Village Farms International Commences Build-Out of Netherlands Cannabis Facility
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Insights
The commencement of the build-out of Village Farms International's first indoor cannabis production facility in the Netherlands is a strategic move that positions the company to capitalize on the country's legal recreational cannabis market. The fact that Village Farms holds one of only 10 licenses under the Dutch Program to legally produce and distribute recreational cannabis is a significant competitive advantage. This exclusivity likely means reduced competition and a secured market share, which could enhance the company's revenue streams and profitability in the European market.
The company's phased approach to production, starting with a smaller facility in Drachten followed by a larger one in Groningen, demonstrates a calculated capital expenditure strategy. This could be seen as a risk mitigation technique, allowing Village Farms to scale operations based on market response and regulatory developments. Investors should note that the company's ability to fund the build-out from cash on hand suggests a strong liquidity position, which is often viewed favorably in financial assessments.
Village Farms' target to begin production in the fourth quarter of 2024 provides a clear timeline for when the market can expect product availability and potential revenue generation from the Dutch operations. The projected capacity of the Drachten facility at 2,500 kg of dried flower annually and the subsequent Groningen facility with a capacity of 10,000 kg, sets a quantifiable growth trajectory for the company. Investors should monitor the ramp-up of production and subsequent market penetration as key indicators of the company's performance in this new venture.
It is also essential to consider the implications of the international cannabis strategy on the company's overall risk profile. While expansion into the European market offers diversification benefits, it also introduces regulatory and operational risks associated with new market entry. The success of the Dutch Program and the integration of the company's operations within it will be critical factors in realizing the anticipated benefits of this expansion.
The legal landscape of cannabis in the Netherlands is unique, with a long-standing tolerance policy that has recently evolved towards a more regulated market. Village Farms' participation in the Dutch Program indicates compliance with these evolving regulations and an ability to navigate the legal complexities of cannabis production and distribution in the European Union. The company's experience in the Canadian market, which has undergone its own legal transitions in recent years, may provide valuable insights into managing regulatory compliance and leveraging it for strategic advantage.
For stakeholders, understanding the legal framework of the Dutch Program and how it aligns with Village Farms' operations is crucial. The company's proactive approach to meeting regulatory requirements not only fosters a stable operating environment but also positions it as a potential leader in shaping the future of the European cannabis industry. This could have long-term implications for the company's brand reputation and influence within the sector.
– Company Targeting Start of Production for Fourth Quarter 2024 –
VANCOUVER, British Columbia and DRACHTEN, Netherlands, Jan. 31, 2024 (GLOBE NEWSWIRE) -- Village Farms International, Inc. (“Village Farms” or the “Company”) (NASDAQ: VFF) today announced it has commenced the build-out of its first indoor cannabis production facility in Drachten, Netherlands. Through its majority-owned (
The Drachten facility, with capacity of up to 2,500 kg of dried flower annually, is the first of two facilities Village Farms has planned to supply the Netherlands legal recreation cannabis market under the Dutch Program. The second, larger facility, to be located in nearby Groningen, has planned capacity of up to 10,000 kg annually with production beginning as early as 2026.
“As a limited license market with a long-established consumer base and a cannabis-friendly regulatory environment, the Netherlands represents a very attractive near-term opportunity in our international cannabis strategy,” said Michael DeGiglio, President and Chief Executive Officer, Village Farms. “We are thrilled to build on our rich history in the Netherlands to leverage our experience as a leading, profitable cannabis business in Canada for this first major European recreational market. Our two-phased approach to ramping up production enables us to enter the market in a timely and capital efficient manner in line with the roll out of the Dutch Program. We look forward to contributing to the success of the Dutch Program, as well as the communities in which our facilities will reside.”
About the Dutch Closed Supply Chain Experiment (“Dutch Program”)
The Netherlands government’s Dutch Closed Supply Chain Experiment (the “Dutch Program”) is intended to determine whether and how controlled cannabis can be legally supplied to existing retailers (known as “coffee shops” (cannabis cafes)). Under the current approach, the sale and use of cannabis for recreational purposes, including at more than 550 coffeeshops across the country, are tolerated, however production and distribution of cannabis to coffeeshops is prohibited. Under the Dutch Program, 10 license holders are exclusively permitted to produce and distribute cannabis to approximately 100 coffee shops (in 10 designated municipalities) that are required to purchase from the 10 license holders. The Dutch Program will operate and be evaluated over a four-year period, with a potential one-year extension. The evaluation of the Dutch Program will inform the Netherlands government’s decision on the future of Dutch coffeeshop policy, which could include national legalization of recreational cannabis production and distribution.
About Village Farms International
Village Farms leverages decades of experience as a large-scale, Controlled Environment Agriculture-based, vertically integrated supplier for high-value, high-growth plant-based Consumer Packaged Goods opportunities, with a strong foundation as a leading fresh produce supplier to grocery and large-format retailers throughout the US and Canada, and new high-growth opportunities in the cannabis and CBD categories in North America, the Netherlands and selected markets internationally.
In Canada, the Company's wholly-owned Canadian subsidiary, Pure Sunfarms, is one of the single largest cannabis operations in the world, the lowest-cost greenhouse producer and one of Canada’s best-selling brands. The Company also owns
In the US, wholly-owned Balanced Health Botanicals is one of the leading CBD brands and e-commerce platforms in the country. Subject to compliance with all applicable US federal and state laws and stock exchange rules, Village Farms plans to enter the US high-THC cannabis market via multiple strategies, leveraging one of the largest greenhouse operations in the country (more than 5.5 million square feet in West Texas), as well as the operational and product expertise gained through Pure Sunfarms' cannabis success in Canada.
Internationally, Village Farms is targeting selected, nascent, legal cannabis and CBD opportunities with significant medium- and long-term potential, with an initial focus on the Asia-Pacific region and Europe.
Cautionary Statement Regarding Forward-Looking Information
As used in this Press Release, the terms “Village Farms”, “Village Farms International”, the “Company”, “we”, “us”, “our” and similar references refer to Village Farms International, Inc. and our consolidated subsidiaries, and the term “Common Shares” refers to our common shares, no par value. Our financial information is presented in U.S. dollars and all references in this Press Release to “$” means U.S. dollars and all references to “C$” means Canadian dollars.
This Press Release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, Section 27A of the U.S. Securities Act of 1933, as amended, (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is subject to the safe harbor created by those sections. This Press Release also contains "forward-looking information" within the meaning of applicable Canadian securities laws. We refer to such forward-looking statements and forward-looking information collectively as "forward-looking statements". Forward-looking statements may relate to the Company's future outlook or financial position and anticipated events or results and may include statements regarding the financial position, business strategy, budgets, expansion plans, litigation, projected production, projected costs, capital expenditures, financial results, taxes, plans and objectives of or involving the Company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for the Company, the greenhouse vegetable or produce industry or the cannabis industry are forward-looking statements. In some cases, forward-looking information can be identified by such terms as "can", "outlook", "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "try", "estimate", "predict", "potential", "continue", "likely", "schedule", "objectives", or the negative or grammatical variation thereof or other similar expressions concerning matters that are not historical facts. The forward-looking statements in this Press Release are subject to risks that may include, but are not limited to: our limited operating history in the cannabis and cannabinoids industry, including that of Pure Sunfarms, Inc. (“Pure Sunfarms”), Rose LifeScience Inc. (“Rose” or “Rose LifeScience”) and Balanced Health Botanicals, LLC (“Balanced Health”); the legal status of the cannabis business of Pure Sunfarms and Rose and the hemp business of Balanced Health; risks relating to the integration of Balanced Health and Rose into our consolidated business; risks relating to obtaining additional financing, including our dependence upon credit facilities; potential difficulties in achieving and/or maintaining profitability; variability of product pricing; risks inherent in the cannabis, hemp, CBD, cannabinoids, and agricultural businesses; market position; ability to leverage current business relationships for future business involving hemp and cannabinoids; the ability of Pure Sunfarms and Rose to cultivate and distribute cannabis in Canada; existing and new governmental regulations, including risks related to regulatory compliance and regarding obtaining and maintaining licenses; legal and operational risks relating to expected conversion of our greenhouses to cannabis production in Canada and in the United States; risks related to rules and regulations at the US federal (Food and Drug Administration and United States Department of Agriculture), state and municipal rules and regulations with respect to produce and hemp, cannabidiol-based products commercialization; retail consolidation, technological advances and other forms of competition; transportation disruptions; product liability and other potential litigation; retention of key executives; labor issues; uninsured and underinsured losses; vulnerability to rising energy costs; inflationary effects on costs of cultivation and transportation; recessionary effects on demand of our products; environmental, health and safety risks, foreign exchange exposure, risks associated with cross-border trade; difficulties in managing our growth; restrictive covenants under our credit facilities; natural catastrophes; the ongoing COVID-19 pandemic; and tax risks.
The Company has based these forward-looking statements on factors and assumptions about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. Although the forward-looking statements contained in this Press Release are based upon assumptions that management believes are reasonable based on information currently available to management, there can be no assurance that actual results will be consistent with these forward-looking statements. Forward-looking statements necessarily involve known and unknown risks and uncertainties, many of which are beyond the Company's control, which may cause the Company's or the industry's actual results, performance, achievements, prospects and opportunities in future periods to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, among other things, the factors contained in the Company's filings with securities regulators, including this Press Release.
When relying on forward-looking statements to make decisions, the Company cautions readers not to place undue reliance on these statements, as forward-looking statements involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward-looking statements made in this Press Release relate only to events or information as of the date on which the statements are made in this Press Release. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Contact Information
Lawrence Chamberlain
Investor Relations
LodeRock Advisors
(416) 519-4196
lawrence.chamberlain@loderockadvisors.com
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