A Blenheim-based organic medicinal cannabis company is up for a review by the Ministry for Primary Industries as the agency’s multimillion-dollar Sustainable Food and Fibre Futures fund partnership with it reaches its mid-point.
Puro was the sole company to have the MPI commit in 2022 to providing $13 million over five years for the “medicinal cannabis playbook, genetic breeding and organic production” project. Puro itself committed to $19m in funding.
As of March this year the MPI has committed $2.93m to the project, with Puro injecting $4.35m.
Puro’s production is based outdoors on the fifth-generation MacFarlane family farm near Blenheim, with Sank MacFarlane in chief executive role and brother Winston as chief operating officer.
Multiple SFFF projects were commissioned by the previous government, either late last decade or early this decade, most with five- to eight-year timelines.
Projects totalling $61m are either a year from completion or starting to fall due for mid-term reviews on investment to date and project direction.
This includes a joint dairy industry study into plantain as a nitrate mitigator that has had $12.6m committed to it, and has been recently criticised for its research direction.
Other projects include $8m committed over five years to a sustainable high value sheep milk project in 2022, and a further $8m the same year committed to Ngai Tahu for a North Canterbury project on regenerative farming.
Ballance Agri-Nutrients was the sole recipient of $10 million over five years from 2020 to develop 12 nutrient technologies to meet environmental challenges.
Canterbury company Leaft Foods headed up by Synlait founder John Penno was the sole partner to have $8m committed over five years from 2020, for developing leaf protein concentrates.
Steve Penno, the MPI’s director of investment programmes, confirmed a mid-term review of Puro is currently underway, with results to be publicly available early next year.
“An independent reviewer was chosen by the programme governance group through a selection process. The review will assess how the programme its tracking against its intended outcomes,” he said in a written response to Farmers Weekly.
Medicinal cannabis industry sources have expressed surprise that Puro, which was founded only in 2018, was the sole recipient of the $13m SFFF grant.
The grant is the second largest single grant in the $75m-a-year SFFF programme, coming after the $17.5m granted to the “Nurturing the Land” project in 2022.
In contrast, that project’s funding was spread across multiple industry partners including Massey University, Fonterra and Livestock Improvement Corporation.
SFFF modelling has Puro due to capture $100m in revenue by 2031 and be employing 200 full-time staff by 2026. Puro employed about 80 seasonal staff for its 2022 harvest.
In a written response to Farmers Weekly, Puro chair Tim Aldridge said the sector has faced significant challenges due to regulatory restrictions, which have only recently changed. He said it will take time for these to positively affect revenue and growth.
Industry insiders have said much rides on Puro’s success given the scale of the grant and the focus it places on a single company operating in the relatively new and still to be proven medicinal cannabis market.
Approved last month, the regulatory changes have removed the unintended consequences of the earlier regulations that made it difficult for medicinal cannabis companies to export products.
“This is a chance for everyone, including Puro to get the revenue they really need,” said one insider.
Two years into the SFFF project, the funding provided on an annualised basis from the MPI has been relatively constrained. It amounts to $2.93m so far, only 22% at the halfway point, out of the $13m committed.
The MPI’s Penno confirmed activities in some workstreams had changed, resulting in lower budget requirements in years one and two.
Aldridge said slower than anticipated approval of the regulatory changes had demanded the company adapt to that challenge. He said investment is expected to increase in response to the ability to now export material and innovate new products.
Craig Bunt, Otago University’s inaugural professor of agricultural innovation, said outdoor cannabis growing for medicinal purposes is a risky area, with issues around background microbial loads being one risk area.
He acknowledged the challenges the recently changed regulations had meant for export growth efforts in a sector aiming to be the country’s next wine industry.
“But I think NZ’s Brexit moment for medicinal was when the recreational marijuana referendum was defeated. Companies looking to enter the market were clearly expecting it to go the other way and had to pivot towards medicinal marijuana.”
He maintains NZ will struggle to compete globally in the $25 billion-a-year medicinal cannabis market but one area could be in generating quality genetics, similar to what has been done in the hops sector.
Puro has not pursued plant variety rights for cultivars under development, but may do so in future. Aldridge said Puro continues to provide new genetics to NZ partners and hopes to expand this internationally now that seed export is permitted.
Carmen Doran, CEO of Helius, a key purchaser of Puro extracts, told Farmers Weekly the partnership between her company and Puro has always been based on a medicinal focus, with Puro contracted to supply organic outdoor-grown compounds to Helius.
While acknowledging the sector is due for more consolidation and possible failures, she said Helius and Puro continue to maintain a solid relationship.
A multimillion-dollar supply agreement was signed between the two in January 2022 for Puro to supply 10 tonnes of cannabis over five years.
“We continue to progress with the five-year contract and our goal is for it to continue beyond that.”
