A brief analysis of the mistakes of the leadership of the Belgian companies that led to the closure of the capacity for the primary processing of hemp
It is necessary to learn from the mistakes of other companies, before illiterately spending the already small resources invested in the primary processing capacity in Ukraine.
Three years ago, the article “ Belgium is increasing hemp processing capacity ” described the dynamics of Belgian hemp breeding and, as one of the positive examples, was the initiative to create hemp straw processing facilities / trusts near a small settlement of Marloie. The bankruptcy of a Marloie-based Be.Hemp limited company (Marloie) raises a number of questions before the rapidly developing cannabis market in both Europe and our country and the analysis of Belgian errors is extremely interesting for national projects specializing in hemp straw / trusts processing.
On March 29, 2019, the Belgian courts opened proceedings against the bankruptcy of Be.Hemp. During the preliminary investigation, it became known that the company that “launched” the production capacity for the primary processing of cannabis in September 2016 had recently experienced considerable difficulties, but neither the investors nor the contractors of the company understood the severity of the problem and did not anticipate the company’s direst financial condition. due to a number of mistakes made by its management.
In particular, the company “closed” the previous fiscal year with a net loss of € 414 thousand, resulting in a consolidated loss of Be.Hemp of € 876 thousand, which is not commensurate with financial assets reaching € 1.4 million. funds of the company in the amount of € 945 thousand). According to the company representative, “Such financial losses of the company are due to a number of technical delays and insufficient development of existing production tools. In addition, the company faced difficulties in entering the hemp fiber market. ”
Established production capacity on the market allowed annually from 5 thousand tons of hemp straw / trusts to produce about 1.5 thousand tons of fiber and 2.5 tons of fires. According to the developed business plan of the enterprise, the products produced were to be used for the production of insulation panels, textiles and knitwear, biocomposite materials and as dry closets actively used in the zoobusiness.
About 80 farmers from the Belchanvre hemp production cooperative took part in providing the above small plant with raw materials. The launch of the company, as well as the construction of the production line, required investing financial resources in the amount of about € 2 million (Namurinvest and Idelux participated in the investment). Investments in the construction of primary processing facilities for straw / hemp trusts, among other things, included subordinated loans, as well as assistance from the regional administrative structures of the Walloon Region.
Difficulties manifested in the outside began with the fact that in the regional press there were publications that Be.Hemp could not pay off the suppliers of hemp raw materials - local farmers. Belchanvre found himself in an extremely problematic situation, since, on the one hand, it was the functionaries of this structure that attracted farmers to grow industrial crops of technical hemp in the interests of the company, on the other hand, the production cooperative was one of the shareholders of Be.Hemp. Be.Hemp, which received a negative image on the market, was confronted with the fact that agricultural producers did not want to enter into contracts for the cultivation of raw materials in the interests of production facilities located in Marloi.
Among other things, it should be noted that hemp fiber is not a local or regional, it is a global market that requires certain skills to work on it. Among other things, the equipment for the primary processing of hemp implies the presence of certain production skills. That is why, at the initial stage, Be.Hemp faced constant disruptions and far exceeded the period of reaching the production capacity planned in business plans. Most likely the constantly arising technical problems with the establishment of the production chain did not allow the company's managers to focus their efforts on developing market opportunities and establishing relationships with respect to the stable sales of their products. Another difficult problem for the company was experimenting with machines and mechanisms that were originally “laid out” to work in the production chain. Instead of setting up proven production chains for years effectively operating in EU countries, the company’s management decided to experiment with individual components, assemblies and mechanisms. This situation led to constant downtime due to the need for additional equipment adjustment, the breakdown of previously concluded contracts and of course the imposition of penalties. In addition, the company’s management constantly had to invest in the purchase of additional equipment necessary for the normal operation of the enterprise, which did not allow to invest sufficient resources for this purpose in research and the creation of new products.
Finally, prices for not very high-quality hemp fiber produced by the company have fallen significantly over the past two years due to the entry to the market of a large number of similar products from Eastern European countries. The initial data incorporated in the financial model of the enterprise in the amount of € 650 per ton had to be revised and reduced financial indicators based on the cost of € 450 per ton. Naturally, the absence of this “cushion of strength” significantly affected the dynamics of the enterprise’s development, its investment indicators and, naturally, the financial soundness of Be.Hemp.
Despite the rather short period of development of Belgian hemp breeding, in Wallonia, this is the second precedent of the bankruptcy of a company specializing in the cultivation and processing of hemp in the region. In particular, Chanvreco, founded in 2007, was unable to provide competitive products in the market and was liquidated.
Despite the negative experience of the development of Belgian hemp breeding, other players in the Belgian technical cannabis market “feel much better in the market”. For example, the Belgian company Iso Hemp continues to develop its production capacity. Having concluded long-term contracts with local construction companies, Iso Hemp actively manufactures insulation blocks based on hemp fires . The peculiarity of the activities of the above company is the diversification of the supply of raw materials and a huge range of consumers of products, formed over the past few years.
Fndings
Despite the fact that the hemp sector of the economy of our country certainly has a promising future, it is necessary to learn from the mistakes of other companies before spending the small resources invested in primary processing facilities in Ukraine illiterately.
Commentary of the Association "Ukrainian technical hemp"
Not only hemp fiber processors in EU countries face such problems. The tactics of solving this kind of difficulties arising from cannabis processors is regularly explained in the course of the " Hemp University " by national experts specializing in the processing of hemp straw / trusts. For example, it was explained why, in 2018, when faced with similar problems, he had to sell the cannabis primary processing capacities Michel Tereshchenko, a number of plants for the primary processing of hemp raw materials in Ukraine do not work, and the national projects for the primary processing of hemp are not currently demanded by the market and in a good way uncompetitive. Currently, the only positive example of stable operation of the enterprise for the primary processing of hemp straw / trusts is the production activity of the Hemp Bio Group company (a plant for the primary processing of bast crops on a mobile platform), which operates efficiently in the western regions of Ukraine.