Marijuana Business Magazine May-June 2019

Marijuana Business Magazine | May-June 2019 42 P ublicly listed cannabis companies in Canada aim to shift attention away from the limited growth opportunities on their home turf in favor of Europe in order to justify their sky-high valuations. These industry executives point to a wave of European medical cannabis legalization, citing an ever-increasing number of countries with new laws that provide added business opportunities—a domino effect that is real. Moreover, year-over-year sales growth in Europe more than tripled from 2017 to 2018, thanks mainly to Germany and Italy. In March 2017, Germany legalized medical cannabis. What German legislators didn’t predict then was that harvesting the first domestic cannabis was going to take years. In the meantime, patient numbers soared, with medical marijuana covered by health insurance in most cases. That left only one option: imports, at least until the end of 2020 and most likely beyond. And that’s when Canadian exports ramped up, doubling year after year. At least half a dozen European coun- tries also saw an opportunity and passed legislation in the past couple of years to allow local cannabis production and exports. Countries outside Europe also legalized to have a piece of the export market cake. Well-capitalized Canadian com- panies bought assets everywhere around the world, just in case. Few of the countries that recently legalized medical marijuana did so with the sole purpose of providing access to their patients. Most saw the German market opportunity. In countries such as Colombia, Greece and Portugal, companies started growing cannabis for export before doctors could even prescribe MMJ for domestic patients. How Big Is the German Market? As Marijuana Business Daily ’s recently published report, “Medical Cannabis in Europe,” shows in detail, Germany represents about two-thirds of the total MMJ sales in Europe, followed by Italy and the Netherlands, each with about 15%. All other countries combined are just 5% of the total. The enthusiasm created by the European market—and Germany in particular—is based on long-term predictions and not on an immediate, realistic estimation of the market. In 2018, about 4,000 kilograms (8,818 pounds) of MMJ were sold in Europe— nearly 3,000 of those in Germany. Our estimate of total retail sales in Europe in 2018 was $84 million, most of that sold at mom-and-pop phar- macies that kept almost half the retail sales price. Colorado sells as much cannabis every 20 days, on average, as European retailers sold in all of 2018. Of course, Colorado is a mature market, while Europe is just starting. International companies bet on the European potential, but many hurdles will need to be cleared for that potential to be reached. By the time we get there, it looks as if competition will abound. In fact, after a long delay, Germany appears to be getting its own cultivation industry up and running—with an assist from Canadian producers. In April, the German subsidiaries of Canadian companies Aphria and Aurora Cannabis—in addition to a joint venture partner of Wayland Group—were the three companies chosen to cultivate MMJ in Germany. Why European Growth Can’t Be Compared With North America The Netherlands and Switzerland are excellent examples of how European markets can plateau before becom- ing meaningful when the medical community remains unconvinced of MMJ’s value and patients are forced to pay out of pocket. Is Europe the Next Promised Land? Trends & Hot Topics | Alfredo Pascual