Cannabis’s future is clearly global. It seems every few months a different country proposes new regulations to allow medical or recreational use in some form. Investors and operators with successful businesses in the U.S. and Canada are understandably interested in continuing this activity abroad, and many are aggressively investigating and pursuing those opportunities.
Having personally grown cannabis and consulted in three different countries (Canada, U.S. and Colombia), I can affirm that moving into an international market is not always seamless. Cultural, environmental and governmental challenges may outweigh the benefits of expanding internationally. Consider the following questions and tips as you decide whether launching a cannabis operation on foreign soil is the right move for your business.
Will this opportunity present an elevated safety risk to you or your employees?
1. Determine the political stability of the region where you are considering doing business. As cannabis legalization spreads to Asia, Africa, Central America and South America, concerns surrounding gangs, drug cartels and civil war become more prevalent. No cannabis opportunity is worth being kidnapped.
2. Consider elevated risks of establishing cultivation sites in countries or regions where natural disasters are common. Earthquakes, hurricanes and severe flooding are common to many regions that are otherwise ideal for cultivating cannabis. Caribbean islands are subject to annual hurricane threats and flooding, while earthquakes are common to Colombia.
3. Verify if the country in question presents an increased risk of human disease. Yellow fever occurs in parts of Africa and South America, and malaria is found in more than 100 countries. Stay up to date on vaccinations and take any preventative medication your doctor recommends.
4. Familiarize yourself with native wildlife that could pose a threat to your cultivation team. Venomous snakes, spiders and scorpions can be real concerns for outdoor cultivators. On two different occasions, I have seen caiman (small crocodilians) in bodies of water bordering Colombian grow sites. While not a major threat to humans, startling a caiman could mean bad news for your ankle.
5. Learn a second language. If you don’t speak the local language, and locals don’t speak English, prepare to have a translator with you at all times. Local translators' pricing will vary depending on the local economy, but they are preferable to bringing one with you as they will better understand the local slang. Clear communication can prevent dangerous situations. Before heading out to explore on your day off, it’s a good idea to ask locals about the safety of the area that you will be visiting to avoid any crime hot spots.
Does pursuing this opportunity make business sense?
6. Identify whether the country in question will allow for medical and/or recreational sales. Obviously, both is best.
7. Seek countries whose regulations allow for export as well as domestic sales. Canada, Lesotho and Colombia currently allow for export. But a small island with an inexpensive labor force may not be a great business opportunity if export is prohibited and the local population is small.
8. Dig into regulations that restrict cultivation. If laws will limit cultivation area or plant count, building a profitable business may be a challenge. Based on my experience in the domestic Canadian market and export-focused Colombian market, domestic producers need at least 20,000 square feet to compete locally, and international producers should aim for a minimum of 100,000 square feet.
9. Be clear if regulations allow for both high-CBD and high-THC cultivation. Although CBD is found in everything from medicine to cosmetics, there is tremendous supply competition on a global scale. Legal THC production is much less common and, therefore, much more profitable.
10. Understand what form of cannabis you can export. For example, South Africa is permitted to ship dry flower, while Colombia may only export oil.
How much will this start-up cost? How soon will you earn your money back?
11. Anticipate substantial pre-cultivation costs. Licensing, lobbying, translators, legal fees, accountants and consultants will consume a lot of money before even one seed is planted. Set aside at least $200,000 USD for these initial expenses.
12. Budget about $2M USD for buying land, building greenhouses, acquiring genetics and hiring. That number will fluctuate greatly based on the size and scope (e.g., outdoor vs. greenhouse) of the operation. Big operations should plan to raise much more.
13. Get a handle on the hidden costs of doing business. Operating expenses such as electricity and fuel can be surprisingly expensive in many countries. Commercial cannabis growers in Puerto Rico pay double the electrical costs of any U.S. state, while fuel prices in most European countries are twice that of the U.S. or Canada. Cannabis taxes and exporting fees could be prohibitively expensive.
14. Research international market demand. If exporting, what will be the “going rate” for wholesale product? Will you be globalizing your own brand or providing white-label products to larger companies?
15. Research local market demand. How much are consumers willing to pay on the domestic market? For a starting point, look to local pricing of illicit cannabis.
Where should you put down roots?
16. Allow differences in elevation, temperature, weather and solar radiation to dictate the appropriate growing structure. A commercial cannabis operation in Canada won’t look anything like a commercial cannabis operation in Laos—and it shouldn’t.
17. Guarantee a reliable water source for your cultivation facility. Well water is preferable to river water, but anticipate utilizing some form of water treatment, such as reverse osmosis equipment, regardless of the source.
18. Ensure that your cultivation site is accessible. If you plan to build a greenhouse in a rural location, make sure roads leading to your site can support heavy vehicles such as 18-wheelers and that heavy rains won’t render roads impassable.
19. Locate your operation away from chemically intensive crops. Each country has its own pesticide regulations and standards. Herbicide and pesticide drift from neighboring farms can severely damage cannabis or render it unsaleable.
20. Take advantage of the sun. While indoor grows may be appropriate for cold climates or urban areas, outdoor grows in sunny or tropical regions can eliminate the need for greenhouses altogether.
Where should your money be spent?
21. Staff your cultivation team with the local workforce. Low labor costs are one of the driving reasons to cultivate in another country.
22. Contract greenhouse builders who are experienced with large international projects. A company from Colorado that specializes in hoop houses may not have the breadth or know-how to build a tropical greenhouse in Thailand.
23. Identify a local general contractor (GC) to manage all construction. You’ll go crazy trying to learn building codes and local idiosyncrasies surrounding construction. A reliable GC will help you avoid getting ripped off.
24. Be creative when sourcing high-volume inputs, such as grow substrates. Shipping soil halfway across the globe can be costly. Consider local materials that can be blended to create appropriate grow substrates, such as coco fiber or rice hulls. Most of the world’s coconut and rice production occurs in South American and Asian countries, so commercial growers in these regions can save money by utilizing by-products of these industries.
25. Use growers and consultants experienced with high-profile cannabis start-ups. Many countries have been cultivating cannabis for decades, but not within a legal, regulated framework. Recruit head growers from the U.S., Canada or Europe to assure Good Manufacturing Practices (GMP) and to prevent non-compliance issues in the future.