Village Farms Bets the Farm on Global Cannabis Boom After Divesting Produce Arm

Agricultural giant exits vegetables to chase cannabis dominance with greenhouses, licenses, and a high-risk, high-reward international strategy

In a bold pivot signaling its full embrace of the global cannabis opportunity, Village Farms International (NASDAQ: VFF) sold off its produce division in May 2025 for $40 million in cash while retaining a 37.9% stake in the spin-off entity, Vanguard Food LP. This move transforms the company into a focused, asset-rich cannabis operator with a cleaner balance sheet and a clear mandate: scale its global cannabis operations using its massive greenhouse footprint and international licenses.

The transaction delivers immediate liquidity and removes the volatility tied to fresh produce pricing—offering a strategic reset for investors. Village Farms now becomes a rare “pure play” cannabis stock backed by real assets and international exposure.

Greenhouses as Strategic Weapons: A Unique Cannabis Infrastructure Moat

Village Farms’ most significant competitive advantage is its 4.8 million square feet of greenhouse capacity in British Columbia, operated by its wholly owned subsidiary Pure Sunfarms. Unlike many cannabis operators that lease or retrofit facilities, Village Farms owns purpose-built greenhouses originally designed for high-yield produce. This vertical integration and scale give it one of the industry’s lowest production costs per gram—a crucial advantage in an increasingly commoditized cannabis market.

The greenhouses are not just producing for the Canadian market. With EU GMP (Good Manufacturing Practice) certification, Village Farms has opened up medical cannabis export pipelines to Europe, where demand is growing in Germany, the UK, and emerging markets like Poland and the Czech Republic.

The Global Expansion Plan: Texas, The Netherlands, and Beyond

Texas: Laying the Groundwork for U.S. Legalization

Village Farms has a 2.2 million square foot greenhouse in Texas that currently cultivates hemp. But it has a longer-term vision: a swift pivot to THC-based recreational cannabis when U.S. federal reform permits it. With cannabis legalization advancing state by state—and rescheduling discussions underway at the federal level—the facility positions Village Farms to become a major U.S. supplier with minimal capex.

The Netherlands: A Rare Recreational License

Through its Dutch subsidiary, Leli Holland, Village Farms holds one of only ten licenses issued under the Netherlands’ Coffee Shop Experiment. This gives it early entry into the legal recreational market in a country of 17 million. Phase II of the program, expected in early 2026, could expand Village Farms’ Dutch output fivefold, offering a gateway into European recreational sales.

Medical Exports Surge: 285% Growth in Q1 2025

International medical cannabis revenue grew 285% year-over-year in Q1 2025. The company expects to triple its export volume by year-end, targeting Europe and Australia. With global medical demand projected to exceed $10 billion by 2030, Village Farms’ certified greenhouses and supply chains are well-positioned for sustained growth.

Financial Reset: A Cleaner Balance Sheet and Leaner Earnings Profile

With the divestiture of its produce arm, upcoming pro forma financials will reflect only cannabis operations, making it easier for analysts to value the business without agricultural noise. Key highlights:

• Q1 2025 Cannabis Revenue: $39.2 million
• Canada: 85% of sales; International: 15%
• Net Profit Margins (Canada): 8%, up from 5% in 2023 due to operating efficiencies
• Net Cash Position: Eliminates debt burden, unlike competitors such as Canopy Growth ($2.2B debt)

At current trading levels, Village Farms’ stock is valued at an estimated ~5x trailing EBITDA—a steep discount to peers like Tilray (8x) or Aurora (7x). This valuation gap provides an asymmetric risk-reward profile for long-term investors.

Challenges Ahead: Legal Uncertainty and Competitive Pressure

1. U.S. Federal Legalization Remains a Key Catalyst

While the Texas facility offers potential for fast scaling, federal cannabis prohibition still prevents full commercial exploitation. However, Village Farms is aligning with state-level regulators and industry groups to stay ahead of policy changes. A federal rescheduling or SAFE Banking reform could unlock significant value.

2. Dutch Pilot Program’s Future Is Unclear

Though Leli Holland’s recreational license is a first-mover advantage, the long-term structure of the Netherlands’ Coffee Shop Experiment remains under evaluation. There is risk that expansion may be delayed or curtailed. Nevertheless, Village Farms holds one of the few seats at the table in Europe’s first legal recreational cannabis market.

3. Fierce Competition in Canada and Abroad

Village Farms faces pressure from other low-cost producers like Organigram, Aphria, and Hexo. However, its combination of greenhouse scale, vertical integration, and export licenses create cost and operational advantages that could help it maintain market share and pricing power.

Investor Outlook: Asymmetric Upside With Risk-Managed Foundation

Village Farms’ transformation into a cannabis-focused firm creates a compelling investment case:

• Downside Protection: Net cash, real assets, and a profitable core business
• Upside Optionality: Exposure to U.S. and European recreational markets, medical export growth
  
• Valuation Discount: Stock trading at a lower multiple than peers despite stronger fundamentals

Analysts recommend monitoring the stock for dips below $X/share, where it offers a ~4x EBITDA entry point. Key upcoming catalysts include:

• Q2 2025 pro forma cannabis-only financials
• Progress in Leli Holland Phase II license expansion
• Regulatory updates on U.S. THC reform

Unlike many overhyped cannabis “story stocks” that promise future growth without current profits, Village Farms delivers real cash flow, tangible assets, and global regulatory exposure.

Village Farms May Be the Dark Horse of Global Cannabis

By exiting the crowded produce space and doubling down on its cannabis infrastructure, Village Farms is repositioning as a lean, scalable, and export-ready cannabis powerhouse. Its greenhouse platform offers both cost leadership and production flexibility—two critical advantages in an increasingly globalized cannabis economy.

Investors willing to stomach near-term volatility for potential long-term gains may find Village Farms to be one of the most undervalued and operationally sound plays in cannabis today. The greenhouses are built. The licenses are secured. Now, it’s a matter of execution.

Final Verdict: Hold through the transition. Buy the next dip. Watch the global expansion unfold.