In light of a possible federal legalization, a number of companies in the US adopted the Multi State Operator (MSO) model. Being scattered across the US with redundant infrastructure in every state dramatically increases costs and complicates the supply chain, inhibiting the industry from reaching its full potential. “US operators are generating a lot of revenue today, which illustrates the significant pent up demand for the regulated industry vis-à-vis the black market,” says Kyle Detwiler, CEO of Clever Leaves. “But I think we are now at the verge of an industry evolution. When Biden won the election, everybody got excited about a possible federal legalization. Yet, I think that the next movement will be multi-national players; that’s going to be the next trend and our time to shine is around the corner.”
Multi-national operator
Clever Leaves is indeed no MSO, but rather an MNO, which stands for multi-national operator. “When we started, the first thing that we wanted to do was to find a balance between focus and nimbleness,” Kyle recounts. “Usually, successful businesses focus on doing one or two things better than the rest. We knew since the beginning that we want to focus on one or two countries and focus on the cultivation and extraction segments– we didn’t want to pin places all over the world. The risk here though is that you might find yourself in a situation where the ground shifts underneath your feet, and everything you had done up to that point would need to be reconsidered.”
Indeed, Kyle further explains that initially some regulations weren’t clearly defined, and some companies relied on that. “But then, some of those changed; plus, a very few and elite group of EU-GMP producers started to come online, like Clever Leaves.” For multi-national operators like Clever Leaves, securing an EU-GMP certification is an incredibly important step, as that allows companies to export their cannabis products in markets with very big potential, such as Germany. “The industry on the pharma side takes a long time to develop,” he says. “First, you want to spend the time necessary to get all the licenses and certifications, and only after you can start marketing. Yet, you might think you are done once you've reached this point. Truth is, it is going to take another while to start shipping significant amounts of product – initially, you start by sending only a handful of samples. So, you have to keep staying focused and working.”
A favorable regulatory environment
Such a resilient approach has now allowed Clever Leaves to ship its products to more than fourteen countries. Not only because the company is EU-GMP certified, but also because it has set up its operation in a country with a favorable regulatory environment. “When we started, we looked at different countries, and picked Colombia for the great combination of growing environment, and for the regulations that allowed export,” he continues. “Then, we went to the EU, and looked at Greece, North Macedonia, Spain, Germany, Denmark, and the UK; eventually, we came to the conclusion that Portugal had the right balance of low operational cost and perfect growing climate. But also, if you step outside of cannabis, you can see that Portugal has a long tradition of controlled environment agriculture, so the country offered us the perfect stage.”
With cannabis regulations around the world constantly changing, there is quite a bit of uncertainty. Yet, Kyle is sure of one thing. “The market is continuing to get built,” he says. “And with new countries coming online, more opportunities will present themselves. At the same time, you see established markets heading towards a potential change: for instance, in the US, a lot will depend on if and how Biden will address federal legalization: if he will go for a federal model, then the approach to the market will be more focused on partnerships; on the other hand, if regulations will be different and will still let single states handle the matter, then you would rely more on MSOs as they can be great partners in such a context.”
And when it comes to partners, Kyle remarks that Clever Leaves is very much open to new partnerships, to advance the industry in its entirety. “We have gained a lot of knowledge and hands-on experience with regards to operating a cannabis business on a global scale,” he says. “We can help new companies establish themselves and give them a head start in this exciting industry. There are so many countries with such huge potential, and cannabis companies should keep an eye on them. For instance, South East Asia is a location to pay attention to: regulations are getting more progressive there. This will create a more competitive market with better quality products at competitive prices.”
For more information:
Clever Leaves
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cleverleaves.com