LEADING German medical cannabis healthcare company The Bloomwell Group, is preparing for a major push into the recreational market – and believes its peers would be ‘foolish’ not to.
The young holding company, founded in 2020, recently closed the highest seed investment round for a European cannabis company to date, securing $10m from US growth capital provider Measure 8 Venture Partners and Dr Reinhard Meier’s Venture Capital Investors fund.
Currently its portfolio consists of two companies, Frankfurt-based licensed wholesaler Ilios Santé and its ‘flagship’ telemedicine healthcare company Algea Care.
Ilios Santé, which is a wholly owned subsidiary, imports and distributes pharmaceutical cannabis to Germany and is reportedly working on product development and manufacture in the medical space.
Algea Care is, according to Bloomwell’s Co-Founder and CEO Niklas Kouparanis, the ‘biggest telemedicine healthcare platform for medical cannabis patients in Germany and Europe’, with some 6,000 patients and 80 doctors registered to its platform, alongside around 20 physical onboarding centres.
The company says it expects to report revenues of €5m for 2021, and has its eyes firmly set on expansion following its recent funding round.
Mr Kouparanis told BusinessCann that Bloomwell is focused on ‘every single vertical in the medical cannabis space aside from cultivation’, and that its next investment will be an ‘obvious next step’ which will ‘also be part of that vertical integration’.
Though he declined to comment on the details of this upcoming investment until an official announcement is made in ‘February or March’, the company’s longer term ambitions are far less opaque.
From Medical To Recreational
Unlike other European medical cannabis companies BusinessCann has spoken to, who have been typically reticent regarding their ambitions towards the German recreational market, Mr Kouparanis says he is ‘not afraid to speak about it’.
“When we talk about repositioning, it is also important to talk about the changes which are happening in the market right now, especially with legalisation coming up.”
He added that while Bloomwell ‘will still have subsidiaries which are focused on the medical market’ it was ‘of course very keen and very focused also on the recreational market and creating a consumer brand for cannabis in the recreational field.’
“Germany will be the biggest cannabis market in the world with 80 million inhabitants. So it would be foolish for an entrepreneur to not see there’s an opportunity and have strategies for that opportunity.”
Medical Veterans To Shape Recreational Market
For those who already have an established foothold in the European medical cannabis market, a transition to the recreational space could present not only the opportunity to cash-in but one to shape the future of the industry.
Mr Kouparanis said that he believed the ‘companies who shape the recreational market will be medical companies’.
“I will take it even further, I think it’s necessary to have a head start with medical cannabis to actually be successful in the recreational market.”
He explained that although being in medical cannabis would not automatically give a company a head start, it came down to who has the strongest brand, supply channels, and most importantly distribution channels.
Citing Canada as an important example to learn from, he suggested that while there were a number of billion-dollar publicly listed companies with plenty of stock, ‘the problem was distribution’.
“That’s why the recreational market actually never took off. I think now 60% of consumers in Canada still buy cannabis on the black market, which is not something we want in Germany.”
According to the latest figures published by the Canadian Government, just 53% of cannabis consumers reported making a purchase from a legal storefront in 2021, up from 41% a year earlier.
Those who are succeeding in winning customers over from the black market, according to Mr Kouparanis, are those ‘who were active in the medical space’ and had well established supply and distribution channels.
“The only way you can dry up the black market is to take care of supply and take care of distribution channels, and have an infrastructure ready which works. Otherwise people will still be forced to get cannabis on the black market. That’s very important.”
While the opportunities for medical cannabis operators to transition to the recreation space are clearly plentiful, there is little chance of the medical market disappearing under the shadow of the world’s largest adult use market.
Targeting a patient or targeting a consumer requires a ‘completely different approach’, he added, assuring that ‘there will always be a medical market’ because ‘there will always be patients’.
“There will always be a medical market. But compared to the recreational market, let’s talk facts, it’s a very small portion of the cannabis market in general.”
Still Work To Do
In order for Germany to become a ‘role model for recreational or legalisation for cannabis’, as Mr Kouparanis hopes, there is still work to be done to ‘avoid the mistakes’ of the North American markets.
First and foremost was ensuring that those tasked with setting out the model for recreation were sufficiently informed, or had experts at hand to guide the process.
Last year Social Democrat (SPD) politician Karl Lauterbach said during an interview with the Rheinische Post, that ‘illegally sold street cannabis is being mixed with a new type of heroin that can be smoked’ leading cannabis users into heroin addiction.
According to analysis from VICE Germany, who worked with the police and NGOs, there was no evidence to back up these claims, while Mr Kouparanis said this ‘just doesn’t happen’.
Further suggestions from The Greens, also part of the new coalition, that cannabis can be cultivated in fields outside in Germany shows that ‘there is still a lack of knowledge and experience’ that ‘needs to be solved in future’.
He did however hail the appointment of Burkhard Blienert, a former drug policy spokesman and co-author of the Recreational THC Report 2021, as Commissioner on Narcotic Drugs at the Federal Ministry of Health this year as a positive step.
On a more practical level there are also issues with supply, with Mr Kouparanis estimating Germany will need to find hundreds of tonnes of flower from other countries to meet demand.
“We don’t have companies to actually cultivate cannabis, the only companies who cultivate cannabis at the moment are medical companies, which cultivate 2.6 tonnes a year, which is nothing. We estimate around 200-400 tonnes at the start of legalisation annually.
“So we should be the first country that actually allows recreational imports. That is very important for Germany in order to have a successful legalisation.”
Main image from L to R: Samuel Menghitsu, Niklas Kouparanis, Julian Wichmann, Anna Kouparanis
