Health Europa – The changing attitudes of the cannabis industry and shift towards non- smokable products

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Health Europa – The changing attitudes of the cannabis industry and shift towards non- smokable products 1
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Oliver Zugel, CEO of Foliumed, talks to us about the market dynamics of the Columbian cannabis industry, his company’s strategy and the emerging shift towards non-smokeable products.

Foliumed is an export-focused, Colombian producer of medical cannabis extracts and CBD consumer products. Organically growing its own proprietary strains in the sunny highlands of Colombia, the company operates an extraction facility complying to international standards. Here, CEO and Founder Zugel talks to us about the changing Columbian attitudes of the cannabis industry, the emergence of low cost producers, and the steady shift towards non-smokeable products.

Tell me a little bit about yourself and how you got into cannabis

After graduating from the London School of Economics, I had the privilege of working in strategy consulting with Harvard Professor Michael Porter. This prepared me to become CEO of highly regulated gaming companies, managing over 20,000 employees and going public in 2007.

On one of my trips to Las Vegas, I met Shane Terry, a serial cannabis entrepreneur who had been a F-18 fighter pilot and Top Gun commander in his prior life. Together we created Taproot, my first cannabis venture, an extraction company producing one of the bestselling vape pen brands in the USA. Both of us were convinced that that non-smokeable products would be the future of our industry.

What are the benefits of shifting to non-smokeable products? Have you seen a transition from smoking/inhaling cannabis to individuals purchasing more non-smokeable products?

The tendency to transition from smoking cannabis to vaporising and consuming non-smokeable products is already well established in North America, where the share of flower in total consumption has plummeted from 80% to 50% some years ago.

In Europe’s medical markets, physicians are reluctant to prescribe flower as they can be inconsistent from batch to batch, hard to dose and produce toxic substances. Medical vaporisers, synthetic THC medicines and standardised cannabis extracts are better alternatives but are not yet widely available.

What inspired you to create Foliumed?

Through Taproot, I realised that producing cannabis indoor consumes absurd amounts of energy. Imagine someone having a beer, brewed with indoor-grown
barley and hops… not only would it cost exponentially more, but people would be very concerned about sustainability. This will not be different in cannabis, and within 10 years most cannabis will come from low cost locations where it can be grown year-round under natural sunlight.

This is why I created Foliumed in Colombia together with Shane and our local partner Diego Felipe Navarro who have been dear colleagues and friends ever since. At Foliumed, we are in the lucky situation of cultivating cannabis under the most favourable climatic conditions in the world, supported by an excellent regulatory framework the Colombian government created with great foresight.

What makes Foliumed different from other cannabis producing companies in Colombia?

Our industry in Colombia is still in the early innings, and we work very closely together through our industry association. We all share the common goal of turning Colombia into a global cannabis powerhouse, providing new sources of income for rural communities and tax income for the government, fundamental for political stability following the 2016 peace agreement.

None of this can be achieved by a single company, and we are glad that everyone is contributing to this objective even if each company’s strategy differs. Some of our competitors focus on the local market, others on exports of ingredients or the production of CBD products. Many have the ambition to replace the Canadians as the world’s largest producers, and have raised hundreds of millions of dollars to pursue that goal.

Foliumed is 100% financed by its founders, and therefore we always needed to make the most of what we have got…. literally turning over every dollar three times. Diego Felipe Navarro and his team have done an incredible job in placing us amongst the leaders despite those constraints.

We do not really want to be the largest company in Colombia, much less so in the world, and are very careful where we place our bets. For example, whilst some
companies pursue cultivation on hundreds of hectares, for us cultivation is more of necessary evil to control the quality of our supplies.

With our eyes firmly set on Europe, we think “the bigger the better” philosophy of some of our competitors really does not apply. European medical regulators care
about efficacy, safety and reliability, and this will not be any different in cannabis. We feel that rather than volume and price, success in Europe will come from having pharma capability, distribution and brands, and that’s the game we want to play in conjunction with partners who are leaders in those fields.

Health Europa – The changing attitudes of the cannabis industry and shift towards non- smokable products 2

How have the attitudes, policy and regulation changed in Colombia over the years regarding the use of cannabis for recreational and medicinal purposes?

It is important to understand why the government of President Santos decided to establish a medicinal cannabis framework in 2015. With Colombia being one of the world’s leading exporter of agricultural commodities like coffee or roses, cannabis offered diversification with higher growth, better margins and the ability to capture added value. It was equally as important to find a new source of income for rural communities who had been involved with the illegal drug trade, adding much needed stability to the country after decades of civil unrest.

This also explains why every producer in Colombia is obliged to buy at the least 10% of our flower from small farmers. The government simply does not want the benefits of this new industry to accrue exclusively to large foreign corporations, a lesson learned during the banana wars so vividly described in Gabriel Garcia Marquez’ One Hundred Years of Solitude. Also, it is interesting to note that neither recreational consumption nor the export of flower is allowed, in an attempt to establish medical cannabis processing know-how locally.

What is the developing role of the medical cannabis industry in Colombia?

We believe that medicinal cannabis has the possibility to become the largest export sector for Colombia. Whilst there is a lot of hype and speculation associated with this green gold rush, we truly believe in the potential for medical cannabis to do a lot of good for the country. For example, on our farm nearly 90% of employees are single mothers, and our management is 100% Colombian. Well-run Colombian cannabis companies already are presenting their products worldwide and contribute positively to the country brand of Colombia.

How do you expect the medical cannabis industry to grow internationally? What are the opportunities and challenges that international expansion can bring?

We believe that the most interesting opportunity for Foliumed is Europe. Whilst most industry observers agree that Europe’s medical cannabis market will be larger than North America, we believe this will take time. Europe is more strictly regulated and demanding in terms of quality standards, and will not permit the type of liberal advertising we see in the USA. In addition, with the EU in political crisis, each country will treat cannabis regulations differently for the foreseeable time.

Penetrating the European market therefore requires a country-by-country approach, and scaling up with a “one-size-fits all” philosophy does not work. Local partnerships and strategic alliances are critical for success, and those cannot always be established through acquisitions paid for with overvalued stock.

We think that these barriers play in our favour, and we are confident to establish a meaningful position for Foliumed in a market with high barriers to entry, limited competition and attractive margins.

Oliver Zugel
CEO
Foliumed

Please note, this article will appear in issue 10 of Health Europa Quarterly, which will be available to read in July 2019

Read the original article at: www.healtheuropa.eu

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