The Race to European Cannabis Legalisation.

As Germany makes promising steps towards legalising cannabis with incoming chancellor Olaf Scholz at the helm, the opportunity for the rest of Europe to follow suit is blown wide open. Legalisation is forecast to potentially boost Germany’s annual tax revenue by a substantial €3.4 billion (£2.6 billion) said the Institute for Competition Economics, as well as generating up to 27,000 new jobs across the sector and beyond. Meaning supply will soon need to jump to meet incoming demand.

Germany’s plan to build a three-way coalition consisting of the Social Democrats (SPD), Greens and Free Democrats (FDP) could be just the hybrid political marriage to get legalisation over the line. The effect could trigger a domino effect across the continent, boosting a European market set to be worth more than €3 billion per year by 2025, compared to an estimated €400 million this year.

But it’s not just Germany jumping on the cannabis bandwagon, Italy have too launched themselves in the race to become the first in Europe to legalise recreational cannabis use in adults. A nationwide referendum to legalise cannabis is planned to take place in early 2022, after supporters more than 500,000 signatures – the minimum required to hold a nationwide vote.

June 2021 also saw Portugal’s two key political parties, Left Bloc and Liberal Initiative, present proposals for the legalisation of adult-use cannabis. Similarly, in Switzerland the Netherlands and Luxembourg, new laws are being discussed with pilot schemes allowing cannabis to be legally produced, imported, and distributed to registered users, it is estimated that products will land firmly on shelves within 1-2 years of pilot projects beginning. Should this be the case, the race will be on for which of the two countries to first become the EU leader for a fully legal adult-use cannabis supply chain.

A New Approach

As the U.S. and Canadian cannabis markets show, this new approach to cannabis is set to instigate multiple financial and economic benefits. Forecasting shows the opportunity for allowing new players to produce cannabis would introduce a potential 35,000 new jobs per country. When compared to the U.S. marijuana legalisation, which saw usage double to 321,000 in three years, this doesn’t seem at all unthinkable.

When using the U.S. as an example, its clear that once one state or region takes the plunge on passing cannabis laws, the economic advantages follow suit. Opportunities for the companies dominating the U.S. market to jump across the pond is huge. With supply chains and expansions strategies already firmly in place, as soon as legalisation is around the corner, these big players ought to be prepped and ready to act.

Tilray

Tilray is a pioneer in cannabis research, cultivation, production, and distribution. Named one of TIME’s 100 Most Influential Companies in 2021 for its extraordinary global impact, especially domineering in the wake of its recent merger with Aphria to become the ‘new’ Tilray. This acquisition allows the new company to leverage its newly combined strengths, including geographic scale, broad product range, and brand expertise to ensure their offering always meets the needs of consumers and patients.

Tilray first moved into Europe when it partnered with German pharmaceutical wholesaler NOWEDA and service provider Paesel + Lorei back in 2017, to distribute the first full-spectrum cannabis extracts in the country. More recently, it strengthened its position in Europe after being selected by the Luxembourg Ministry of Health as a supplier of certified medical cannabis products for the country’s medical cannabis program. Despite a tough previous year, the Canadian giant is still the largest licensed producer in the Canadian cannabis market, worth a whopping CAD$4.62 billion ($3.65 billion).

In the EU, however, the company expects to generate $1 billion in revenue by the end of 2024 through a mixture of organic growth and acquisitions. Tilray already has state-of-the-art cultivation facilities in both Portugal and Germany with the ability to supply pharmaceutical-grade medical cannabis across international markets, with arrangements already in place to supply cannabis through major pharmaceutical distribution channels. With its excellent knowledge high-quality reputation, Tilray is in an excellent position to lead the cannabis market when EU legislations begin to change.

Aurora

Aurora is another Canadian pioneer in medical cannabis with a focus on advancing patient access globally. Its products and brands are dedicated to helping improve health, wellness, and overall quality of life. Aurora is paving the way to a new era of choice when it comes to medical cannabis. Consisting of three key brands, Aurora, CanniMed and MedReleaf, available in one shop to ensure that relevant products are matched to customers to put the patient first with modern, convenient, and cost-effective formulations. Aurora has driven industry standards forward to ensure safe, high-quality cannabis, through its scientific, research, and innovation-led approach.

Despite federal hurdles, in 2020, Aurora successfully penetrated the U.S. market through its acquisition of Reliva, LLC, one of the biggest producers of hemp-derived CBD products in the U.S. Alongside this, in November 2021 Aurora also acquired a significant equity stake in Growery B.V., one of 10 successful applicants for a cannabis production license in the Netherlands. Although the agreement is subject to the approval of regulations, this move is crucial to ensuring Aurora’s ability to infiltrate the European cannabis market as soon as laws begin to change. Its ten sub brands continue to break through as industry leaders in the medical, performance, wellness, and adult recreational markets in every market entered so far, which only bodes well for incoming European opportunities.

MGMC Pharma Group

From germination to drying, MGMC prides itself on growing superior quality product capable of exceeding the requirements of the most stringent regulations across the globe. After southern Africa updated its medical cannabis business licenses regarding growth and production in 2019, the group’s mission became focussed on being one of the leading producers of African origin cannabis and hemp products in the world. Due to in-depth genetic research and production strategy it provides a broad range of strains at industry-leading prices.

Alongside this, the company prides itself on injecting economic value into the local communities where its farms are based. Growth in tents with artificial lighting, temperature correction and humidity control can produce up to 10,000 tons of carbon per hectare per year. By growing plants across Sub-Saharan Africa, they are presented with the ideal conditions for optimised growth, severely reducing environmental impact and cost of production.

MGMC Pharma Group has already successfully established routes to market in Australia and Europe. As the first African medicinal cannabis producer to export Cannabis Crude Oil products into Australia, its strategies for entering the potential European market look strong.

In the words of Michael Patterson, President of MGMC Pharma Group:

All roads lead to Europe.

The company is now focussed on expanding its domestic and international capacity through new strategic partnerships across the USA, Australia, New Zealand, Africa, Asia and Europe. In an aim to stay ahead of the competition when entering Europe, the company has ensured all its operations, facilities and processing are fully EU GAP compliant, to ensure there are no issues with supply chain processes once these markets become available to enter.

Canopy Growth

Another Canadian company leading the cannabis market is Canopy Growth, whose mission it is to express “the true power of this extraordinary plant”. By building an organisation defined by purpose, it aims to transform the experience and perception of the cannabis industry.

Priding itself on having a deep understanding of consumer behaviour, Canopy Growth harness the best in customer-led insights to guide its innovations. This allows it to create the most authentic brands and high-quality products tied closely to the wants and needs of cannabis consumers.

Within the Canopy group sits Spectrum Therapeutics, the first company in Germany to obtain licenses to import whole flower medical cannabis from Canada in 2016 (pka. MedCann GmbH). Following this, in 2019 Canopy Growth received the first ever UK licence for a storage and distribution facility dedicated to medicinal cannabis. In the same year it won an exclusive contract to supply medical cannabis in Luxembourg, connecting it intrinsically with the European market. To date, Canopy Growth has successfully entered the health and wellness consumer space in key markets including Canada, the United States, and Europe via its various sub brands, ensuring a certain presence is felt as a foot in the door ahead of any change in legislation.

What’s next?

It’s clear the opportunities for growth in Europe will be huge once regulations change, and these cannabis giants are ahead of the game when it comes to entering an emerging market. From strategic partnerships, to acquisitions and gradual integrations of a broader product ranges and sub brands, it’s clear who the dominating companies will be once the laws begin to change. I’m really interested to see the next steps in terms of how companies approach the roll out, and what this means when applied to various legislations across Europe.

If you’d like to discuss the exciting trends and opportunities in the cannabis market with me in some more detail, I’d love to hear from you. Drop me a message at joe.holmes@lifesci-cm.com.