Germany’s recreational cannabis market is set to be the biggest in Europe

With more than 83 million inhabitants, Germany is the most populous country in Europe. It is also the continent’s most powerful economic engine, with a gross domestic product of $3.8 trillion – the fourth largest in the world in 2020 after the United States, China and Japan. The central nation should introduce German recreational cannabis legislation that will decriminalize certain aspects of possession and sale, control consumption throughout the country through the distribution of licenses and make Germany the cannabis capital of Europe.

The latest statistics provided by the Federal Association of Cannabis Business (Bundesverband der Cannabiswirtschaft), published on September 19, indicates that the amount of flowers imported for medical and scientific purposes increased by more than 80% in the first half of 2021 compared to the same period of the previous year. In the first six months of 2021, 8.96 tons of cannabis flowers were imported, compared to 4.94 tons in the same period of 2020.

In addition, 980.4 kg of dried cannabis flowers intended for medical consumption (necessary for the production of extracts) were imported in the first half of 2021. During the same period in 2020, the quantity was 820.3 kg, an increase of approximately 19.5%.

If the history of the European Union is any indication, what happens in Germany rarely stays in Germany; on the contrary, the country’s judicial decisions tend to reverberate throughout Europe. This is why the legalization of adult marijuana in Germany will likely redefine the future of the segment across the continent.

With Olaf Scholz as the new Chancellor of Germany, the cannabis industry has a new champion who is leading cannabis policy. His party, the Social Democratic Party of Germany, is part of a coalition in the Bundestag with the Liberal Democratic Party and the Greens – dubbed the “traffic light coalition” – a direct translation of the German word Ampelkoalition. So far, all parties to traffic lights have agreed to legalize adult use.

Private consumption of cannabis in small amounts is already tolerated by German law, and medical use has been legal since 2017. While the legalization of medical use was a giant step in the right direction, the market has not is not developed as fast as it might have in the past. four years ago.

Why? First, doctors are reluctant to write prescriptions. (It takes time to move a traditional establishment in a new direction.) German laws requiring heavy paperwork to obtain permits and insurance coverage haven’t helped either. Then came COVID-19 and supply chain barriers, which negatively impacted the level of medical consumption.

At the same time, however, the German collective mindset quickly changed. According to Statista, approximately 37% of Germans between the ages of fifteen and thirty-four used cannabis in 2018. As more and more governments legalize the use of marijuana, for medical or recreational purposes, we are seeing a collective increase in acceptance of cannabis use.

The traffic light coalition’s push to legalize cannabis for adult use is a positive development, both in terms of generating tax revenue and meeting people’s growing demand for this freedom. But “legalization” can mean different things in theory and in practice, and we have yet to see the details of a future bill.

EU Good Manufacturing Practice (EU GMP) requirements are part of the medical cannabis market in Germany, and they may come into play again for the recreational market. These practices include everything from quality assurance to personnel, outsourced activities, premises and equipment requirements. They also include rules regarding documentation, production, and defect and recall procedures. It takes time, effort and resources to receive EU GMP approval, and there are not many EU GMP approved operators in the world.

If EU GMPs do not become a requirement for recreational production and sale, many operators from other parts of the world – including Canada and Latin America, as well as other parts of Europe – will probably enter the market. Many of these growers offer low-cost production models capable of producing products for as little as ten cents per gram. That said, the quality of the product produced by these growers remains in question.

Other aspects affecting the size and rate of growth of the recreational market are import rules, definition of points of sale (pharmacies or dispensaries, the latter of which do not exist in Germany), potential limits of personal use (i.e. THC or the number of grams a person can buy in a month), health insurance coverage and licensing requirements. Additional questions remain: how many licenses will be available? Will licenses be limited to cannabis stores only? Will Germany roll out a pilot program in a specific area first, or will the bill immediately cover the whole country?

Regardless of the above issues, any potential bill would need to be approved in both the Bundestag (where the traffic light coalition was formed) and the Bundesrat, the legislative body that represents Germany’s sixteen states at the level federal.

While rapid legislative change seems likely, as the new government will want to show strong will and promise kept, challenges arising from COVID-19 could hamper the pace of legislative activity.

On a more personal note, many international operators – including my company, IM Cannabis (IMC) – are paying close attention to developments in Germany. As IMC already operates in the German medical market and has the required EU GMP license, we believe that a legal German adult market will result in huge business opportunities.

The German approval will likely be followed by similar legislation from other European countries.

Oren Shuster is CEO of IM Cannabis, a publicly traded entity operating in the medical and adult sectors in Israel, Germany and Canada. Shuster has over two decades of experience building and growing businesses in the medical technology and technology/software industries. He has also held management positions in companies in the telecommunications and digital media sectors.

Mary I. Bruner