Germany has the largest legal medicinal cannabis flower market in the EU, and it’s about to expand out even further. With imports coming from Canada and even Uruguay, the German cannabis flower market is, indeed, ready to fully explode.
Germany has been growing its medical cannabis market in the last few years. According to worldstopexports for 2019, Germany imported $240 million worth of cannabis oil – or 7.8% of all cannabis imports for the year, making it the second largest importer behind the US. In that same time period, it also exported $230 million worth of cannabis oil – or 8% of the market for the year.
Now, the emphasis is more on cannabis flowers, and Germany sure isn’t slowing down. In July, Germany released data on medical cannabis imports for Q1 and Q2 of 2020. Q1 showed an increase of 16%, while Q2 showed an increase of 32%. It should be remembered that Q2 of 2020 was when the coronavirus was at its worst, and lockdown measures were strictest.
Prior to this year, Germany imported approximately 3.1 tons of cannabis flower in 2018, and 6.7 tons in 2019. During this time, Germany requested additional imported cannabis from the Netherlands to help with supply shortages it was experiencing. The increase this year in imports is related to the rise in new patients in Germany, as well as the addition of new cannabis exporting countries. Approximately 60,000 Germans are registered to use medical cannabis as of June 2019. That number has likely risen substantially since that time.
A little about Germany and cannabis
Possession of cannabis is still illegal in Germany, despite the growth of its medicinal market. German law does allow for residents to have a ‘small amount’ of cannabis, but this amount is not consistent and can vary between 6-15 grams depending on location. Sale and supply crimes are predicably illegal, with prison sentences of five years or below for more standard cases, or up to 15 for more severe cases. Personal growing of cannabis is also illegal.
On the other hand, medicinal cannabis was legalized in 2017 in Germany, and since that time Germany’s medical cannabis market has become the largest cannabis market in Europe. Up until 2019, supply for this market came strictly from abroad as Germany was not cultivating its own cannabis. Now Germany is working to supply its own market, but still requires imports, en masse, from other countries.
New market for imports
Up until recently, the only suppliers of cannabis to Germany were the Netherlands and Canada. However, Germany didn’t want to be beholden to such a small number of suppliers, and (BfArM), the German Federal Institute for Drugs and Medical Devices, authorized Germany to receive imports of cannabis flowers from other countries like Spain, Portugal, and Denmark. In fact, Germany now works with at least 30 cultivators, which has greatly improved Germany’s supply situation, and greatly increased the German cannabis flower market.
Germany isn’t just looking to European countries and Canada for supply though. In late 2019, Portugal received an initial shipment of 1,000 kg of cannabis flowers (high-THC). The shipment was very secretive in that the final destination for the product, and the buyer, were kept private, while the shipment itself was actually done legally. According to the customs documentation, the exporter was licensed producer Fotmer Life Sciences, and the deal was for $3.2 million including all related costs. The final destination didn’t seem to be Portugal though.
As it turns out, more recent news has pointed to Germany being the final buyer. Apparently, Tilray, a Canadian-based producer which now operates in many countries, started offering Germany high-THC flowers as of September 30th of this year. Tilray’s director of government and public affairs in Europe, confirmed to Marijuana Business Daily that the shipment was indeed grown by a 3rd party in Uruguay, that it was imported through Portugal via Tilray’s subsidiary in that country, processed there, and then shipped to Germany.
Part of what makes this story interesting is that the supplier – Fotmer Life Sciences, is not EU-GMP certified, meaning it is possible to import non-EU-GMP certified products to Germany through the right avenues. In this case, processing through an EU-GMP certified facility in Portugal made it possible to pass onto Germany. It also makes it look like Germany will go to some interesting lengths to import more flower (maybe particularly high-THC), and that it’s willing to bend the rules to do so.
Who are some of the big players?
Right now, Canada is home to the biggest companies to export to Germany, or run facilities under subsidiary names there. Tilray is a big one, with name value the world over. It operates in Germany along with Canadian-based Canopy Growth, Aurora Cannabis, Maricann, Northern Green Canada, and Cronos Group.
One of the newer companies to join the Canadian satellite cannabis team is Aphria, which claimed to make its first shipment of dry flowers to its subsidiary in Germany, CC Pharma GmbH, earlier this month.
Clearly Canada has a good hold on Germany, but imports do, indeed, come from the Netherlands, Uruguay – apparently via Portugal, and Spain, through Spanish producer Linneo, which provides cannabis flowers to Germany as well as Israel and the UK, though under different names. Medical cannabis producers in other countries are also trying to get in on the German cannabis flower market. Producers in countries like Colombia, Australia, Lesotho, Malta, Greece, and Denmark are also looking to get their products into Germany. How much money these companies can make in the future, might create a challenge though.
What about wholesale pricing in Germany?
So, how much does cannabis cost in Germany wholesale? In November of 2019, the German Federal Government agreed to buy no less than 650kg of medical grade cannabis flowers from local cultivators at the price point of €1.5 million per quarter of product. This, in turn, sets a standard for average wholesale pricing at €2.3 per gram. This low price is an indication that medical cannabis companies probably won’t be able to attain the high margins that such companies have been seeing, prior to this designation being made. It also means that theoretically, prices should be kept low for German citizens.
To give an idea of the difference… retail prices for medical marijuana in Germany are as high as €20/gram right now. This is mainly due to a mandated 100% markup by pharmacies, not enough global suppliers that meet EU-GMP standards, and a domestic cultivation license that was only finalized after many delays. The new price point, along with bringing in new exporters, is important in bringing this price down.
Who will grow domestically?
Three different companies were picked to locally cultivate this cannabis for the government. Aurora Produktions GmbH – a subsidiary of Aurora Cannabis, Aphria Deutschland GmbH – a subsidiary of Aphria, and local Germany-based Demecan GmbH.
Pricing in medicinal markets is generally much lower than recreational markets where larger taxes are added on. But it does beg the question of how enticing the market will be for domestic growers (and importers), if they can’t inflate their costs to bring in more money.
The three companies that won the contracts to grow for the government will provide packaged cannabis flowers to BfArM. The German government has indicated that it will institute an application process for distribution in the future. What this means is that domestic growers and producers won’t be able to actually sell directly to pharmacies, even with established distribution channels. They will instead require a distribution license.
Weirdly, this just slows down domestic products hitting pharmacy shelves, and promotes Germany importing more. The German cannabis flower market, in fact, is expected to continue relying on imports to cover demand, which makes the aforementioned license for distribution for local cultivators…a little strange. Almost like Germany would prefer to import.
Conclusion
Germany’s medicinal cannabis market, and specifically the German cannabis flower market, is getting bigger every day with tons of countries vying to get their products through German borders and onto pharmacy shelves. Germany wants to import so badly, that it even seems to be going through semi-sketchy means, sending non-EU-GMP certified product through other EU countries in order to access more flowers!