Bogotá — The cannabis business in Colombia has grown at an accelerated pace in recent years, with exports of around $8.4 million between January and November last year, and there is also a burgeoning cannabis-based food and beverage industry based after the first permits were granted by Colombia’s food and medicines regulatory agency Invima.
As the business grows in Colombia, opportunities are opening up for more players to participate in the production chain, and this wave has already touched the startup space, in which nascent companies have identified opportunities in the country.
According toindependent think tank Fedesarrollo, the legal cannabis market could generate 7,772 formal agricultural jobs in Colombia by 2025, and 26,968 by 2030.
If cannabis is for consumers within Colombia, a business requires much less capital investment and infrastructure. In the current market, organic cannabis can be grown without GMP standards, but such businesses can only legally serve consumers and patients within Colombia’s borders.
Luis Merchán, CEO of Flora Growth
Juan Manuel Téllez, CEO and co-founder of cannabis producer Greenlab, explains that thanks to the country’s conditions, cannabis flower can be produced at a low cost and companies are doing so for between $0.10 and $0.30 per gram.
“Because of current Colombian regulations, patients cannot have direct access to the flower, limiting its use to finished products. For this reason, demand for the flower in the domestic market is still low,” he explains.
However, he says that some countries may be paying from between $0.50 to $2 per gram.
For example, he says that “in dispensaries in the United States and Europe, a gram of flower is sold for over $10, so the potential of this industry is very high”.
Why is it so expensive to start a business?
Luis Merchán, CEO of cannabis products company Flora Growth, told Bloomberg Línea that to cultivate cannabis, growers first have to make sure they have strains that can grow in their greenhouses.
Next, growers must identify and test the strains in a process that allows them to check the validity of the strain, test for THC and other molecular components, and make sure the yields and consistency make sense for the grower’s business plans.
Even during the test cultivation and research process, it is important to adhere to a strict set of rules and regulations, he said.
Once the testing is done, growers must apply for a commercial license from the Colombian government as an immediate next step.
License costs in 2023:
Each cannabis business model requires a license in Colombia. For example, for the production of seeds, plant components and cannabis flower, cultivation licenses will be required, but if the business is more focused on the processing of cannabis flower to obtain extracts for the pharmaceutical, cosmetics and food industry, it will be best to opt for a manufacturing license.
“It is not necessary to make the full license payment, as the ministries provide the option to make an initial payment of approximately 11 million pesos ($2,238) per license and the remainder can be deferred in annual installments. The licenses are granted for a period of 10 years”, Téllez explained.
According to figures provided by Greenlab, this is the current cost of the licenses, granted by the Ministry of Justice:
- Seed license for cultivation: 12,449,000 pesos ($2,533)
- License for the cultivation of psychoactive cannabis plants: 43,557,000 pesos ($8,863)
- License for the cultivation of non-psychoactive cannabis plants: 14,866,000 pesos ($3,025)
The license for the manufacture of derivatives is granted by the Ministry of Health:
- Cannabis derivative manufacturing license: 30,000,000 ($6,105)
Luis Merchan of Flora Growth said that operators must remain aware of regulatory requirements and laws, as they are constantly changing for the cannabis industry.
“Although cannabis is still a Class 1 narcotic according to the UN, there is still a tremendous amount of oversight concerning the industry, and business leaders can inadvertently break laws if they are not extremely vigilant,” he said.
What’s needed to launch a business?
Entrepreneurs must consider the costs required for a project, and plan their strategy considering not only the prices of the license but also the purchase or rental of a plot of land, land adaptations or the construction of reservoirs.
Greenlab’s Téllez says it is also key to structure a budget for security and infrastructure: surveillance; greenhouses; lighting, irrigation and ventilation systems; drying and storage warehouses; offices; access to registered genetics, and certifications, among other factors.
He says the average investment for a cannabis cultivation project of 1,000 m2 can currently range from 500,000,000 to 2 billion pesos (between around $101,000 and $407,000), depending on the level of technology used, and that the cost of extraction equipment can be up to $800,000, depending on the characteristics.
Merchán explains that the space required for a commercial crop depends on the scale of the operations sought by the entrepreneur. If the grower prefers a small/medium crop, a greenhouse or small operation of around 1.2 acres would be sufficient to provide the required production.
As the grower with the largest government-sanctioned cultivation license in Colombia, Flora Growth currently has 249 licensed outdoor acres, he explains.
“Other determining factors regarding space for cultivation depend largely on the size of the business an entrepreneur wants to operate - Colombian conditions are ideal for outdoor cultivation, but operators can also grow indoors, which does not require a large amount of space,” he said.
More economical options
Greenlab’s Téllez said that other options for entrepreneurs to get started in the business at a lower cost include the private label model, which “allows CBD [a chemical compound of cannabis] products to be launched in the Colombian market without the need for licenses, since they are over-the-counter cosmetic products.”
Greenlab, for example, supports other entrepreneurs to develop their own brand of CBD products, covering them with their licenses and certifications, “so that they can have a product on the market with Invima registration and thus take the first steps in this industry”.
Another scheme is the distribution model, whereby entrepreneurs can become distributors of CBD products with very low investments.
“There are currently many companies developing this model in Colombia and that are constantly looking for alliances for product distribution,” Téllez added.
Translated from the Spanish by Adam Critchley
