Timo Bongartz joined Cannavigia on 1 October as the Chief Commercial Officer. We had a conversation with him about why he’s here, his vision and where the cannabis industry is heading.
Why did you decide to join Cannavigia?
Previously I worked in the horticulture industry, setting up the business section in Osram. It was a long and interesting journey, but I was ready to do something new. I see myself more as a builder than a manager, so I am always looking for new challenges. The previous job was a hardware job and for me it was time to go back to software. I was looking for a digital company and have known about Cannavigia for a long time. I reached out and told them that I am interested in making a change. There were other offers, but I feel particularly strongly about Cannavigia because they have a great team and are very well positioned in the market – both with regards to their product as well as the need for the product. Good products and people are the foundation of a successful business.
The industry exploded a few years ago and now it seems that there are some troubles. How do you see the industry right now?
I think at the moment the industry is going through the realisation of their reality. In the past a lot of business models were built on hope. We all know that that is not the correct path. We are in the valley of tears and slowly starting to go up again, becoming mature and professional. This is the normal curve for any new industry. Cannabis is nothing new, but cannabis as a legal industry is something new. Everybody has been investing heavily in facilities and any business that is very asset heavy and hits a slump, will have trouble. There are issues with additional funding and a lot of companies have high operational expenditure and with the drop in revenue they must get these operational expenditures under control. This is why Cannavigia is such an important part of the industry because it gives you control over your facility. The place where the industry is right now, is the perfect place for Cannavigia as a company.
There are various wars influencing the industry and we are also dealing with the remnants of the Covid epidemic. Do you think the industry is strong enough to conquer these setbacks?
100% yes. Not for everybody, because there are companies that will fail, and this is normal for a new industry because some do not have their business model under control. If you ask some companies who their market is, they have no idea. Several companies have this under control though. They have clear target customers and sales channels, and these companies will survive. Some of the big companies who are trying to control the industry need to have their stranglehold broken. If you look at some of the big Canadian companies you will see that they got their funding through retail investors, these are not professional investors. People invested because they thought it was the green-rush time. They gave their money to companies who burnt through cash and never turned a profit, and these companies are an example of how not to do business. When the funding stops for these companies, it will free up investor possibilities and also free up a lot of product that is now sitting on the shelves. Canadian product is flooding the market, and this prevents the growth of local markets. Because they are just letting product go to turn it into cash, the price is dropping, and this is adversely affecting the smaller companies and new companies in countries like Thailand. We will cross this bridge, but it will go faster if the retail investors stop pumping money into the big companies. More countries are realising that their existing drug policies are not working, and they are making changes to their laws. This means that the possibility for growth is there.
Changes in countries like Thailand and Malta happened with a huge fanfare, yet they are not moving forward. Is this happening because it’s a new industry or is there a root problem that needs to be addressed?
These changes are new for all countries to move from an illegal to a legal market. The only historical example we have to look at is the Prohibition in the USA and that is almost 100 years ago. There is no blueprint and if you do not have that, mistakes will be made. If the cannabis grower goes to a bank, the bank has no policy how to go about it. And it’s not just the banks, this is all the businesses that cannabis growers need. The working relationship needs to be developed. At the same time, we must distinguish between medical and recreational. The medical market is growing steadily, it is working and it is improving, and it is here to stay and with the end to stigmatisation it becomes easier to prescribe. The recreational market is different. A lot of people thought it would just happen and it did not. In a lot of countries, a significant percentage of people are not in favour of legalisation and therefore the only way to go about it, is to do an experiment – a pilot project. Then you are gathering data, and this data can be presented as a fact and therefore help to change the attitude of the people who do not approve. This why things are moving slower in Switzerland, Germany, and the Czech Republic, but it is moving forward, and it is solid. This is the game changer. This will not only influence international law, but also help to get society behind it. People believe data and because it is a new industry, we have no data. So, we need to collect it. Society needs to be taken on this journey of a drastic regime change. Medical has that framework already and recreational needs to create this framework step by step.
Any predictions for the future?
Germany is the biggest country in Europe and therefore potentially the biggest market. Them moving towards a pilot project will help to remove the stigma around cannabis medically and thereafter recreationally. The Netherlands have chosen their ten growers which means that the stock that is bought by the coffee shops will be legal. The pilot project in Switzerland is well under way and seems to be running smoothly. In Europe we are therefore seeing that the medical market is growing and that it is supported and soon the data from the recreational projects will start coming in. The duty of the government is now to collect this data and show the proof that they want a better product, that they want to protect minors and that they want to suppress the black market. Once they have proven that, the progress of the recreational market will continue. I see this happening in Europe, but I also see this happening in Africa and other continents. I think that the economic South will play a big role in moving forward. This will only happen if the market opens for free trade. Everybody has their eye on Thailand even though the rest of Asia is very conservative. Tourism from China to Thailand will also help the normalization process. Lastly: It is also important to create a critical mass to change EU law. If Germany wants to change it, if Portugal wants to change it, if Czech Republic wants to change it then these countries must stand together and change EU law. Free trade is part of the Schengen agreement and must be pursued by all countries interested in this.
A final word?
There are currently 150-170 growers in Germany. Mostly they are one hit wonders. They grow one crop and cannot follow it up with a crop that is similar. Sustainable sales and revenue are only possible if you have the correct cannabis management software helping to have stable products in the end.