yeah, they are.
Speaker 3: It's a little bit of tricky because, you know, when I say medical cannabis, it's like really medical chemistry.
Speaker 3: Flower, it's not pharmaceutical cannabis, right, correct?
Speaker 3: Yeah.
Speaker 3: And the more the product is Getting into the category of pharmaceutical being a bill, being a think-sharing, whatnot, yeah, and you have.
Speaker 3: You need to go to More amounts of clinical trials and you need to build much more evidence and that is extremely time-costing, intensive and right now there's only really one, one classic pharmaceutical Canada's product you can get right on you and the prime majority is flower, yeah what is that?
Speaker 3: What is that?
Speaker 3: Pharmaceutical products from GW pharmaceuticals like a Sativa.
Speaker 2: Yeah, exactly, yeah, okay, I'm sure you followed along with Canada and we saw that they had a big rise and then a big fall, and it was a combination of, in my opinion, some regulatory issues with health Canada also, that evaluations were based on what you could, how much you could cultivate, but not how much you could sell.
Speaker 2: Yeah, so we saw, you know, like 20 Hector greenhouses get erected, but they didn't have the outlets and they thought that they were going to export all this stuff and all of a sudden, there was a big bottleneck at the retail or wholesale level.
Speaker 2: Yeah, what lessons do you think Europe can learn from a country like Canada's approach to international, if I you know?
Speaker 3: the Right.
Speaker 3: Now we are seeing the issue of Canada Coming to Europe because we are seeing Relatively low cost that many people have is coming into the new big market because there is such an oversupply which are at prices which are maybe partly under cost.
Speaker 3: So that is destroying markets right now here.
Speaker 3: So that's not good.
Speaker 3: So my learning is more I'm a little bit surprised at normal business Principles seem to not apply for Canadian cannabis companies in regard to one thing.
Speaker 3: Therefore a long time, a lot of problems, not profitable, and normally that is okay.
Speaker 3: Then you have a market correction and companies fall out, but somehow this is again and again money available to keep on going.
Speaker 3: Normally there would be a market correct, like in our other industries, and that is something we need to Accept that things need to break.
Speaker 3: You have a high price and yet in the value of tears and then stabilizing.
Speaker 3: So now we need to stabilize.
Speaker 3: But now we are keeping it going and now taking the issues to other regions, and that is something what I personally Think.
Speaker 3: It's important to go through the phases and accept.
Speaker 3: It's very normal that it's, you know, after a Gross and high-phase it's going down, but it needs to normalize and put that we need to just accept that if things are working or not working.
Speaker 3: But that is one thing, just general answer.
Speaker 3: But also you bigger is not better repurposing tomato greenhouses for cannabis Until today.
Speaker 3: I'm surprised about it, because what does it have, tomato, in common with the cannabis plant?
Speaker 3: If you take a flower greenhouse where the people are used to produce batches and have a flower like cannabis, I understand, but tomatoes it's a high wire crop growing totally.
Speaker 2: It's a high wire.
Speaker 2: It's a long harvest cycle.
Speaker 2: Cannabis is fast.
Speaker 3: The infrastructure is different.
Speaker 3: If you use the same team, it's totally different.
Speaker 3: There's a place to follow and everything.
Speaker 3: So this is also something too big, too fast, too big, too much investment.
Speaker 3: It looks very asset heavy and not like okay, where can we be with asset lean and also this approach of going everywhere at the same time and vertically integrated.
Speaker 3: So it's a lot of complexity in the business model, in diversification in regions and products and so on.
Speaker 3: That is difficult to manage.
Speaker 2: What are you excited for?
Speaker 2: The future for Europe?
Speaker 2: What needs to happen in order for everything that go tipping forward at an accelerated rate?
Speaker 2: Because it seems like a lot of the people we were talking to, we were down at Switzerland with some clients and it's like we're waiting on Germany.
Speaker 2: We hope maybe two years.
Speaker 2: There seems to be a mystery around when it really is time to go.
Speaker 3: That's a good one.
Speaker 3: So for me personally, the important thing is to make the first steps.
Speaker 3: They are always the hardest, but if you start going, you go.
Speaker 3: And for me, the first step now is in Germany.
Speaker 3: The government said, okay, they want to do a two pillar strategy.
Speaker 3: First pillar is where you allow consumption, where you allow possession, where you allow to grow three plants at home and where you can join social clubs which grow with its members the cannabis.
Speaker 3: With that you decriminalize, you start to enter stigmatization and you make, so to say, normal and the people are no criminals and so on.
Speaker 3: So that is, I think, good for society and that is for me a very important first step, because other steps can follow easier, because you can also speak about issues, you integrate the society in the further process.
Speaker 3: But you need to do the first step.
Speaker 3: So I'm very excited about that.
Speaker 3: And then the second pillar in Germany is all about pilot projects, so what they do for five years and evaluation in different regions, and the same is happening in Switzerland and the same is happening in the Netherlands.
Speaker 3: So you have three countries and they are more or less.
Speaker 3: The Swiss and the Dutch are ahead, but they are all in a similar timeframe, more or less, and then you have five years, you have some data points, you have several countries, and then could be a huge topic.
Speaker 3: But it's important that it's going, but I think it will be slower and just not as fast as people hope, but it's a bit Stop.
Speaker 2: It's a little bit stunning.
Speaker 2: It's clear that something has started here.
Speaker 2: It's not going away.
Speaker 2: No, so between Holland, switzerland, the country officials elected what ten farms to allow these THC trials?
Speaker 2: Yeah, and then where would that medicine go?
Speaker 2: So it gets destroyed.
Speaker 3: It gets destroyed, or what I just referred to is all programs for recreation, so all these countries have medical programs, so we have in Europe.
Speaker 3: Good amount of the countries have medical programs, so medical cannabis is in the most countries, while a lot of countries are available, but these three programs I was referring to is really wrecked.
Speaker 3: So in the Netherlands I think everyone knows the coffee shop, but there's always the total absurd situation that the product is illegal until it is on the shelf at the coffee shop.
Speaker 3: Then it's all of the sudden legal, magic, yeah, magically legal.
Speaker 3: So the government said okay, we want to nominate, select ten licenses.
Speaker 3: They grow for the coffee shops, so start to that.
Speaker 3: The supply chain becomes legal.
Speaker 3: They exclude it in this experiment Amsterdam, rotterdam, because it's much too big.
Speaker 3: You need much more rows.
Speaker 3: So that there were selected municipalities which are much smaller and these ten rows grow for them and for the coffee shops.
Speaker 3: But they also need to give a good product portfolio.
Speaker 3: So they need to grow different strains, obviously, but also produce hash and so on, what the normal coffee shop could do users and buy today.
Speaker 3: So they need to come up with a good amount of nice products.
Speaker 3: That is in the Netherlands, and to really test how we can legalize the supply chain, because now it comes also to the Netherlands from all over the world.
Speaker 3: You get the Moroccan hash, you get the.
Speaker 3: You know, that was always, it was always.
Speaker 3: Yeah.
Speaker 3: So, and in Switzerland it's a program also with municipalities and they're it's different because people like you and me we are maybe Swiss and then we say want to participate in the program, and then you got selected and then in the pharmacy your name is registered and then you can buy it.
Speaker 3: But it's recreation, right?
Speaker 3: So that is this program in Germany they want to do it similar like in the Netherlands, that a city of Cologne, for example, want to be part of the experiment, and then you need to grow in the municipality, you need to distribute there and you need to have a point of sale there, vertically integrated, totally.
Speaker 3: But in the city, right, you cannot be in, I don't know.
Speaker 3: You know sell it in Munich, but grow it in, I don't know, berlin.
Speaker 3: So it's really in a regional experiment to test the whole supply chain and to understand, you know, potential issues, to accompany this whole thing with the field research, to get quantified, to get data, to then hopefully change EU law.
Speaker 3: Because this is actually the big thing, why everything is so slow.
Speaker 3: Because internationally, you know, you cannot export an import cannabis because it is under the UN's single convention, it's narcotic, so no one is allowed.
Speaker 3: You need to go out of the UN single convention to say I export the recreation cannabis so and that grew by another country Canada did that but in Europe it's also forbidden under EU law and that is a huge issue.
Speaker 3: That's why you cannot, for recreational purposes, take wheat and fortical and export it to Germany.
Speaker 3: You cannot, it's not possible.
Speaker 3: So what everyone needs to wait is that there is enough pool from the member state to change EU law and say we don't see cannabis as narcotic, which fall under this and that category, and take it out.
Speaker 3: Then you can.
Speaker 3: That's going to take some time, yes, take some time.
Speaker 3: But there's also desire because see the countries like Portugal it's a great country to cultivate.
Speaker 3: They don't have a stronger mass market.
Speaker 3: They want to export, yes, and maybe the Germans say I want the import.
Speaker 3: And then the Dutch say and the Luxembourg and Malta, they are several, the Czech, they are several countries moving, so you need to just collect a team for the same purpose.
Speaker 3: And I think what that is are the Germans and the Dutch and the Swiss are doing it right now as a pilot project great because this they can do with ILLULA and get it started and wait until you have like a critical mass in the end to change the policy.
Speaker 2: Out of all the cannabis you've seen from all over the world, they get imported into Germany.
Speaker 2: Are there any countries where, like, they're really doing a great job, or do you know what I mean?
Speaker 2: No, yeah, totally.
Speaker 2: Who's the best growers in the world?
Speaker 2: I bet each grower from each country will tell you they're the best grower.
Speaker 2: Yes, you're right, but from your perspective.
Speaker 3: I think it's not so much countries I can pinpoint it to.
Speaker 3: It's good in selecting the right partners and having the right process and tools to ensure that you get good product which is fulfilling their requirements, and I think their company is doing that very well.
Speaker 3: So I think that is more the dispute with the wholesale of a biased product knows to scout correctly and select correctly.
Speaker 3: But yeah, I think it's testament to the global industry that you can grow good cannabis all over the world in the past and today and in the future.
Speaker 3: There's a possibility for everyone, but you need to find your proposition, sure.
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