Understanding the Dutch Cannabis Market

The Netherlands is preparing an experiment with the legal cultivation of cannabis for recreational use. In this article we explain the present Dutch Cannabis Market and give a preview on the experiment and its business opportunities.

Tolerance policy

The Netherlands was the first country in the world to decriminalize a part of the cannabis market. Since the 90’s licensed coffee shops are allowed to sell cannabis products for recreational use and offer their customers a safe haven to consume cannabis under strict conditions.

The actual legal situation is confusing. Producing, transporting and selling cannabis is illegal, but selling cannabis in special designated places, the world-famous Dutch ‘coffee shops’, is tolerated with a special license from the local government. Customers need to be adult (18+) and the coffee shops have to follow a strict set of rules (‘gedoogcriteria’). Two of these rules are: The maximum storage quantity in a coffee shop must not exceed 500 grams, and the maximum purchase quantity per customer is 5 grams.

Backdoor paradox

Where it’s allowed to enter a coffee shop to buy cannabis (‘front door’), it’s illegal to produce cannabis and to bring it to the coffee shop (‘back-door’). This creates the so called ‘back-door paradox. The situation is hard to explain to the thousands of tourists that visit the coffee shops in Amsterdam. Even many Dutch don’t fully understand this.

It also causes some troubles. The illegal cultivators cannot guarantee a daily supply to the coffee shop. As a result, coffeeshops must be creative. It’s a common practice to buy larger quantities of cannabis ‘whenever good quality is available’ and keep them in stashes outside the shop. This is illegal but coffeeshop owners have no other choice. Whenever the police discover a stash, the related coffee shop gets a penalty, or worse will be closed.

No consumer protection

Customers who buy ‘legal’ cannabis in a coffee shop are not in violation, but the product they buy has no guarantee of any quality, since it’s an illegal product. The coffee shop owner is not allowed to test the cannabis in a laboratory, there is no government-controlled label. The customer’s health is not protected by any rule or system.

Experiment

To change this paradoxical situation, the Dutch government decided to start an experiment with a regulated back-door. The experiment will examine the impact on cannabis cultivation and sales for recreational use in a closed chain for the duration of four-and-a-half years. Coffee shops in 10 designated Dutch cities will only sell cannabis that is cultivated by licensed producers, starting in 2022.

Starting in 2020 cannabis producers can apply for a cultivation license within this Dutch experiment. The maximum 10 licensed producers have to produce their cannabis products in the Netherlands and can only sell to the 79 coffee shops that have been selected to participate in the experiment. Within the experiment the government wants to guarantee a big variety of cannabis strains to the customers.

Although the scale of the experiment is limited, it’s a first step to legalise the entire cannabis chain in the Netherlands in the long-term.

Business opportunities

The Dutch experiment offers a lot of business opportunities. Are you active in the cannabis market (growing, building growing facilities, genetics, water management, pest control, lightening, climate control, packaging, security, IT solutions or others) and do you want to explore the Dutch market opportunities? 420 Consultancy can navigate you through the Dutch cannabis market, introduce you to the relevant stakeholders and help you to survive the regulatory pitfalls.

Feel free to contact us.