Going Dutch: How The Netherlands Still Influences Europe’s Cannabis Trade

By Oliver Bennett, Special Contributor to New Frontier Data

The Netherlands has been Europe’s key cannabis pioneer. Its world-famous culture of cannabis-selling coffee shops dates back to 1976, but the regulations surrounding the phenomenon have been scrutinized over the years. Amsterdam’s recent attempt to quell cannabis tourism demonstrates an increasing dissatisfaction with the current status quo.

The tolerance for personal-use recreational cannabis has deep roots in Dutch society, which for over four decades has given the impression of a pragmatic and liberal national environment. As well as the revenues gained from leisure and taxation which recreational-use cannabis have brought, the Netherlands has given licenses for firms to grow medical cannabis since 2003, making it the primary destination for patients from more restricted countries (including other EU nations and the U.K.), and furthering its status as a continental beacon to the industry.

Still, there are long-term inconsistencies in the country’s cannabis policy, most notably regarding recreational cannabis. Visitors to the Netherlands often do not realize that it is a criminal offence to sell cannabis, and that coffee shops are only tolerated insofar as they obey certain rules, including not selling to minors (i.e., ages under 18). And while coffeeshops can sell cannabis in that decriminalised environment, they are not allowed to purchase the amounts of cannabis they need to meet demand – leading to inconsistencies and supply-chain issues which lead shops to trade with the illegal market.

The upshot from the mixed approach is that coffee shops have for a long while bought through the ”back door”, enabling a vast grey area of flourishing illegal activity.  A huge, illegal cultivation industry (based primarily in the southern region of Brabant) is destined for both domestic use and export. So big is the Dutch illegal cannabis sector that statisticians have estimated the industry’s being worth €4.8 billion a year – this despite a decline in the actual number of coffee shops.

Supporting the illicit activity has long been a bone of contention in the country, and it is set to change. The Netherlands is currently trialling a major pilot program (known as the “controlled cannabis supply chain experiment”) to assess applications to grow recreational cannabis, along with importing from North America’s bigger suppliers.

The four-year program dates to 2018, when the government first allowed up to 10 licensed importers to supply local adult-use recreational cannabis to coffee shops in 10 selected parts of the country. There remain doubts about the plan and its conditions – the aims are to allow greater regulatory oversight to help decrease crime.

Some 149 applications came through this year from companies in North America eager to supply the Dutch coffee shops and gain footholds in the wider European recreational market. The program is said to need 56 tonnes of cannabis per annum, and will roll out next year with the aim to regulate the cannabis supply to the coffee shops and improve social impacts in terms of crime and public health. The North American suppliers will be high-scale, as only applicants which demonstrate that they can cultivate to scale (a minimum of 6,500 kilograms per year) – will be considered. Regulators may yet influence the culture of coffee shops, too, toward transitioning from bar-style settings to more of a dispensary-style model.

Some proprietors are pleased with the program, suggesting that the Netherlands could become the leading cannabis market in Europe. Others have qualms, noting that  about a quarter of the Dutch recreational market relies on imported hashish rather than herbal cannabis, and thus remains in illicit hands.

On the medical cannabis side, supply and production for a legal program nearly 20 years old is overseen by the Office of Medicinal Cannabis (OMC) in the Dutch Ministry of Health, with the Netherlands’ sole supplier being Bedrocan. The  Netherlands enjoys a special exemption from the ban mandated by United Nations’ Single Convention on Narcotic Drugs, and it exports medical cannabis to several other European countries (e.g.,Denmark, Finland, Italy, Poland, and Sweden, among others) – and last year increased its exports to Germany, Europe’s largest market, pending that country’s own experiments in domestic production.

Both the recreational and medical markets will transform the Netherlands, and build on the nation’s status as a leader in the cannabis industry. But so ingrained is the reputation of Netherlands as a cannabis haven that it is incorporated in branding: Canada’s retail chain, Dutch Love Cannabis was so named “in testament to Amsterdam in the Netherlands, a well known (decriminalized) destination for cannabis tourism, and leader in destigmatized cannabis use”.

Ever so appreciated in the legal cannabis culture at large, the Dutch experiment shall likely remain a subject of fascination among observers and investors alike for the foreseeable future.