The German cannabis marketplace has been a priority for Canadian-based LPs and it has arguably represented the biggest and most important market outside of North America. Germany is home to over 82 million people, with nearly 90% of its population covered by a government national health insurance plan that includes medical cannabis. In 2019 the government granted 13 applications for domestic cultivation however they are not expected to produce its first domestic harvest until at least late 2020.
The current domestic country cultivation plan has set a cap of 10,400 kilograms over the four-year program; it should be noted that this total would not have met the demand for product in 2018. There are several restrictions placed on domestic cultivators in Germany: GMP standard for the production of pharma-grade product, intense security controls, a production limit of only three different THC/CBD ratios and that only indoor cultivation will be permitted.
Given domestic supply will not satisfy the requirements of the German medical cannabis market in the foreseeable future, Germany has received over 23 import applications. It approved 13 in total, including seven from Canada that all received EU-GMP certification. Those approved producers also need to either own or have an agreement in place with a German importer. In early April 2019, Canadian-based Aurora Cannabis and Aphria were both selected as winners of five of the 13 available lots. Canopy Growth was left out but has since purchased a German company that specializes in cannabinoid-based medical therapies used by European physicians.
Why the interest? Germany had only 633 medical cannabis patients in 2017. That number grew to 40,000 by mid-2019. The potential of 400,000 patients is within reach; that represents only 0.5% of the population. Given that it was only in March 2017 that the German government passed a bill amending narcotics legislation, one can see why the German model may be a template that other European countries choose to follow.
In an article published by the firm Bird and Bird LLP that reviews the future of cannabis in the UK, the authors offered the following suggestion:
“A potentially profitable approach is, we suggest, to examine the path trodden by Germany, which, three years ago, was in a similar regulatory situation to the UK. After gradual and measured deregulation, however, the prescribing of medicinal cannabis is now widespread and becoming routine, and, in April 2019, the first two licences to grow medicinal cannabis in Germany were granted.”
It’s easy to see why North American LPs would be very interested should other European countries follow the German model. Demand for medical cannabis will continue to rise in Germany, with other countries monitoring the opportunity there and possibly emulating some elements of their go-to-market strategy. Until domestic cultivation can be dialed up, imports from well-established and experienced cannabis producers will be required to meet the demand in these countries.