In a fast changing market, quality and flexibility are critical
Jacopo Paolini is a founding partner at Enecta, an Italian-Dutch company that develops new cannabis genetics and is a producer and seller of high-concentration cannabinoid products for the medical, pharmaceutical and nutraceutical industries. The company recently began marketing two new hemp cultivation seed varieties for CBD and CBG production. Founded in Holland in 2012, Enecta is based in Bologna, Italy.
HempToday: Talk about your CBD business, branded, wholesale and bulk ? What percentage of your overall business is in bulk and wholesale?
Jacopo Paolini: In the last three to four years, the market changed fast. In 2016 and 2017 our Italian production of biomass and extracts was 60% in bulk and 40% in final products. The overall demand for CBD grew constantly throughout Europe, but the price of the bulk material available on the market dropped drastically.
Unfortunately, several companies are filling the market with cheap bulk material that has neither quality control nor traceability of the production process. This can have a bad impact on the entire market due to the fact that all these products are consumed by people. Our strategy was the opposite. We improved our expertise in growing and extracting CBD, together with a more strict control of each step of the production process, with the aim to guarantee high quality and fair prices to the final client. This strategy is paying off and currently our production is 72% in final products and 28% bulk.
HT: Tell us about more about your products and quality assurance; What systems do you have in place that address product quality?
JP: We monitor, control and certify each single step of the production process. All the genetics are registered at the Community Plant Variety Office (CPVO), three of them are at the National Catalogue (NAK) in the Netherlands, and two of them in the state of Colorado (U.S.). The cultivation process is according to Good Agricultural and Collection Practices (GACP) guidelines.
We’ve created a GACP manual for our farmers. We’re discussing with the national association of farmers in Italy about expanding distribution of our manual to all the farmers in Italy. The extraction process is EU – GMP certified by a German auditor. In 2021 we expect to obtain EU GMP certification for countries such as Australia and NZ, which are slightly different from Europe.
HT: What’s the difference between “registered” or “certified” seeds in Europe and the USA?
JP: In the U.S., within six months you can obtain registration in the national catalog. In Europe, it takes three years. In the U.S. only 400 grams of seeds are needed for testing, while in Europe it’s around three kilograms. Also, the current level for THC in Europe is 0.2% while in the U.S. It’s 0.3%.
HT: What’s the geographic scope of your customer base on Enecta’s CBD products? Where are those products sold?
JP: Our network extends to most parts of Europe as well as Canada, Australia, Brazil and soon Japan. In Europe, our biggest markets are in Italy, Greece and Spain. For the years 2021 and 2022 we are focusing on the UK and France.
HT: What kind of cannabinoid levels can we expect in the new varieties, Enectaliana and Enectarol?
JP: Enectaliana is a genotype with high CBD levels. The results from the last harvest are: 6.0% CBD and less than 0.2% THC. Enectarol, on the other hand, is a genotype with high CBG. From the last harvest, we got 5.5% CBG and less than 0.1% THC. For outdoor cultivation we collected data from two sites: In northern Italy about 50 km from Verona, and in central Italy about 100 km from Rome.
HT: What are the other key characteristics of these varieties?
JP: Our strains are photosensitive (not automatic), tested in areas going from the south of Europe (Greece) to northern Europe (Lithuania) and always with good results. Other than the contents of cannabinoids, our aim was to obtain a higher quantity of biomass, reduce the quantity of seeds needed per hectare, and cut down the amount of stalk waste.
HT: How long were these varieties in development?
JP: The breeding program started in early 2015, and we were able to release the first stable pre-basic seeds in 2017. In 2018 we started the registration program at the CPVO and the following year, 2019, the registration in the NAK. Now we’re in the process of improving the replication process. In the first part of 2021 we were able to reproduce almost 2 million seeds, and we’re confident that by the end of the year we can guarantee 10 million seeds each 4-month cycle.
HT: These new varieties are nearing a listing in the EU seed catalog. Tell us a bit about the process to get those listings.
JP: In order to have the varieties registered in the EU, it’s necessary to pass two important tests. The distinctiveness, uniformity and stability (DUS) test establishes if the new variety is clearly unique among all other existing varieties within the species; whether the variety remains uniform during propagation; and whether its characteristics remain stable during repeated propagation.
Testing for Value for Cultivation and Use (VCU) is a check against other industrial plant varieties to establish parameters important for hemp production; ~95% of production must be close to standard in order to pass.
In 2019 and 2020 we successfully passed 1 DUS and 1 VCU test, and in 2021 we’re completing VCU 2 . At the end of the process, we’ll be granted the blue label and listing in the EU catalog that will give us the possibility to reproduce and market seeds in unlimited amounts. Our strategy is to invite as many farmers as we can from all around Europe to test our varieties and to get ready for the massive launch in 2021
HT: Where do you see the markets for these new varieties?
JP: The biggest markets are in the Czech Republic, Germany, Poland, Croatia, Romania, Greece, Hungary, Lithuania, France and Spain, due to the similar climate conditions to those of Italy. At the end of 2021 we will release variations of our strains which are more suited for producing CBD and CBG flowers.
HT: What is your outlook for the CBD sector over the next two years?
JP: Exciting. New high-cannabinoid strains and new methodology of extraction (no solvents and no CO2), will drastically reduce the price of the bulk material and we will translate this into lower prices for our customers while maintaining the same quality level. I think I’m not the only one taking this road, so we’ll see a lot more products on the market with lower prices – as much as 30%-35% lower.
HT: How has your company managed through the pandemic?
JP: Personally I took a lot of CBD against anxiety and stress in 2020. It was a tough year for everyone. First of all, our duty was to assure all our employees stability in their job and all the tools necessary to be able to work online. We didn’t have layoffs, and, in fact, hired some new people. On the commercial side, in the first part of the year we faced a stop involving all the European shops that were buying our products. So it was a hard time, but restructuring our business model, we quickly switched from a B2B to a B2C model, and the change is paying off.
HT: Your company is coming up on it’s 10 year anniversary in 2022. What’s been the key to Enecta’s longevity?
JP: When you’re doing something that you love, time flies. Three things are the secret to our longevity: First, humility. From the first moment, I felt that the CBD market was going to be one of the biggest markets ever. I decided to enter the market with little steps, to be a student and learn how to grow together – and never pretend to be a master of it.
Second, flexibility. From way back in 2012 when my partner Marco and I were resellers of Enecta branded CBD products, each year we tried different ways to grow. Sometimes it went well, sometimes not so well. But we were always able to rise from a fall and run faster when the path was right.
Finally, responsibility. Our products are used by individuals for health reasons. So it’s our duty, it doesn’t matter if it costs us more, to guarantee our clients the highest quality products and to continually invest in reducing the production costs and the final prices of the products. Only in this way will more and more people be able to use CBD products for their benefit.