We chat with Lars about the legalization of adult-use in Germany and all the exciting things at SynBiotic. The SynBiotic SE ecosystem continues to grow and thrive. Twelve companies with fantastic founders and teams working day by day towards our collective vision – to unlock the power of cannabinoids to heal modern world diseases.
Good afternoon and welcome to another edition of CannaList Conversations. Today, we are joined by Lars Müller of SynBiotic, a German company in the news. What have you guys been doing?
Doing great. Thank you for having me, Mike.
So you guys have raised some money and made some acquisitions? Can you tell us a bit about what your strategy is going forward?
With SynBiotic, I’m building Europe’s biggest group of companies for the whole topic of cannabinoids. So, we have a buy and build strategy. We have three verticals, R&D, production, and direct-to-consumer medical brands. And for each vertical, I’m searching for the best of the best in Europe to try to get them on board. Then, here at SynBiotic, or if we don’t find a good player in Europe, we can build our own companies with our teams and strategies.
And once they’re in the portfolio, what type of support do you provide, and what can they benefit from being part of the family?
Wow, that’s a huge question. We have 12 companies now in our group. We have two R&D companies; one from Ireland and one from Canada. So, we have a lot of very interesting R&D capabilities there. We have five companies on the supply chain, including a small CBD production company, wholesalers, etc. And we can get everything you want from the market: CBD THC, everything; and, of course, several brands and companies on the direct-to-consumer medical side. So, we can import everything; we can build everything: brands, companies, etc. That’s the big vision. And yes, the strategy behind SynBiotic is to build a kind of an ecosystem where we can do everything based on cannabinoids and terpenes; to develop better products for diseases like sleep pain, stress, anxiety, and all those big central nervous system problems.
And you’re also looking beyond the plant? Firstly, you’re looking at synthetics as well. Is that correct?
Yes, but synthetics are not our focus, not the priority. So though, when we think about recreational cannabis, of course, cannabis is the core plant. Still, several other plants contain cannabinoids and terpenes like hops, cacao, licorice, echinacea, and passionflower. My focus is on cannabinoids and terpenes and not on a single plant. So that’s why we are thinking way beyond cannabis and hemp. But, of course, our focus at the moment is mainly hemp and cannabis. For example, we just launched Worldfirst CBD replacement extract with CB plus. It’s a plant extract mixture made from hops extracts, cacao extract, echinacea extract, passionflower, and another one; and yes, to build cool products for customers.
And what’s the advantage of looking at the other plants?
We have this funny thing called normal food in Europe. CBD extracts are not legal or regulated in food. CBD is okay for cosmetics, but in Europe, we still have this problem with CBD. And, of course, we will get into the same problem with all the other cannabinoids. And there’s no real alternative or another extract we can use in our products. So that’s why we created this CBD alternative or CBD replacement extract with the name CB plus, not just for Europe, but also for other countries worldwide because there are countries, like Turkey, Japan, China; big countries, where they’re not allowed to use hemp. They’re not able to use CBD or THC. Of course, you can produce it chemically or via synthetics, but CB plus is a plant-based CBD alternative for those countries or other ones worldwide.
And how has the recent activities in Germany, particularly the announcement that they’re going to legalize adult use, changed your strategies, if at all?
As I mentioned, SynBiotic is very well positioned for everything that will come in the future. We are already importing medical cannabis, such as flowers, extracts, and tinctures from different countries in the world into Germany, and then we sell it to pharmacies and doctors. And we’re now able to sell it to regular stores. It’s the same way, but much easier for us, of course. We have to think about and focus more on the supply chain part. That’s something I’m focusing on in 2022 and maybe bringing in one more “big player” into the SynBiotic world that is very well positioned in the cannabis supply chain part. Because when we have the official legalization here in Germany, it will be a race for the best strains and products. The volume will be crazy. And it’s not that easy to get the volume now in Germany for the medical part. So everything is cool. We have to wait, plan and see how things will evolve in the following months. How are we able to sell recreational cannabis in Germany? So there are a lot of question marks and a lot of” to do’s.” And, yes, exciting times!
Is there any sense of timing? I mean, is this something that will happen in 2022? Or is it something that will take two or three years to implement? What are you hearing?
If you ask ten people, you get ten different answers. So there are two parts. There’s one part that says, “Okay, we will get it in 2022.” That will be crazy; to get it done by the end of 2022. But to be honest, I think it will happen in the 2023 to 2024 timeframe, kind of over two years. But everything between one and three years is totally fine. So we have a lot of time to prepare. And we need that time because there is so much to do. We have to find ways to sell. We need a new quality standard for flowers and THC products. At the moment, we have “cheapy” pharma. So we have to define so many different things. And I don’t know if one year is enough.
And what does the market look like? For example, you said there will be Russian people who will now be interested in the German market. So do you anticipate there’ll be a lot of outside players trying to enter the German market?
Yes, outside players in combination with German players. I think we will see the same joint ventures as we saw in 2017 with the three licenses for importing and producing medical cannabis. At that time, they could not get licenses as a German company. It was a Canadian and German joint venture. It depends heavily on what the license setup will look like for this kind of cannabis store; and, of course, their quality level, the new quality standard for THC products. But there will be a lot of pressure. A lot of money will flow into different companies next year because everyone wants a piece of the pie; the recreational cannabis pie.
And so far, if I’m not misunderstanding, you guys have raised 13 million euros? Is that about right?
We had two small capital increases as a stock-listed company. We are not able to sell as much as we want. We received a smaller amount last year. In December it was 6.35 million euros. And we had another small round a few weeks ago for exactly 7 million euros. We are, of course, planning to raise more capital to get everything ready for the recreational rush. But yes, we do it step by step and as a stock-listed company. Now we have euros, of course, and we have our stock. And with all the legalization, cannabis is now getting more and more attractive. Our share price doubled; when the news came out, we would see recreational cannabis here in Germany. Now it’s consolidating at 50% plus than a few weeks ago. We have a lot of liquidity. So we now have a very nice liquid share, and we have money to buy new companies and get everything on track.
And you think that now that Germany has gone down this path, other EU countries will start to move in and follow suit?
Yes, if we do our homework correctly in Germany and get everything solved, I’m 100% sure that the rest of the EU will follow. So, since Switzerland is not a part of the EU, Switzerland and the UK will probably be next. But in my personal opinion, all the other European countries are looking to Germany to see how they will solve the various issues that might arise. And then they will hopefully copy them. But this would be the second wave. The first wave is the German legalization. And the second in Europe. When Europe opens up, it will be crazy. There are more people in Europe than in Canada and US, so that it will be super interesting.
With everything moving so fast, how will you manage that growth?
Really good question, but that’s the beauty behind SynBiotic. We are not one company with a very big management team and hundreds of employees. We are a group of companies. We now have 12 companies with separate CEOs and management teams; every company has expertise in one field, such as CBD and importing THC. And so we have a group of very fast “speedboats and not one big slow ship; that’s the beauty behind this buy and build strategy, and that’s a huge advantage if I compare SynBiotic to competitors here from Germany or Europe.
So, are you the Rocket Internet of cannabis?
There are worse things.
I’m building the groundwork, the fundamentals, how to make everything, new brands, cannabis stores, everything we need because we have single companies, but we have a lot of group work at the moment. And that’s super powerful. So, we are currently talking with eight CEOs and so many intelligent hats about how we will address legalizing it, the challenges within the next couple of years, how we can build market leaders, products, and stores. And that’s the beauty behind SynBiotic growth.
And what’s your biggest challenge, then?
I think the challenge will be this big unknown and the question marks regarding production, but it’s just a matter of time. Hopefully, the politicians will let us help them build the perfect rules. I hope they will not say: “okay, that’s the rule, and never talk to us.” Because we have this kind of vendor here in Germany, where all their competitors were sitting together and saying, “please let us do this together; build something great because we know the industry.” And that’s one thing, but time will solve this problem. And another one is that I think we need to make this quality standard clear for products and then solve the supply chain part; so, importing the products. Can we import products from the US or not? Can we import products from the EU? Do we need GMP quality or just food-grade quality or something in between? Who can get the licenses? How many licenses per company? There’s so much to do, but hopefully, this will get solved within the next year. There are no real roadblocks. It’s go, go, go!
And since this is a relatively new industry, are you able to find talent? Do you have the people that can execute your plan?
We have no problem finding really good talent because we have this group of companies there. We have noticed that so many different and outstanding teams of their age are parts of the company. So SynBiotic will be bigger next year; we will help the companies carry out shared services or have a SynBiotic HR department that allows every company to find the best talent. However, we are now well known in the German market and the European industry with all the PR we’re doing, like videos and interviews. So, I’m getting several emails per day from very talented guys and girls who want to work for SynBiotic because the vision is cool. What we’re doing is cool. We’re on the right track, and the timing is perfect. So, I think we will not have a problem finding the right talent.
And are you seeing anyone else in the landscape trying to do this buy and build approach?
Not really. In Germany, we have one group here that has had the group in the company name, but there’s no real buy and built platform or group approach? I know Cronos Group, which I think is a Canadian company. But I don’t think they have a real aggressive blind build strategy, like Synbiotic. I don’t know of any competitors. We are consolidating the European market to build the biggest group. I think we are the biggest group right now in terms of companies. I believe there are a few players out there. They’re a little bigger in revenue, but we will catch up within next year.
And so your primary focus is Europe, but was afterward? Asia, or where would you go?
I think we have so much to do in Europe. So with CBD, hopefully, we’ll get it legalized, and then we can easily sell CBD and food products. So that will be a really big boon as well. And then we have this cannabis movement on the medical side and the recreational side. We have so much to do within Europe alone within the next five to 10 years. So we are focusing on Europe. I think that’s the primary target, but, of course, super interesting to look into countries like Thailand and others.
Do you see products come into the questionable market? Such as Delta-8 and products that are being offered in non-pharmaceutical locations? How do you deal with that? And how does the industry counter that for your company and Germany?
We see some products come in. They’re available at Rossmann or something like that. But I didn’t see a product with Delta-8 at Rossmann because it’s a THC product, and I know Delta-8 is not regulated in a good way. I think that’s one of the most important things we have. How can we sell THC products in Germany? We need tough rules. We need a controlling setup that controls everything and makes it safe so that anyone who gets the license to sell THC products has no “bullshit” in their product. That’s why we need a quality standard. I call it in German, “Reinheitsgebot,” Something we have here for the beer as well, so we need something similar for THC in recreational products.
And how do you work with the politicians to ensure that they don’t tax it to death so that it doesn’t end up being non-competing in the market? Because if you layer taxes on it, people will go back to the black market.
Yes. That’s another challenge. I forgot the tax thing. I think that we will find a good solution. That’s why we already have this working group in Germany. I like this group of competitors working together with the politicians. We will get a good solution to sell a gram of cannabis somewhere between 8 to 12 euros. That’s a street pocket price as well, for a good quality product, and there will be taxes on it, of course, but there’s enough margin left for us. So I think we will find a suitable solution.
In addition to the taxes, do you think they’ll try to regulate the potency of the THC content?
Maybe they will regulate the amount someone can buy, but I don’t know if it’s per gram or the THC content. So that’s on our to-do list now for next year; to figure out the best way. What is the best way to solve this problem?
And how has COVID changed the way you’ve approached this project?
COVID changed nothing for us. I’ve been working remotely since nine years ago. SynBiotic is a kind of remote company. Of course, we have companies in our SynNiotic group with their own offices, but COVID didn’t change anything.
Did you participate in the industry conferences or any cannabis conferences before that?
This year I attended the International Cannabis Business Conference. So we are trying to make everything happen, even in COVID times. And we will do this for next year as well, of course.
Right. Well, we very much appreciate your time today. We know that you’re on a tight schedule. So thank you for joining us. Again, really exciting stuff! And we look forward to great things in Germany because we hope it will open up the rest of Europe. Thank you for giving us some of your time. I wish you the best of luck. We’ll check back in in a couple of months, and you can tell us all the great things you’ve been doing.
Yeah, I love it. Thank you, Mike. Take care.